Commodity Aggregation

To make farming viable in India, we need to ensure remunerative prices for small and marginal farmers who are otherwise forced to sell most of their produce in distress in local markets at very low prices immediately after the harvest. Through our SHGs, we have facilitated an initiative to help farmers aggregate their produce and collectively sell in bigger markets at a time when they can get a better price.

Over 85% of farmers in India are in the small and marginal category, cultivating over 44% of the country’s farm land. Smallholder farmers are fragmented in space and have only small quantities of surplus to sell, which they dispose in local, unorganized markets. They are often heavily in debt to landlord-trader-moneylenders, being caught in interlinked market transactions and are forced to sell their produce immediately after the harvest (distress sale). Even when they have staying power, they face acute risk on both sides-production (output risk due to climate variations) and market (price risk due to market fluctuations). Long value chains ensure that much of the surplus is shared by the chain of intermediaries. Hence, there is growing awareness that smallholder farming can survive only if the farmers come together, organise themselves and tweak markets in their favour through collective sale of aggregated commodities. The platform through which farmers can do this is the Farmer Producer Organization (FPO).

Since 2012, SPS has promoted an independent FPO, RamRahim Pragati Producer Company Limited (RRPPCL), which procures commodities from smallholder farmers belonging to SHGs in the region. The FPO has contacts with corporate buyers and government schemes interested in bulk purchase of the farmer aggregated crops. The presence of the FPO in the local markets weakens the power of the traders and ensures base prices in the market for farmers. It functions as both a point of joint sale of output, as well as a platform for sourcing inputs for farmers. In the fiscal year 2013-2014, RamRahim procured total commodities equivalent to Rs. 282.51 lakhs.

In 2015, RRPPCL has entered the online marketplace through the National Commodities Derivatives Exchange (the first FPO to do so), so that it can conduct transactions in the future market ensuring sale prices of specific crops months before harvest. This action helps to protect the farmer from the price volatility of agriculture. In addition, plans have been developed to establish a produce processing center in the Bagli area to provide the opportunity for value addition to crops through primary cleaning and processing (spiral grading, winnowing, etc.) that will move the farmer further along the value chain.

Commodity Aggregation

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