Agricultural Value Chain: The Concept Of The Agricultural Value Chain

In this essay, the author

• Opines that the growers in ag vc are the most vital node and their position determines the sustainability of the chain.
• Explains that the market linkages in agriculture can be divided into two distinct systems; traditional marketing systems, and vc marketing.
• Explains that sub-optimal growth of food processing is attributed to the vicious circle of high unit cost - low demand, low capacity and utilization.

• Opines that the growers in ag vc are the most vital node and their position determines the sustainability of the chain.
• Explains that the market linkages in agriculture can be divided into two distinct systems; traditional marketing systems, and vc marketing.
• Explains that sub-optimal growth of food processing is attributed to the vicious circle of high unit cost - low demand, low capacity and utilization.
• Explains that domestically, affordability is the key issue since price differential between fresh and processed food is very high, whereas low-income indians are very price sensitive.
• Explains that the cultural barriers of preference for fresh food and eating at home are constraints in development of this sector. urbanization, nuclearisation of family, working couple, costs of domestic help, media exposure, and finally emergence of the global consumer.
• Explains that the cost and quality of farm produce suffers because of tiny and fragmented holdings, low technology, inferior agri-imports and inappropriate variety.
• Opines that the cost of power, cold chain, water, storage, handling, transportation, etc. is high and availability is inadequate or inappropriate.
• Opines that availability and timeliness of credit are major issues since bankers' perception of risk in the sector is high and they are reluctant to lend despite being included under priority lending.
• Opines that availability of working capital is a bigger problem for this sector and its inventory requirements are high.
• Opines that this sector does not often use the best technology, machinery, and management practices. product innovation is sporadic and low.
• Opines that a wide network of r & d institutions under csir, icmr, and agriculture universities exists, but their linkage with users like farmers and industry is undeveloped.
• Explains that the cost of packaging varied from 20 to 60% of the end consumer price due to high costs and uneconomic scales.
• Explains that long and fragmented supply chain is a constraint. there is mis-match between demand and supply, limited choice to consumers, unacceptable wastage and hygiene, opportunistic profiteering and irrational pricing.
• Explains that marketing and distribution except by big companies is largely unorganized and fragmented. the share of organised sector in agro processing is less than 25% in india.
• Explains that while kirana stores have the advantage of proximity to consumers, they are associated with low product quality, lack of variety and low hygiene and cannot provide shopping experience. fragmented retail structure results in inefficient storage, transportation and distribution, wastages and value loss.
• Explains that companies use logistics service providers and c&f agents to reach wholesalers and then retailers, each with a margin of 0.5-1.5%, 4-7%, 8-20% respectively.
• Explains that rs.100 goes to processors, and less to farmers, village and district commission agents and wholesalers. all qualities and grades get mixed up.
• Explains that organized retailing reduces intermediaries and transaction costs and makes it cheaper for consumers. it enables processors to test market their products effectively.
• Compares india's high food tax rates with the uk, ireland, and malaysia.
• Explains the poor quality of raw material supply and high losses during transport from farm to factory.
• Opines that poor and inconsistent quality of processed products due to lack of standardisation and quality control.
• Explains that india is one of the world's major food producers but accounts for only 1.5 percent of international food trade owing to low level of value addition to food production.
• Explains the concept of "agricultural value chain" (vc) as a sequence of value adding activities, from production to consumption, through processing and commercialization.
• Explains that farmers are engaged only in farming and have no influence over the management of the vc. a first step to chain development is to support them to improve their farming skills and capital formation through farm extension and financial intervention.
• Explains that farmers are specialised in farming and exert influence over the management of the chain. they have developed basic assets and farm management skills but are yet to improve their relations and linkages with the market.
• Explains that growers are not only engaged in farming, but have moved into other activities in the vc, such as processing, marketing, or exporting of produce, without exerting more influence on the management of the chain.
• Explains that growers have moved upstream in the vc, increasing both their activities and their influence to manage the chain. they are specialised chain actors with attractive product lines, basic farm management skills, and willingness to innovate and take risks.
• Explains that farmers produce commodities that are "pushed" into the marketplace and the other actors do the rest of the job to push the end product to the consumers.
• Explains that in vc marketing system growers are linked to the needs of consumers, working closely with suppliers and processors to produce the specific goods required by consumers.
• Explains that agriculture is changing rapidly from fragmented production and marketing relationships to integrated market systems, or chains, driven by economies of scale and globalization of the food chain.
• Explains that the food industry employs 1.6 million workers directly/indirectly and this is projected to grow to 37 million by 2025. this can be achieved by minimising expenses at levels of food processing, developing facilities for storage of agricultural food produce, transportation, processing facilities, utilisation of residues and bi products.
• Recommends that national plans for improvement and extension of agro-processing technology at farm, traditional small industry, and modern industry levels be prepared.