In the course of a farming cycle, farmers face many issues – from sowing and harvesting to transporting and selling their produce for the best price. And price uncertainty is one of the many critical issues that haunt farmers. As a farmer is a price taker, he is subject to the price being an uncontrolled or exogenous variable.
In a developing country like India, where nearly 70% of the population’s livelihood is dependent on agriculture and its value chain, prices affect the income and consumption of a farmer as their expenses are primarily in food production and consumption.
Often, farmers don’t realize the costs of cultivation to compare it with their income in order to gauge their profit. To address this cost-benefit gap, WayCool identified partners in the value added food industry like food processors, and worked backwards from demand to supply to support farmers, ensuring that they always get a fair price for their produce and can maintain profitability.
A study was conducted to understand how this model improved farmer livelihood, especially for crops such as sweetcorn and baby corn grown in Attur, Salem in Tamil Nadu and Channapatna in Karnataka.
The majority of farmers lack an understanding of how fluctuating prices pose a risk. They rarely look at cost-benefit analysis in agriculture thus failing to identify how much they should invest and how much they can reap.
The average monthly income per agricultural household from July 2018 to June 2019 is only USD 10.218, with net receipts calculated using the “paid out expenses” approach.
WayCool has identified food processors as partners who provide quarterly or half-yearly requirements, unlike retailers who provide a daily or weekly demand. Food processors have a larger demand period of 3-6 months for crops like sweet corn and baby corn. The average cultivation period for both crops is 2-3 months. This allows the farmers to know the demand and market prior to harvest.
Food processing also provides value addition to the products. For instance, crops like sweet corn and baby corn are processed into pickles, have kernels removed and sold separately etc. Because of demand forecasting, the supply from the farmers is fixed which in turn results in minimal price fluctuations and steady income.
Thus, the farmer has a forecast of production and an assured buyer. WayCool identifies such buyers for the farmers to ensure assured market realization and profit margins for the farmers, which results in farmers derisking themselves.
Following the implementation of the identified solution, around 70 sweetcorn farmers and 50 baby corn farmers joined hands with WayCool and food processing buyers. Their collaboration has resulted in the following impact:
Overall, the economic status of farmers, who chose to integrate with WayCool and identified food processing buyers, has improved resulting in an increase in their profits. During the tenure of the study in these regions, Sweetcorn farmers recorded an average yield of 8 tonnes per acre while baby corn’s average yield was 4 tonnes per acre.
For both crops, there is 3-7 times assured higher revenue for the farmer. This indicates that the assured market realization strategy has improved the livelihoods of farmers resulting in assured and certain profit margins for farmers.