Value chain in agricultural system : Linkages of farmers to markets
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Dr Lakshmi Dhar Hatai
Stagnating productivity, rising costs, declining farm incomes, and high price volatility of agri-commodities, are making farming un-remunerative and risky. A significant revolution in food habits is encouraging diversification towards high - value commodities, post-harvest processing and value addition of agricultural produce. To raise income, employment, profitability, food security, global competitiveness and social welfare, a holistic approach with emphasis in value chain and value addition in agricultural produce has become imminent.
Agricultural value chain includes the full range of activities and participants involved in moving agricultural products from input suppliers to farmers’ fields, and ultimately to consumers. A value chain involves a series of value generating activities through which a farm / firm develops a competitive advantage and creates value.
The modern agricultural value chains are networks that specifically support three major flows: (1) Physical product flows- physical product movements from input suppliers to buyers to final consumers. (2) Financial flows- Credit terms and lending, payment schedules and repayments, savings and insurance arrangements (3) Information flows- these coordinate the physical product and financial flows. For the smooth functioning of the agricultural sector and success along with the agricultural value chain, all the three flows need to be continuous and regular. The value chain is a connected series of organizations, resources and knowledge streams involved in the creation and delivery of value to the end-consumers. It focuses on creating value in the eyes of the end-consumer this flow of demand is called demand chain. While supply chain is about the integration of manufacturer with wholesaler or retailer, but value chain is about the integration of the product and the end-customer. Thus, supply chain focuses upstream on integrating supplier and pro- ducer process, improving efficiency and reducing wastage and value chain focuses downstream on creating value in the eyes of the customer.
Farmers’ income can be enhanced not just by increasing productivity but also through efficient and effective value addition. The difference between price paid by consumers for value added products and farmers realization has been increasing rapidly. Lack of backward linkages between farmers, processors and longer chain intermediaries has resulted in lack of adequate economic benefits to farmers. Value addition to farm produce is possible through cleaning, grading, packaging, processing, branding and marketing etc. Value addition has a potential to generate more local jobs, better income and services. To improve market access for farmers, developing a robust agricultural value chain is essential. This includes enhancing linkages between farmers and markets by investing in infrastructure, minimizing the role of intermediaries, and encouraging collective marketing through farmer producer organizations (FPOs). Implementing contract farming and promoting direct marketing channels can help ensure fair and stable prices for farmers. Moreover, the use of digital technologies can facilitate real-time market information, improve transparency, and connect farmers directly with buyers. These efforts collectively strengthen the agricultural value chain system and increase farmers’ income.
Benefits of Value Chain in Agriculture :
1) Helps small farmers to expand crop area, produce market-led crops and increase crop yield (information flow)
2) Reduces cost and improves quality
3) Enhances credit absorption capacity of the stake holders
4) Reduces risk at all levels from production to the final sale
5) Brings in agriculture-led growth
6) Reduction in distress sale
7) Institutional framework to protect the primary producers
8) Farmers will be a better bargaining position with marketers
9) Value addition of farm produce at local level
10) Increasing income, profit and livelihood security
The agricultural marketing forces like marketable surplus, marketing channels, number of players at each level, profit margin of respective players and value addition by different channel players.
Linking of farmers to the markets through efficient value chains would reduce the use of intermediaries in the chain, and strengthen the value-adding activities by better technology and inputs, upgraded infra- structure and processing and exports. The value chain process can raise the income of farmers and will provide incentive for improving their management practices towards higher farm productivity.
The writer is Associate Professor and Head, Department of Agricultural Economics, at College of Agriculture, Central Agricultural University, Imphal, Manipur-795004.
Stagnating productivity, rising costs, declining farm incomes, and high price volatility of agri-commodities, are making farming un-remunerative and risky. A significant revolution in food habits is encouraging diversification towards high - value commodities, post-harvest processing and value addition of agricultural produce. To raise income, employment, profitability, food security, global competitiveness and social welfare, a holistic approach with emphasis in value chain and value addition in agricultural produce has become imminent.
Agricultural value chain includes the full range of activities and participants involved in moving agricultural products from input suppliers to farmers’ fields, and ultimately to consumers. A value chain involves a series of value generating activities through which a farm / firm develops a competitive advantage and creates value.
The modern agricultural value chains are networks that specifically support three major flows: (1) Physical product flows- physical product movements from input suppliers to buyers to final consumers. (2) Financial flows- Credit terms and lending, payment schedules and repayments, savings and insurance arrangements (3) Information flows- these coordinate the physical product and financial flows. For the smooth functioning of the agricultural sector and success along with the agricultural value chain, all the three flows need to be continuous and regular. The value chain is a connected series of organizations, resources and knowledge streams involved in the creation and delivery of value to the end-consumers. It focuses on creating value in the eyes of the end-consumer this flow of demand is called demand chain. While supply chain is about the integration of manufacturer with wholesaler or retailer, but value chain is about the integration of the product and the end-customer. Thus, supply chain focuses upstream on integrating supplier and pro- ducer process, improving efficiency and reducing wastage and value chain focuses downstream on creating value in the eyes of the customer.
Farmers’ income can be enhanced not just by increasing productivity but also through efficient and effective value addition. The difference between price paid by consumers for value added products and farmers realization has been increasing rapidly. Lack of backward linkages between farmers, processors and longer chain intermediaries has resulted in lack of adequate economic benefits to farmers. Value addition to farm produce is possible through cleaning, grading, packaging, processing, branding and marketing etc. Value addition has a potential to generate more local jobs, better income and services. To improve market access for farmers, developing a robust agricultural value chain is essential. This includes enhancing linkages between farmers and markets by investing in infrastructure, minimizing the role of intermediaries, and encouraging collective marketing through farmer producer organizations (FPOs). Implementing contract farming and promoting direct marketing channels can help ensure fair and stable prices for farmers. Moreover, the use of digital technologies can facilitate real-time market information, improve transparency, and connect farmers directly with buyers. These efforts collectively strengthen the agricultural value chain system and increase farmers’ income.
Benefits of Value Chain in Agriculture :
1) Helps small farmers to expand crop area, produce market-led crops and increase crop yield (information flow)
2) Reduces cost and improves quality
3) Enhances credit absorption capacity of the stake holders
4) Reduces risk at all levels from production to the final sale
5) Brings in agriculture-led growth
6) Reduction in distress sale
7) Institutional framework to protect the primary producers
8) Farmers will be a better bargaining position with marketers
9) Value addition of farm produce at local level
10) Increasing income, profit and livelihood security
The agricultural marketing forces like marketable surplus, marketing channels, number of players at each level, profit margin of respective players and value addition by different channel players.
Linking of farmers to the markets through efficient value chains would reduce the use of intermediaries in the chain, and strengthen the value-adding activities by better technology and inputs, upgraded infra- structure and processing and exports. The value chain process can raise the income of farmers and will provide incentive for improving their management practices towards higher farm productivity.
The writer is Associate Professor and Head, Department of Agricultural Economics, at College of Agriculture, Central Agricultural University, Imphal, Manipur-795004.