corporate farming,

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Information about corporate farming,

Published on April 29, 2009

Author: vikkeysanchethi



An overview about indian farming industry and its future deals .. detai about family , corporate farming

Smot- School of Business 7&8, 2nd cross street, nehru nagar, perungudi (near taramani railway station) chennai-600096 Ph-044 43593570



Corporate farming  Corporate farming is a term that describes the business of agriculture, specifically, what is seen by some as the practices of would-be mega corporations involved in food production on a very large scale

INITIATIVE OF CORPORATE FARMING  National Agricultural Policy (NAP) of Govt. of India announced in 2000 envisaged that “Private sector participation in Agriculture shall be promoted through Contract Farming and Land-leasing arrangements (Corporate Farming) to allow accelerated technology transfer, capital flow and assured markets for crop production.

Corporate Farming  This is a system for the production and supply of agricultural / horticultural produce under forward contracts between producer / supplier and buyers.  Essential to this is the commitment of the producer/seller to provide an agricultural/horticultural commodity of a certain type, at a specified time and a price and in the quantity and quality required by a known and committed buyer.

REASONS FOR CORPORATE FARMING  Consolidation of small farm lands into larger land holdings  Increase in agricultural productivity  Introduction of value added products

 The farmer/producer will be required to plant contractor’s crop on his land, harvest and deliver a quantum of produce (based on anticipated yield) to the contractor.  He shall provide land and labor necessary for this. The contractor shall supply all required inputs for the production of the said crop

FARMS + CORPORATE A NEW SUPPLY CHAIN IN INDIA  Collaborative partner ship  Oilseeds , cotton and horticulture  new agri business  Knowledge intensive farming  Better solutions for farm related problems  More opportunities


WHAT IS FAMILY FARMING ?  A family farm is a farm owned and operated by a family, and passed down from generation to generation. It is the basic unit of the mostly agricultural economy of much of human history and continues to be so in developing nations.  Many remember the years when farming was a way of life. When you grew all your own food...eggs, pork, beef, poultry, gardens full of bountiful vegetables.  You didn't have to plant thousands of acres to make a living.  Those days are gone. Gone forever we're afraid. Along with those days, the Family Farm is disappearing.  In developed countries the family farm is viewed sentimentally, as a lifestyle to be preserved for tradition's sake, or as a birthright.  What once was an occupation thought to be unskilled by many, (even though it wasn't), has become a very technical job.

ALERT INDIA. .? W H Y I S T H E FA M I LY FA R M D I S A P P E A R I N G ?  Many farmers feel this is in the plans either by the government or by big corporations. If they run most of the farmers off of the farms, big corporations can take control of agriculture completely, thereby eventually being able to set their own price for agriculture products.  Today's prices are driving farmers out of business. What occupation do you know of that still receives the same wages received in 1972?  How many products sold in the world today has someone else setting the price the producer receives for it? A farmer can not say I want $2.50 per bushel for corn, as that is what it cost me to raise it. Someone else sets a price, and there's nothing a farmer can do about it. Someone else controls their destiny. No matter how hard they work, someone else controls the life of a farmer.

Farming is not an easy job. Fighting the weather is a constant situation. Either it's too dry, too wet, too cold, too hot, too windy, not windy enough. Every aspect of the weather affects farming. Fields can be destroyed by INSECTS, PEST like grasshoppers or red spider mites. Weeds can become out of control and drastically reduce yields Farming is a HUGE gamble and even if farmers work as hard as they can, are as honest as they can be, their lives are controlled by others. Their livelihood is in jeopardy constantly. Farming is a 'labor of love' for most farmers. Why else would they be doing this for the prices they are getting in today's market? Some day soon, it will be too late to save the Family Farm. Wake up INDIA !! The Family Farm is about to go. When this does happen, big corporations will ask whatever price they need for crops to make a profit. This, in turn, will increase your cost at the grocery store tremendously. By then it will be too late. ” The Family Farm will have disappeared forever.”

WHY ARE FAMILY FARMS IMPORTANT?  In addition to producing fresh, nutritious, high-quality foods, small family farms provide a wealth of benefits for their local communities and regions. Perhaps most importantly, family farmers serve as responsible stewards of the land. Unlike industrial agriculture operations, which pollute communities with chemical pesticides, noxious fumes and excess manure, small family farmers live on or near their farms and strive to preserve the surrounding environment for future generations. Since these farmers have a vested interest in their communities, they are more likely to use sustainable farming techniques to protect natural resources and human health. The existence of family farms also guarantees the preservation of green space within the community. Unfortunately, once a family farm is forced out of business, the farmland is often sold for development, and the quality land and soil for farming are lost. the current situation, for the quot;family farmerquot; to regain any sort of practical economic independence, it would seem necessary that the entire food industry be restructured. Furthermore, given the extreme number of defunct family farms, it is not so much a matter of saving or preserving the family farm (whatever it was, it is effectively already gone), but of using the remaining knowledge, expertise and farms as the framework for the quot;new family farm.quot;

Corporate farming is a term that describes the business of agriculture, specifically, what is seen by some as the practices of would-be megacorporations involved in food production on a very large scale. It is a modern food industry issue, and encompasses not only the farm itself, but also the entire chain of agriculture-related business, including seed supply, agrichemicals, food processing, machinery, storage, transport, distribution, marketing, advertising, and retail sales.

Corporate farming is often used synonymously with agribusiness (although agribusiness quite often is not used in the corporate farming sense), and it is seen as the destroyer of the family farm. CONTRACT FARMING: quot;Contract farmingquot; is a form of vertical integration where the farmer is contractually bound to supply a given quantity and quality of product to a processing or marketing enterprise. (The buyer agrees in advance to pay a certain price to the farmer and often provides technical advice and inputs (the cost of the inputs being deducted from the farmer's revenue once the product has been sold to the buyer).

Benefits of Corporate Farming The core argument for the methods criticized as corporate farming is essentially: quot;This is the way to keep up with population growth, and to make inroads into feeding billions of people to developed nation standards—this is the only way to feed the world.“ Indeed, rapid technological development and large-scale global production management are responsible for an unprecedented abundance of inexpensive, widely available, attractive, quot;safequot; food. By lowering the cost of raw food inputs, creating sophisticated long-distance distribution networks, producing processed convenience foods, and making food available year-round in vastly stocked supermarkets, corporate farming has presented consumers in the wealthiest regions of the world with an immense variety of food, at relatively low cost. Today, in North America, only about 10% of average income is spent on food. By this measure, provided these methods are sustainable, corporate farming would appear to be a tremendous success.

Corporate farm vs family farm One major difference between independent farming and corporate farming is that a corporate farmer is usually a contracted employee, rather than the owner of the farm. However, ownership itself does not mean independence. An owner-operated farm today faces many constraints that are completely out of the owner's control. Most of these can be seen in light of increasing concentration of ownership, not only of farms, but of the equipment and inputs necessary to farm, and the available sales channels.


Introduction  CORPORATE farming encompasses the production of all crops as well as allied activities including processing of seeds and businesses relating to pesticide, fertilizers, agricultural machinery/equipment used and related research activities  The average agricultural growth rate over last 40 years was 4.3 per cent which reflects good performance. Population growth rate averaged around three per cent over the last 40 years which is slightly below the growth rate of agriculture sector.

Current scenario  With the advancement in technology and awareness, the trend of food consumption is changing towards high nutritional and hygienic foods. This is also widening gap between demand and supply. Food crisis is being observed now-a-days which is likely to persist in future  In this scenario, a higher growth rate of agriculture sector is needed so that the domestic needs could be fulfilled

Contd…  The scope of horizontal expansion in agriculture production has become limited due to shortage of irrigation water .

Solution for the scenario  The scope is now in vertical expansion through improving farm productivity levels. This can be accelerated through corporate farming. Measures and actions  There is a need to make quality seeds and fertilizers available at competitive cost; improved pest/weed management; transfer of agriculture-related technology and providing technical knowledge to farmers together with the requisite funds needed by them and introducing well-planned marketing mechanism.

Policies and laws  In addition to improving facilities given to small growers, the government should formulate policies for initiation of corporate farming on persuasive basis.  Agriculture research and extension department needs to be revamped and its policies and programmes re-designed so that they may play vital role in bringing a revolution through corporate farming

 There is a need to make stringent laws in respect of adulteration of pesticides/fertilisers to enhance crop yield and protect farmers financially  Investment in agriculture sector needs to be increased significantly  The govt should ensure that any genuine and legitimate request in respect to corporate farming is not turned down by any financial institution.

 Higher and sustainable economic growth cannot be achieved unless we succeed in doubling our agriculture production in the next 10 years.  The govt has to encourage banks to invests in productive sectors like agriculture and industry

A case study… KUPPAM PROJECT IN A.P Location: Kuppam, Chittoor district, A.P Project start date: June,1997

Why Kuppam?  Kuppam area is part of Drought Prone Areas Program(DPAP) block and chronically drought affected  Eighty-five percent of the population in the area live below the poverty line  Only 10% of the gross cropped area is under assured source of irrigation  Saline lands  Soil composed of gravel and stones of varying sizes with low level of organic matter

A Pilot demonstration project  The Kuppam Pilot Project was primarily undertaken by the Government of Andhra Pradesh through its Rural Development Department to promote and demonstrate Corporate Agriculture  Demonstrate use of corporate farming  Area coverage 170 acres of land  Corporate: M/S. BHC Agro (India) Pvt. Ltd

Estimated project cost I year 1997 - 98 Rs. 521.09 Lakhs II year 1998 - 99 Rs. 133.83 Lakhs III year 1999 - 2000 Rs. 156.59 Lakhs Sub Total Rs. 811.51 Lakhs II year Farmer's Rs. 152.16 Lakhs Share TOTAL Rs. 963.67 Lakhs

Objectives  To develop a new concept and view for agriculture production (based on modern agricultural methods and equipments)  Making the farm as a commercial Demo-farm which is managed by one hand (Corporate farming)

Investments made  Total investment 10 times more than those of rich farmers adopting modern cultivation practices  Technology transfer from Israel for the purpose

Management  Lands taken from farmers managed by the corporate body- M/s BHC Agri India Pvt. Ltd.  Every farm operation including Marketing, is managed by Corporate body  Employed heavy mechanization except for harvesting and cleaning of produce  Corporate control from stages of planning through the stages of development and management

Costs for farming & Income  Average cultivation cost Rs.20,000 per acre (agro-chemicals 23%, fertilization 18.1%, power and fuel 26%, seeds 8%, labour about 25%)  The company claimed that after an average period of 1.5 years, an income of Rs. 150 lakhs was realised and so far Rs. 29 lakhs income was distributed to the farmers @ Rs. 17,000/- per acre.

Labour  mostly for machine operators or for field supervision and used only to a limited extent for harvesting and for shifting of pipes  Family members, whose lands have been taken over, are engaged as daily laborers.  educated persons have been given supervisory/managerial role on the farm  They get employed only when there is work on the farm

Cropping  The major crop was gherkins ( with a net income of Rs. 12,000 - 15,000 per acre)  The local food crops have almost been eliminated  main guiding principle in deciding the crop was maximisation of crop income.  Farmers were never consulted while deciding on the crops to be grown.

Sustainability  Any system of production to be sustainable- in the first place, the energy (inputs) needed for production must be generated by and within the system itself. In the second place, since the system has to support and provide for those maintaining it, such a system must be able to generate more energy (outputs) than what it needs for its own growth.  the Kuppam project is not sustainable in net energy terms.

PAYMENTS TO FARMERS  It is only the government and not the company, which is making payments to the farmers for the lands taken over for the demonstration  payment for the land is , surprisingly not uniform  Farmers were not happy with the payments because of the big gap between what was promised at the time taking over the lands and the actual payment.

SOCIAL IMPACT  Lands of many farmers were taken against their will  Good cultivated lands, which were supporting cultivation of sugarcane, rice and other food crops, were also taken over  Farmers became totally dependent for a living on the corporate body losing their earlier independent livelihoods.

Positives  Drip irrigation which is a hallmark of the Demo Corporate farm  Proper power supply to the farms toward operating the machineries


Current situation:  Total cultivable area: 160 million hectare  People involved: 60 crores  Total output: 200 million tons Future estimates:  Total cultivable area: 100 million hectares  People involved: less than 60 crores  Required output: 400 million tons

Benefits  Increases out put  Reduces fragmentation  Increases export performance  Technology

Sharad joshi says that “The state should facilitate the exit of small and marginal farmers from farming by buying their land at market prices and provide them capital and training to go for non-farm occupations. Only those who have the mindset, technology, management, and financial resources to face the challenge of the Second Green Revolution should be permitted to do farming as an agribusiness “

Limitations  It makes farmers landless  Undermines local production  Failure of corporate farming in many countries

Few Cases Of Corpotate farming in India Company Area/region and crops 1, IEEFL, Pune Maharashtra, (subsidiary of the Tamilnadu, and Ion Exchange Goa; Plantations India set up in mainly fruit trees 1995) 2. Jamnagar Gujarat, and Farms Pvt. Ltd.- a Punjab; subsidiary of Agroforestry and Reliance horticultural crops Industries (Mukesh Ambani group) 3. Anil Dhirubhai Punjab; Fruits and Ambani Group vegetables (Reliance) 4. Field Fresh an Punjab; fresh equal partnership fruits and venture between vegetables Bharti Enterprises (Airtel group) and Rothschild 5. Vimal Dairy Narmada canal with a capacity to area in north process 2.5 lakh Gujarat; milk for litres of milk ( a captive part of the Rs. 900 consumption crore Vimal Group),

PEPSICO  Pepsi's tomato farming project was primarily responsible for increasing India's tomato production.  Production increased from 4.24 million tonnes in 1991-92 to 5.44 million tones in 1995-96 due to the use of high yield seeds.  Pepsi offered its contract farmers advanced equipment such as transplanters and seeding machines to help them carry out their task efficiently and speedily.  Contract farming has been encouraged by Pepsi.

 In late 1990, the company finally met its commitment to set up agro research centers in Punjab and Karnataka.  Pepsi imported superior technology from china and transferred it to the farmers in Punjab and Gujarat and as a result the Yield per hectare improved from 1 tonne to 3.5, 4.5 tonnes.  Company had invested 18 billion by 2000 in India.  Agri-program had been successful because of its unique laboratory- farm-factory approach.

 In 2000, company‘s export added up 3 billion. The item exported included food, basmati rice , gaur gum and soft drink concentrate.  Pepsi met the soft drink requirements of many of its plants world wide through its Indian operation.  Pepsi had done so much for country’s agriculture sector although It was not bounded to do so after change in regulatory framework.  In 2002, join hands with Punjab Agri-Export corporation to process citrus fruit.

 Pepsi is also in talks with Heinz India to supply tomato paste for ketchup production and is negotiating similar deals with Hindustan Lever and a few other FMCG majors for farm products like tomatoes, potatoes and citrus fruits It grows potatoes for sister company Frito-Lays India’s chips  and maize for ‘Kurkure’. It also grows basmati rice for Pepsi’s Season’s Harvest brand sold entirely in the Gulf.  For UB, Pepsi will cultivate 20,000 acres with barley, and plans to scale up to 1 lakh acres.


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