The document is a project report submitted to G.B. Pant University of Agriculture and Technology that studies intermediaries' intervention in the agriculture supply chain and its effect on farmers' income. It was conducted in Udham Singh Nagar district of Uttarakhand, India in two phases - an initial survey phase and a subsequent data analysis phase. The study aims to identify different intermediaries involved in the rice and wheat supply chain, compare the revenue of farmers who sell through commission agents versus rice/flour millers, and analyze the impact of intermediaries on farmers' income. The report provides background on agricultural marketing in India and the role played by intermediaries in the supply chain.
Report
Share
Report
Share
1 of 41
Download to read offline
More Related Content
Intermediaries intermention
1. A STUDY OF INTERMEDIARIES’ INTERVENTION IN AGRICULTURE
SUPPLY CHAIN AND ITS EFFECT ON FARMERS’ INCOME
A Project Report
Submitted to
G. B. PANT UNIVERSITY OF AGRICULTURE AND TECHNOLOGY
PANTNAGAR-263145, (U. S. NAGAR)
Uttrakhand, India
Submitted by
Prince
I.D. No. 31996
IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE
AWARD OF THE DEGREE OF
Master of Business Administration (Food Retail and Supply Chain)
May,2011
2. CERTIFICATE
We, the undersigned, members of Project Advisory Committee of Ms. Prince,
I.D.No. 31996, a candidate for the degree of Master of Business
Administration (Food Retail and Supply chain), agree that the project report
entitled “A Study of Intermediaries’ Intervention in Agriculture Supply
chain and its effect on Farmers’ Income” may be submitted in partial
fulfillment of the requirements of the degree.
Advisory Committee
(Ashutosh Singh)
Chairman
(Mukesh Pandey) (Nirdesh Kumar Singh)
Member Member
i
3. ACKOWLEDGEMENT
I take this opportunity to express my sincere and deepest gratitude to Govind Ballabh
Pant University of Agriculture & Technology and college of Agribusiness Management
for providing me a chance of learning. This project not only helped me to understand
about the Indian agriculture, but widened this vision in field of management too, by
virtue of being associated with an esteemed and professional institute.
This report is the result of contribution made by numerous people too many to mention
individually, therefore I thank all the respondents who have given their valuable time,
views and authentic information for this project. At the very outset, I would like to
thank my advisor Dr.Ashutosh Singh, Associate professor, department of Human
Resource and personal management for providing me all types of support, constant
encouragement and his relentless efforts to motivate me to achieve my goal. His close
supervision and precious input have made me able to refine this project to this extent. I
consider it my privilege to express my deep sense of gratitude to Dr. Mukesh Pandey,
Associate Professor Department of marketing and Mr. Niredesh Kumar Singh,
Assistant professor, for their continuous guidance, motivation and providing valuable
suggestion and critically analyzed my project work.
I am grateful to Dr B.K.Kumbher Dean post graduate studies for providing me the
B.K.Kumbher,
necessary research facilities. Also I would like to express my sincere thanks to
Dr.Devendra Kumar Dean, College of Agribusiness Management, Dr.B.k. Sikka
Former Dean, College of Agribusiness Management, Pantnagar for providing a chance
to undertake this present study.
This acknowledgement would be incomplete if I don’t mention a special regard to my
parents, my sister Preety, my batch mates, administrative staff of my college and all
those who motivated me to perform better than the best.
Last but not the least; I thank The ALMIGHTY, for blessings me with enough patience
endurance and strength in accomplishment of the Endeavor.
Pantnagar Prince
ii
4. EXECUTIVE SUMMARY
Intermediaries in agri-supply chain are very important component with various pros and
cons. Among the several shortcomings that plague this sector is the high intermediary margin as
a result of numerous intermediaries in the agri-supply chain. These intermediaries add-on their
margins to the produce during its transit from farm gates to the final consumer.
The proposed study was conducted in Rudrapur, Kashipur, Bazpur, Gadarpur and Jaspur
block of district Udham Singh Nagar. The study was conducted in two phases; the initial phase
was survey, information collection regarding farmers and intermediaries while second phase of
study was to analyse the data of survey.
This study was conducted to identify the intermediaries in agri-supply chain and to
compare the income of farmers who market through commission agents and through Rice/flour
millers. The study also analyses the impact of intermediaries on cash flow of the farmers. During
the study it was found that four types of intermediaries are involved namely commission agent,
rice/flour millers, wholesaler and retailers. A major portion of farmers sell their produce through
commission agents .It was also revealed that the farmers who sold their produce to rice millers
received higher profit as compare to farmers who sell through commission agents. The various
facilities provided by intermediaries include assured prices, advance credit, information about
agricultural input and transportation facilities. As a result of these activities the income of
farmers increase considerably.
The study suggests that the farmers should sell their produce directly to the rice/flour
millers as it gives them higher profit. Commission agents are necessary evil in agri-marketing.
But, it is expected that as a result of better extension activities and enforcement of APMC act
the role of commission agent is expected to decrease in future.
iii
5. TABLE OF CONTENTS
S.No Title Page No.
Acknowledgement i
Executive summary ii
Table of Contents iii
List of Exhibits iv
List of Tables iv
1 Introduction 1-3
Background 1
1.1 Agriculture Marketing in India 1
1.2 Role of Intermediaries 2
1.3 Problem Statement 3
1.4 Objectives 3
2 Review of Literature 4-6
3 Research Methodology 7-10
3.1 Research Design 7
3.2 Information required 7
3.3 Data source 7
3.4 Area of Study 8
3.5 Sampling Plan 8
3.6 Research Instrument 9
3.7 Duration of Study 9
3.8 Data Analysis 10
iv
6. 4 Result and discussion 11-20
4.1 Classification of farmers 11
4.2 Intermediaries in agri-Supply chain 12
4.3 Different links in supply Chain of Wheat and Rice 12
4.4 Income of Farmer who sell directly 14
4.5 No. of farmers who are taking credit 16
4.6 Factor affecting the selection of Commission agents by Farmers 17
4.7 Income of farmer who sell through Intermediaries 17
4.8 Comparison of Farmer’s Income 18
4.9 Factor affecting the selection of Farmers by Intermediaries 18
4.10 Facilities Provided by Intermediaries to the Farmers 19
4.11 Increase the Income of Farmer 22
5 Conclusion 23
6 Suggestions 24
Reference vi
Annexure I vii
Annexure II viii
Vita
v
7. LIST OF EXHIBITS
S.No Exhibit No. Title of Exhibit Page No.
1 Exhibit 4.1 Classification of farmers 10
2 Exhibit 4.2 Intermediaries in Agri-supply chain 11
3 Exhibit 4.3 Different links in agri –supply chain 13
4 Exhibit 4.5 No. of farmers who are taking credit 16
6 Exhibit 4.6 Factor affecting the selection of Commission 17
agents by Farmers
5 Exhibit 4.8 Comparison of income of farmer 18
7 Exhibit 4.9 Factor affecting the selection of Farmers by 18
Intermediaries
8 Exhibit 4.10 Facilities Provided by Intermediaries to the 20
Farmers
9 Exhibit 4.11 Increase the Income of Farmer 22
vi
8. LIST OF TABLES
S.No Table No. Title of Table Page No
1 Table4.1 Variable Cost of Production 14
2 Table 4.2 Changes in the cash flow of farmer 21
vii
9. 1. INTRODUCTION
Background
The marketing as a term is broader than traditional trading and agricultural marketing as a
concept is still evolving in the Indian agrarian society. The National Commission on
Agriculture defined agricultural marketing as a process which starts with a decision to
produce a saleable farm commodity and it involves all aspects of market structure of system,
both functional and institutional, based on technical and economic considerations and
includes pre and post- harvest operations, assembling, grading, storage, transportation and
distribution.
Agricultural marketing also reflect another dimension from supply of produce from rural to
rural and rural to urban and from rural to industrial. In modern world it became challenging
with the latest technologies and involvement of middlemen, commission agents who keep
their margins and move the produce further. As it is well known more the number of
mediatory more will be the costs as each transaction incurs expenses and invites profits.
Ultimately when it comes to the producer the cost of the produce goes up steep. In the entire
process of marketing the producer gets the lowest price and the ultimate consumer pays the
highest as the involvement of more middlemen.
1.1 Agriculture Marketing in India In the case of agricultural marketing in India it is
not exactly the marketing in the literal sense and we can call it as ‘distributive handling’ and
to go further we may call it as ‘distributive handling’ of agricultural produce as there are
number of intermediaries who are involved in marketing the agricultural produce. Marketing
systems are dynamic; they are competitive and involve continuous change and improvement.
Businesses that have lower costs, are more efficient, and can deliver quality products, are
those that prosper. Those that have high costs, fail to adapt to changes in market demand, and
provide poorer quality, are often forced out of business. Marketing has to be customer-
oriented and has to provide the farmer, transporter, trader, processor, etc. with a profit. This
requires those involved in marketing chains to understand buyer requirements, both in terms
of product and business conditions.
Activities include market information development, marketing extension, training in
marketing and infrastructure development. Improvement of marketing systems necessitates a
1
10. strong private sector backed up by appropriate policy and legislative frameworks and
effective government support services. Such services can include provision of market
infrastructure, supply of market information, and agricultural extension services able to
advise farmers on marketing. Training in marketing at all levels is also needed.
1.2 Role of Intermediaries The number of middlemen or intermediaries is shrinking
dramatically as the structure of the food and agriculture system changes. Major customers are
requiring their producer-suppliers to perform many of the services previously accomplished
by middlemen. This fact may be detrimental to small- to mid-sized producers in maintaining
their access to important customers. Producers attempting to accomplish all of the assembly
and distribution functions otherwise performed by intermediaries will need to bear that cost
themselves. In some cases, producers may be able to perform those functions profitably but in
many cases the actual costs of assembly and distribution are underestimated by producers,
resulting in losses. Some producers may be in a position to accomplish all of the necessary
assembly and distribution functions themselves or as a group. However, for others not in that
position, eliminating “middlemen” may not be as desirable at first glance as producers might
think, unless they can accomplish all of those functions at a lower cost as those individuals or
firms who performed those assembly and distribution activities on their behalf.
Intermediaries are an important link in the supply chain. One should not forget that even if
there are 3 to 4 intermediaries in the existing supply chain, still the chain is very efficient.
Just ignoring them will lead to no fruitful result. Taking out the middle man from the chain
does not guarantee a higher realization of price for the farmers. The Commission agents play
a very important role by providing finance to the farmer. Though there are arguments that the
intermediaries is exploiting the farmer by charging high interest rate and also that the farmer
is forced to sell the produce to the middle man but he provides finance to farmer when it is
required, procures from the farm level, gives extra credit to meet the house hold needs of the
farmer. The farmer knows that he is not getting the best price from the middleman; He is
fully aware where the mandi is even in the mandi he has to sell to commission agent so why
not sell the produce in the village itself without the hassle of additional transportation cost.
2
11. 1.3 PROBLEM STATEMENT
The traditional agriculture supply chain model that is operational in India results in
significant reduction in farmers’ income. The farmers have the option to sell his produce in
various agriculture agencies. However selling in mandis in most cases is unprofitable due to
two notable reasons – (1) cost issues involved in transporting produce to mandi, and (2)
structural deficiencies rampant at mandis. On an average, the distance between regulated
markets (mandis) and farm field ranges from 7.7 kilometres to 15 kilometres in India. Indian
agriculture being dominated by small and marginal famers, it may not be economically viable
nor commercially feasible for a small farmer to sell their produce directly to consumers. Here
the agri intermediaries play a crucial role, they add values at several stages of the goods
movement in the value chain because of their specialized role which everyone cannot does
and the biggest role they are playing is the aggregation of goods from large number of small
farmers scattered across a vast area but the negative impact of the agri intermediaries in
downgrading the efficiency of the agricultural marketing in India. It won’t be fallacious to
state that intermediaries also have a role in increasing price of several food commodities. So
the proposed study has been undertaken with the following objectives.
1.4 OBJECTIVES
1. To identify different intermediaries who are involved in supply chain of rice and wheat.
2. To compare the revenue of farmers who market through commission agents and through
Rice/flour millers.
3. To analyse the impact of intermediaries on Income of the farmers.
3
12. 2. REVIEW OF LITERATURE
Patel (2009) in his study found that agriculture intermediaries in form of commission agents
at mandis (government regulated markets) operate at 4-5 percent margins, intermediaries at
wholesale markets get around 30 percent, and retail vendors make around 20 – 40 percent.
Consequently, the price of commodities that range between Rs 5 – 7 per Kg at farm gate
eventually costs in the range of Rs 15 per kg at the consumer. Among the several
shortcomings that plague this sector is the high intermediary margin that results from the
numerous intermediaries in the agri value chain. These intermediaries add-on their margins to
the produce during its transit from farm gates to the final consumer.
Vasisth and Bhardwaj (2009) observed that Farmers have been at the mercy of traders or
intermediaries while selling their produce, who pay less to farmers and in turn sell it at
exorbitant rates and thus getting huge trading margins as the margin between consumer price
and producers’ price gets added due to several levels of intermediaries prevalent in India
mainly due to the market infrastructure. Many farmers lack instant access to the present
market price.
Michael and Jusman(2008) states that the rationale for emergency of intermediary
institutions in marketing channel has been the focus of research for marketing scholars
review of the work done in this area reveals two broad approaches of this issue. One group of
scholars focus on the ability of intermediary institutions to reduce the cost of the physical
flow of goods and services from producers to users. Another approach adopted by several
researchers has been focus on the role of marketing intermediary in facilitating transmission
of information within the marketing channel between producers and users.
Thorat (2007) analyzed the state level APMC acts, acc. to that the products of the early
1960’s and 1970’s and enacted with the view that the state alone could protect farmers from
exploitation at the hand of traders to overcome this the APMC act were passed, wherein
wholesale trade was conducted under the presence of the responsible government officials
who are designated. The market mandis were administrated by a marketing committee
comprising of representative of farmers traders and other stockholders.
Mohana Rao(2005) in his study formal credit institutions have largely failed to provide
access to farm credit to small and medium-scale landowners, or zamindars. This paper
examines interlocked transactions between traders and landowners in the wheat markets in
4
13. UP that facilitate the provision of credit by traders. It is concluded that the case examined
provides an example where traders lend to landowners in a segment of the credit market that
approximates competitive behavior, without surplus extraction by traders. Key conditions
resulting in this favorable outcome are the existence of both competition for market share and
information sharing on borrowers between traders. Whether this outcome is also beneficial
for other rural groups who may borrow from landowners, in particular sharecropping tenants,
is independent of market relations between landowners and traders and is not determined
here.
Verma and Patidar (2004) describe in his study that the producers may either send their
produce to commission agents who arrange the sale in market or they may themselves bring
the produce to the commission agent premises for sale. After purchasing from the agents, the
wholesaler and exporters sort the crop, pack and then dispatch to different distributing or
consuming market. In the process of marketing the producer has to incur various marketing
costs. Agriculture marketing is costly with high commission charges, trader’s profit margins,
wastage and malpractices.
Bieri (2002) states that the welfare consequences of price instability critically depend on the
type of market intermediary. Both a producer marketing board and a pure middleman will
stabilize consumer prices; but the latter, unlike the producer marketing board, will find it
advantageous to "manufacture" price instability for producers.
Deepak et al.(1999) worked against the backdrop of viewing marketing intermediaries in
developing countries as parasites, Necessary information was collected from all major
stakeholders such as farmers, collectors and commission agents, and the relative position of
farmers in terms of their gains was analyzed. Marketing margin and farmers’ share of gross
income are also analyzed ‘with’ and ‘without’ the cost of malicious practices by marketing
intermediaries.
Matsuda (1997) in his study addressed that functional structure of agricultural electronic
marketplaces, together with associated pricing mechanisms. The analysis of transaction costs
suggests that electronic commerce with intermediaries provides more efficient trading
environments than electronic marketplace without intermediaries. This indicates that existing
intermediary institutions will remain important for agricultural transactions even after the
5
14. adoption of electronic market systems. Compared to other industries or markets, agricultural
markets are characterized as competitive markets and pricing is a key factor for efficient
resource allocations.
6
15. 3. RESEARCH METHODOLOGY
Keeping in view the formulated objectives, the project was carried out with the following
research methodology-
3.1 Research Design
The methodology adopted for the completion of study was descriptive and analylitical
research approach. Descriptive research was used for the identification and role of
intermediaries’ in marketing of agriculture produce while, analytical research approach was
used for analysing the impact of intermediaries on farmers’ income.
3.2 Information Required
For completing the study, information required was about background of Udham Singh
Nagar district, data regarding different blocks and villages of district. Data related to land
holding of farmers, their cropping pattern, their socio-economic status..
3.3 Data Source
Secondary data as well as primary data were used for the information generation. The
inferences were drawn mainly from primary source.
Secondary Data-Secondary data were collected from internet, journals, book research
articles, different mandis and government booklet issued by district agricultural department.
Primary Data-This data was first hand information for the study. This was collected with
the help of survey method using a self structured questionnaire consisting of both open ended
and close ended questions. The questionnaire was used for conducting the personal interview
of farmers and intermediaries.
3.4 Area of Study
The study was conducted in the Udham Singh Nagar district of Uttrakhand within the district
Udham Singh Nagar different areas like Rudrapur, Gadarpur, Bazpur, Kashipur, Jaspur was
taken.
7
16. Figure 3.1 Map of district Udham Singh Nagar
3.5 Sampling Plan
3.5.1 Universe
The universe of sampling was comprises of farmers, intermediaries government personnel
who are directly or indirectly related with marketing of agriculture produce of district
Udham Singh Nagar.
3.5.2 Sampling Unit- Farmers and intermediaries were the sampling units for the study.
These were selected from two villages of each block.
8
17. 3.5.3 Sample Size-
S.No Block Farmer Intermediaries
1 Rudrapur 25 4
2 Gadarpur 25 4
3 Bazpur 25 4
4 Kashipur 25 4
5 Jaspur 25 4
Total 100 20
3.5.4 Sampling Technique-Convenience and simple random sampling employed for the
selection of farmers and intermediaries. Farmers were selected on the basis of their land
holding. In some places judgemental sampling was also used for selecting intermediaries.
3.6 Research Instrument
Questionnaire containing both open and close ended questions was used as main research
instrument. Questionnaire was structured in such a way that it has contained all the questions
which was helpful in getting the objectives of study fulfilled.
3.7 Data Analysis
Data obtained from the survey of samples was analyzed with the help of graphical
representation, tabulation and classification of data and by using statistical tools like 5 point
scale method, bar diagram, pie charts and other related methods. 5 point scale method is used
for analyzing the factors which are affecting the selection of commission agent by the
farmers.
3.8 Duration of Study
The period of study was from 7th of March to 30th April, 2011.
9
18. 3.9 Limitation of Study
i. There may be discrepancies in the actual data and the recorded data due to
misinterpretations and wrong selection of respondents.
ii. Topic is vast but availability of information and timeline was short.
iii. In some cases there were some contradictory answers given by farmers which were
create confusion regarding intermediaries’.
10
19. 4. RESULT AND DISCUSSION
In accordance with the objective of the study, the data collected from primary and secondary
sources were analyzed and interpreted.
4.1 Classification of Farmers
It is very important to know that the categories of the farmers for understanding the
their
socio-economic status. The farmers are classified into three main categories –Marginal
Farmer, small Farmer and Large Farmer.
It is evident from the Exhibit 4.1 that out of total sample, 17 percent are marginal farmers, 50
percent are small farmers and 33 percent belongs to the category of large farmer.
Marginal Farmer
17%
Large Farmer
33%
Small Farmer
50%
Exhibit 4.1 Classification of Farmers
t
11
20. 4.2 Identification of Different Intermediaries involved in Supply Chain of Rice and
ent
Wheat
Farmers producing agricultural produce are scattered in remote villages and t produce has
this
to reach to the consumers for its final use and consumption. There are dif
different agencies
and functionaries through which this produce passes and reaches to the consumer. A market
channel or channel of distribution is therefore defined as a path traced in the direct or indirect
transfer of title of a product as it moves from a producer to an ultimate consumer or industrial
producer
user. There are several channels of distribution which
annels used by farmers according to their
need. Exhibit- 4.2 shows that 60 percent
that, farmers sell their produce to the commission
agents, 35 percent farmers
ers sell to the rice/ flour millers directly and on 5 percent
only
farmers sell their produce to others (Wholeselor and Retailers).
other
5%
Rice/Flour millers
35%
Commission agents
60%
Exhibit 4.2 Proportion of Intermediaries in Distribution of sold produce
4.3 Different links in Supply Chain of W
erent Wheat and Rice
The Exhibit 4.3 illustrates that in Supply chain of wheat and rice in Udham Singh Naga
Nagar
district, there is linkage of four kinds of intermediaries that is Commission agents, Rice
millers/ flour millers, wholesaler and retailers These intermediaries are involved for flow of
retailers.
produce from farmer to ultimate consumer.
12
21. Farmer
Commission Others
agent
Rice millers
/Flour millers
Export
Wholesaler
Retailer
Consumer
Exhibit 4.3 Different links in Agri-Supply Chain of Rice and Wheat
13
22. 4.3.1 Different Types of Marketing Channel for Rice and Wheat
1. Producer– Miller- Consumer
2. Producer– Miller- Retailer– Consumer
3. Producer- Miller- Wholesaler- Retailer- Consumer
4. Producer– Commission agents - Miller– Retailer– Consumer
5. Producer– Govt. procurement– Miller– Retailer– Consumer
These above are the different type of marketing channels for rice and wheat supply chain. In
first channel produce is directly sold to the millers and then it reaches to the ultimate
consumers. In second type of marketing Channel produce is sold to the millers and then it is
further sold to the retailers and finally it reaches to the ultimate consumer. In third type of
marketing channel there is involvement of 3 kinds of intermediaries, produce is sold to the
millers, and then it sold to the wholesaler and again sold to the retailers and finally reaches to
the ultimate consumer. In forth kind of marketing channel there is also involvement of three
kind of intermediaries, in this case produce is first purchased by commission agent then they
sell it to millers, then from millers it sold to the retailers and finally from retailers to the
consumer. In fifth kind of marketing channel produce is first procured by the Government
people then produce is sold to the miller and from milers to retailers and from retailers to the
ultimate consumers.
4.4 Income of Farmer
4.4.1 Cost of Production
Cost of production of paddy and wheat is different. There are different kinds of cost
involved in paddy and wheat production. These costs are two type Fixed cost and variable
cost. Cost of Rice production is high because variable cost is high.
Following items are considered for cost of production
Fixed cost (Land Rate) = Rs 8000/acre
Variable cost = cost of ploughing , seeds, Transplanting, Irrigation, Fertilizer, Pesticide,
Harvesting and Threshing, Transportation
14
23. Table 4.1 Variable cost of production
S.No Parameters Cost /acre Total
Paddy Wheat
1 Ploughing 1500 800 2300
2 Seed 400 700 1100
3 Transplanting 1200 1200
4 Irrigation 1500 500 2000
5 Fertilizer 1200 1200 2400
6 Pesticide 1000 500 1500
7 Harvesting and Threshing 700 900 1600
8 Transportation 1000 1000 2000
Total Cost 7600 4700 Rs.14100
Interest on variable cost = 10.5 percent/year
= Interest on variable cost for 3 month period
= [(Variable cost* Rate of interest* Time)/100]
= [14100*0.105*3/12]
= Rs 370/acre
Total cost = Fixed Cost + Variable cost + Interest on variable cost
= 8000 + 14100 + 370 = Rs.22470 /acre
Total cost of Production is = Rs. 22470/acre
4.4 .2 Value of Total Produce in Market
Total produce from farmers’ field is 32 quintal/acre Paddy and 22 quintal/acre Wheat. Market
price of the produce is for paddy Rs1000/quintal and for wheat Rs1100/quintals. So the total
value of produce is [{(32*1000) + (22*1100)}] = 56200.
Total revenue in market is = Rs.56200
15
24. 4.4.3 Income of Farmers Who Sell their Produce without Intermediaries
ho
40 percent of farmers who directly sell their produce to Rice millers/flour millers.
So the income of these farmers is-
Income = (Total Value of produce – Cost of production)
(56200 -22470)
Income = Rs. 3373 / acre
33730
4.5 No. of farmers who are Availing Advance Credit Facility
In India number of marginal farmers is more than large farmers and the chunk of these credit
facilities is used by these marginal farmers. The reasons for using these facilities by marginal
farmers is unavailability of sufficient amount of money used for crop production .Credit
facilities providing to the farmers are very important feature of commission agents Farmers
s agents.
are selling their produce through commission agents because they are taking credit from
r
them. Exhibit 4.5 shows that only 37 percent farmers take credit from the commission age
agents
while 63 percent farmers use their own money for farming.
Availing Credit
37%
Not Availing Credit
63%
Exhibit 4.5 No. of farmers who avail credit
16
25. 4.6 Factors Affecting the Selection of Commission Agents by F
Farmer
There are many factors responsible for the selection of commission agents by the farmers.
Factors affecting the selection of commission agents were devised on 5 point scale. Exhibit
4.6 shows that the two facto which affect the most in the selection of commission agent
ors
were amount of advance credit and rate of interest on credit. The other factors were also
dvance
important like period of credit and behavior of commission agent.
5
5
4.5 4
4
3.5 3
5 point Scale
3
2.5 2
2
1.5
1
0.5
0
Period of Credit Amount of Rate of inerest on Behavior of
Advance Credit credit Commission agent
factors
Exhibit 4.6 Factors affecting the selection of commission agent
4.7 Income of Farmers’ Who S their Produce through Intermediaries
Sell
Farmers sell their produce to the commission agents because they have taken advance credit
facility from the commission agents Rate of interest on that advance credit is 2 % per month
agents.
or 24 % per year. So the income of farmers who sell their produce through commission
agents is
Income = (Total cost of produce – Cost of cultivation- interest on investment Capital
(56200 –2247 -5304)
470
Income = Rs. 28426 / acre
17
26. 4.8 Comparison of Farmers’ Income Who Market Their Produce without
Intermediaries and Those Who Market Through Intermediaries
After comparison of both the farmers it has been found that there is a difference of Rs 5304 in
the income of farmers. Exhibit 4.8 shows that farmers who sell their produce directly to the
Rice/flour millers have an income of Rs 33730 while the farmers who sell their produce to
the intermediaries have an income of Rs28426.
35000
33730
34000
33000
32000
31000
Income
30000
29000 28426
28000
27000
26000
25000
Direct With Intermediaries
Farmers
Exhibit no- 4.8 Comparison of farmers’ Income
4.9 Factors affecting for selection of farmers by intermediaries
There are many factors responsible for the selection of farmers by commission agents.
Factors affecting the selection of farmers were devised on 5 point scale. Exhibit 4.9 shows
that the two factors which affect the most in the selection of farmers are trust on farmer and
interest on credit. The other factors were also important like quantity of produce and quality
of produce.
18
27. 5
5
4.5 4
4
3.5 3
5 Point Scale
3
2.5 2
2
1.5
1
0.5
0
Interest on Credit Quality of Produce Trust on Farmer Quantity of
Produce
Factors
Exhibit no-4.9 Factors affecting for selections of farmers by intermediarie
intermediaries
4.10 Facilities provided by intermediaries to the farmers
Commission agents provide many facilities to the farmers. Commission agents are the need
of farmers for selling the product in the market. They are giving credit to the farmers and pay
giving
assured prices. Exhibit 4.10 has shown that 20 percent farmers get information about
agriculture input, 20 percent of farmers get information about transportation facilities, 60
percent farmers get advance credit facility as well as other information like market
information and 100 percent of farme get information about assured prices. They give them
farmers
information related to the different markets, knowledge regarding their agricultural activities
and information of agri-inputs.
inputs.
19
28. 100
90
percentage of farmers
80
70
60
50 100
40
30 60
20 40
10 20
0
Assured Price Advance Credit Agriculture input Transportation
Facilities
Faclities
Exhibit -4.10 Facilities provided by intermediaries to the farmers
4.10.1 Impact of Intermediaries on Farmers’ Income
Intermediaries support to the farmers by providing them different facilities. They also give
providing
the information related to high yielding varieties which results in better q
quality and quantity
of the crop. These activities are very much helpful in the farmers’ cash flow.
helpful
Table 4.2 shows improvement in the cash flow of the farmer. Earlier the yield of farmers’
field was 30 quintal/acre paddy and 20 quintal/acre wheat. Market price of the produce was
Rs 900/quintal and Rs 1000/qui
/quintal for paddy and wheat respectively. Now, after the Support
of intermediaries yield of farmers’ field has improved and market price of the produc has
produce
increased. Yield of paddy and wheat is 32quintal/acre and 22 quintal/acre respectively and
market price is Rs 1000/quintal for paddy and Rs 1100/quintal for wheat.
/quintal
20
29. Table 4.2 Changes in the Income of Farmer
Before , Income After ,Income
Yield/Acre Price/Quintal Yield/acre Price/Quintal
Rice- 30 Rice – 900 Rice- 32 Rice – 1000
Wheat-20 Wheat – 1000 Wheat-22 Wheat – 1100
Revenue B = [{(3o*900) + (20*1000)}] Revenue A = [{(32*1000)+(22*1100)}]
Rs. 47000/acre Rs.56200/acre
Farmers’ Income B = Revenue - Cost of Cultivation Farmer Income A= Revenue-Cost of Cultivation
47000 - 22470 56200 – 22470
=Rs.24530/acre = Rs.33730/acre
Percentage Change in the Income of Farmers
% change = [{ ( Income A-Income B)/Income B}*100]
= [{(33730-24530)/24530}*100]
= [(0.3750)*100]
= 37%
21
30. 4.11 Increases in the Income of Farmer
Exhibit 4.11 shows that 37 percent improvement in cash flow of farmer. Earlier the income
.
of the farmers was Rs.24530 but after the help from rice/flour millers the income of f
0 farmers
has increased up to Rs.33730. Improvement in the income of farmer is by Rs 9200
9200.This
improvement in the cash flow of farmers helps in the further capital formation of farmer.
33730
35000
30000
24530
Income of Farmer
25000
20000
15000
10000
5000
0
Earlier Situation of Farmer Current Situation of Farmer
Farmers' Situation
Exhibit – 4.11 Increase in the Income of Farmers
22
31. 6. CONCLUSION
Agricultural marketing includes the movement of agricultural produce from farmers to
ultimate consumer through intermediaries. Intermediaries are important aspect of agricultural
marketing and affect the price paid by consumers as well as the profit received by farmers.
The present system of agricultural marketing is not well-organized and the farmers have to
depend largely on the intermediaries for the disposal of the farm’s yield. The intermediaries
have no hesitation in taking advantage of the farmer’s dependence upon them. Intermediaries
are necessary evil that cannot be removed but efforts can be made to reduced them in order
to bring about efficiencies in the supply chain.
The study was conducted in five blocks of district Udham Singh Nagar namely
Rudrapur, Gadarpur, Bazpur, Kashipur and Jaspur. This study identified the various
intermediaries in agri-supply chain.These include commission agent, rice/flour millers,
wholesaler and retailers. The survey revealed that majority of the farmers were small
farmers. The study identifies two important channels of marketing viz farmers selling their
produce directly to the rice/flour millers and farmers selling their produce to the commission
agents.
During the study it was revealed that the farmers who sell their produce directly to the
rice/flour millers received greater profit as compared to those who sell through commission
agents. It was found that a difference of Rs 5304 existed between the two channels which
means that a farmer who sells his produce to commission agent will receive Rs. 5304 less.
The study also emphasizes on the role of credit in case of commission agents. Majority of the
farmers who sell to the commission agents take loan from them at a higher rate of interest.
Various factors are involved in the selection of commission agents by farmers. These include
period of credit, amount of advance credit, rate of interest on credit and behavior of
commission agent. On the other hand a commission agent also selects a farmers on basis of
certain factors namely interest on credit, quality and quantity of produce and trust on farmer.
The various facilities provided by intermediaries include assured prices; advance credit,
information about agricultural input and transportation facilities. These facilities improve the
income of farmers.
23
32. 6. SUGGESTIONS
1. Most of the farmers depend on agriculture as their main source of income. So, they
should focus on selection of marketing channel like in which mandi or through
which channel they should sell their produce.
2. The farmers should try to sell their produce directly to the rice/flour millers instead of
selling to the commission agent for getting higher profit.
3. Farmers should avoid the habit of taking advance credit from the intermediaries
because they charge a higher rate of interest.
4. The loan providing process of the commercial bank should be simplified, so that the
farmers could easily approach to banks instead of the commission agents.
5. There should be proper government norms in the mandi for selling of produce. There
should not be any fraud in the market pricing strategies of produce.
6. There should be the appointment of ombudsman for keeping the farmer updated and
providing them proper information regarding marketing practices.
7. There should be nonprofit firm to educate the farmer from time to time regarding the
market situation so that they will be able to understand where they should sell their
produce.
8. There should be involvement of cooperatives for selling of produce to the
government warehouses. Cooperative employees should be placed for communication
between farmers and government.
24
34. References
1. T Matsuda,TH Clark System Sciences,(1997) Market Intermediaries and Price Instability:
Some Welfare Implications.
2. Laurence E. D. Smith and Michael (1999)Facilitating the Provision of Farm Credit: The
Role of Interlocking Transactions Between Traders and Zamindars in Crop Marketing
Systems in Sindh.
3. Deepak M. Pokhrel and Gopal B. Thapa (1999)A study based on market price, marketing
margin and income distribution analyses
4. Verma A.R,(2004) “Price spread marketing Efficiency and Constraints in Marketing of
wheat”Vol-8,No-2,Page 171-194
5. Thorat Y.S.P(2007) “Issue in agriculture marketing in India”Vol-4,No-3,Page 59-68
6. Vashisth A.K(2009) “Price Dynamics of Agriculture Commodity Future and its impact on
demand-supply situation of Agriculture commodities”
7. Kothari C.R. Reserch Methodology
8. www.agricultural marketing ,Retrieved on 17/03/2011 at 16.30
9. www.kpmg.ie, Retrieved on 18/03/2011 at 12.30
10. www.google.com, Retrieved on 18/03/2011 at 17.00
11. www.wikipedia.com, retrieved on 19/03/2011 at 16.30
12. www.ficci.com, retrieved on 25/03/2011 at12.00 at 14.00
13. http://www.agriculturemarkrting retrieved on 2/04/2011
14. http://www.agricultural Marketing service - history and Scope.mht retrieved on 12/04/2011
at 08.15
15. http://www.project matterScience Direct - Agricultural Systems and marketing retrieved
on 10.00
viii
35. Annexure I
Questionnaire for farmer
1. Name-
2. Age-
3. Land Holding-
4. Crop currently grown-
5. Village-
6. Educational qualification:
Illiterate Primary Middle school Intermediate Graduate Post Graduate
School
7. What are the major crops you grow?
1.Kharif
2. Rabi
3.Zaid
8. What is the Yield from Your Field?
I. Rice ( ) II Wheat ( )
9. What is the market price of these produce?
i. Rice…………………….
ii. Wheat…………………..
iii. Other crop………………
10. Three years before what was the yield from your field?
I.Rice ( ) II Wheat ( )
ix
36. 11. Where do you market your produce?
1. Major market…………………… 2. Minor market………………………
12. How you market your produce?
i. Directly to consumer ( )
ii. Through intermediaries ( )
iii. Both ( )
iv. Any other ( )
13. If through intermediaries, What is the level of that intermediary?
i. Commission agent ( )
ii. Rice/flour millers ( )
iii. Whole seller ( )
iv. Retailer ( )
14. At what price produce has been sold to intermediary?
i. Rice ………………
ii. Wheat………………
iii. Other crops………….
15. Costs involved in farming?
i. Agri- input………………………
ii. Labor…………………………….
iii. Transportation……………………
iv. Irrigation………………………….
16.Are you availing credit facilities from the intermediaries?
Yes ( ) No ( )
If Yes how much amount you are borrowing?
I. Less than 5000 ( )
II. 5000 to 10,000 ( )
III. More than 10,000 ( )
x
37. 17. Factors involved in the selection of Commission agent?
Factors Points
Period of Credit
Amount of advance credit
Rate of interest on advance credit
Behavior of commission agent
18. What are the facilities being provided to you?
1. Assured price ( )
2. Advance credit ( )
3. Transportation facilities ( )
4. Agricultural input ( )
5. Agricultural extension activities ( )
19. What is the impact of these activities on your farming with respect to
i. Price of the produce
ii. Quality and Quantity of produce
iii. Transit time
iv. Reduction in wastage
20. Annual Income
Less than 50,000 50.000 to 1 lakh 1 Lakh to 2 lakh 2 lakh to 4 Lakh More than 4 lakh
21. Are you having livestock’s?
If yes how much the income from livestock’s………………………………………….
xi
38. 22. Have you ever face any kind of problem? Yes ( ) No ( )
If yes what kind of problems
…………………………………………………………………………………………….
………………………………………………………………………………………………
23. If no what other facilities you expecting from the intermediaries
………………………………………………………………………………………………
………………………………………………………………………………………………
xii
39. Annexure II
Questionnaire for intermediaries
1. What are the major crops of this area?
Season Crops Sowing time
Kharif 1
2
3
Rabi 1
2
3
Zaid 1
2
3
2. What is your level in that supply chain?
i. Commission agent ( )
ii. Whole seller ( )
iii. Retailer ( )
3. from where you purchase that produce?
(1) Direct from farmers ( ) (2) Middleman ( ) (3) both ( )
4. if Farmers, Do you having permanent farmers ? Yes ( ) No ( )
5. How do you decide the price of produce?
Quality basis ( ) Quantity base ( )
6. Where do you finally sale that produce?
(1) Mandi ( ) (2) Rice mill ( ) (3) Directly to consumer ( ) (4) any other ( )
7. At what price you purchase the produce?
I. Rice………….
II. Wheat…………
III. Other crop………..
xiii
40. 8. At what price you sale the produce?
i. Rice……….
ii. Wheat…………….
iii. Other crop……………
9. Do you having storage facilities?
Yes ( ) N0 ( )
10. If yes how much amount you store
…………………………………………………………
11. 17. Factors involved in the selection of Farmers?
Factors Points
Interest on credit
Quantity of produce
Quality of Produce
Trust on Farmer
12. What are the other special services which you are providing to farmers?
6. Assured price ( )
7. Advance credit ( )
8. Transportation facilities ( )
9. Agricultural input ( )
10. Agricultural extension activities ( )
xiv
41. Vita
Prince Verma, the author of this manuscript was born on 18th December, 1988 in
Gadarpur, Uttrakhand. She has completed her high school and intermediate
examination from uttrakhand board, further she took admission in the prestigious
college of agriculture, a constituent of G.B.P.U.A & T (Uttrakhand) batch 2005
and obtained B.Sc. Agriculture degree in 2009 with first division. Thereafter she
got selected in MBA (Food Retail and Supply Chain) management degree
programme in college of Agribusiness Management of the same university. In the
month of November 2010 during campus placement she got selected by D2k
technologies as management trainee.
Address
Prince Verma
Shiva Colony, Kartarpur Road
Gadarpur (U.S.Nagar)
Uttrakhand
Email address-PrincV2008@gmail.com