The Future of Farming is Bright with Farmer Produced Organisations

Agriculture has been an integral part of human society for thousands of years. People around the world have relied on it for food and shelter. A number of factors, including climate change and the global economy, have made farming increasingly difficult in the past few years. The high cost of inputs can cause financial hardship for farmers in rural areas. In addition, they lack access to the latest technology required to compete in the market. By doing so, they run the risk of not being able to meet global demand for food and reducing their profit margins.

Welcome to the World of New Farmer-Produced Organisations

As the world progresses, so does the agricultural industry. To ensure that farmers can provide for the future, new farmer-produced organizations are being formed to support them.?

A Farmer Producer Organization (FPO) is a form of Producer Organization (PO) comprised of farmers. PO is an organisation that organises any type of production, such as non-farm products, agricultural products, artisanal items, and so on. FPOs are promoted by the Small Farmers' Agribusiness Consortium (SFAC).

The Effects of the New FPOs on Agriculture

The new wave of Farmer Producer Organizations (FPOs) is having a positive effect on agriculture. These organizations are helping small farmers improve their production and connect with other markets.?

By providing market knowledge, inputs, and advocacy, FPOs serve as the main source of income enhancement. An FPO program helps farmers improve their socio-economic conditions, increase their access to markets, and develop their entrepreneurial skills.?

In addition to promoting sustainable practices, these organizations advocate for the rights of farmers. Additionally, they are creating networks of farmers to share knowledge and resources. Their efforts have a positive effect on farmers' lives and the future of agriculture.

The effects of the FPOs are far-reaching and are sure to have a positive impact on the future of farming.

What benefits will farmers experience through this system?

By working together and producing their own organisations, farmers will be able to increase their productivity, efficiency, and profitability. In addition, they will be able to better compete with large agricultural companies.

Providing Services:?

FPO provides a variety of services to their farmers, such as expanding capacity via capacity building services, improving market access through improved market connections, and increasing productivity per crop through higher quality seeds, fertilisers, and growing links with better institutions.

?Better income to farmers:?

Better services supplied by FPO serve to boost farmers' socioeconomic conditions by increasing net output and enhancing farmer productivity by offering higher quality produce. Procuring inputs in bulk at a lower cost and selling them in bulk at a market would help farmers achieve higher prices for their output, so increasing their revenue.

?Linking farmers to market:?

Connecting farmers to markets is crucial for improving the livelihoods of smallholder farmers while also benefiting consumers. Smallholders are more efficient producers, but they confront significant challenges in marketing their products. Farmer producer groups ensured marketing links and allowed small farmers to participate in marketing more collectively and efficiently. They are in a better position to reduce transaction costs associated with accessing inputs and outputs, acquiring critical market information, gaining access to new technologies, and entering high-value marketplaces, allowing them to compete with larger farmers and agribusinesses.

Value chain addition:

FPO features a more efficient value chain addition processing unit. Value addition of produce at the farmer's level would allow farmers to do business more easily and keep more money by performing beyond the farm level. Value addition through branding, sorting, and processing improves skills and knowledge, aids in produce procurement, and provides farmers with reasonable prices, facilitating marketing options, reducing post-harvest loss, and providing tremendous employment generation potential for rural poor in general, and women in particular.

Constraints of FPOs

1. Access to flexible capital in the form of joint-equity, like the equity grant scheme of the government, and allowing for private investment from foundations can help meet the minimum requirement bar for direct participation in commodity exchanges and allow for a risk buffer which cannot be maintained by any debt-based instrument.
2. Aggregating and holding raw produce carries severe market risks, and logistical overheads of storage and transport which when not performed to their most efficient level, do not result in a profitable business. This is because the risk involved in procurement and output related activities is far more than that of the input side of the market. While dealing with output related risks, the FPOs have to manage risks related to price volatility, cost of storage and interest costs among many others.
3. FPOs face the classical issue of the Principal-Agent problem where decisions affecting the Principal, the farmers and shareholders of the enterprise, are being taken by the agents, and the management of the producer company most of whom are staff on the payrolls of the parent NGO. If the interests of shareholders are not aligned with that of management, due to gaps in accountability, incentives (management not being allowed to be shareholders, and being on the pay-rolls of the parent NGOs that have promoted the producer company), robust and enduring models of producer companies will be hard to find or form.?
4. Local agri-market environments are controlled strongly by a network of traders, middlemen and other rent-seekers who have entrenched relationships with farmers. The relationship intensity facilitates strong networks of reciprocity and manifests as a power relationship making smallholder farmers bound to these traders in many ways. This apart, they also offer flexible lending terms, albeit at high rates of interest which interlocks the produce making it unavailable for free transactions on the market platform or for procurement by the FPO.

Replicating the Amul Model across India can be highly successful…

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Profits produced under the Amul model enures to the advantage of both the producer and the shareholder without any other investor throwing a shovel into the spoils since there is a perfect alignment between producers and shareholders, and with a perfect mutuality of interest ushered in. Amul, for example, has 7,53, 194 producer-shareholders from 1,815 villages in the Kaira area, mobilising 2.9 million litres of milk per day. It takes a visionary like Patel and Kurien to see a project through to completion. They achieved that with Amul, but no one has stepped up to mobilise farmers growing grains, pulses, fruits, and vegetables for PCs.

Instead of supporting FPOs on paper, the government could establish a few model FPOs around the country. It might be a stepping stone along the lines of Amul, which spawned more than a dozen successful milk cooperatives in India that secured better milk prices with accountability.

Recommendations for FPOs

The potential of Indian agriculture is something that cannot be ignored.? FPOs have the ability to operate as a change agent in India’s rural economy.

Farmers are taking up farming as their profession for subsistence, but there is a serious lack of support from government institutions, which leads to failure of crops and heavy indebtedness. FPOs can provide this much-needed support in terms of loans or guidance for farmers.

The future of farming is bright, and FPOs have a big role to play in this. FPOs have the potential to increase farmers' incomes, improve food security, and promote sustainable agriculture. But to realize these benefits, FPOs need the right policies and support from governments, donors, and other stakeholders.

In India, farmer involvement in futures trading is exceedingly low. It is critical that more farmers or FPOs join in the futures market in order for it to fulfil its price discovery and risk reduction objectives and have an influence on Indian agriculture.

1. To begin, FPOs should concentrate on commodities that are not sensitive in terms of food security or government action. Market interventions through programmes that secure high MSPs, if properly implemented, are likely to render futures obsolete, as the government will cover all market risks with no risk to the farmers.?
2. Determine agricultural producing centres and develop targeted measures to promote futures trading in these areas. In the futures markets, there is a mismatch between producing areas and trading districts. The focus should be on places that are in the commodity-producing districts. The construction of delivery centres is the next priority. Producing districts must be structured around delivery centres. More location-based contracts should be offered because this may not be possible in all circumstances. The Commodity Exchange (NCDEX) can take the lead in this area.
3. Resource Institutions are the organisations on the ground that help the FPOs operate, and they must be taught, educated, and acquainted with ideas like futures markets and pre-harvest hedging. In exchange, they may train FPOs and assist with scaling up. Given the resource institutions' on-the-ground presence, their participation in the connecting process is critical.?
4. FPOs need an enabling policy environment. Governments should provide preferential treatment to FPOs and create an enabling environment for farmer-led innovation. Government agencies such as NAFED, NABARD, SFAC, PACS, and others can all help by giving training or engaging in the market, or both. The presence of government agencies will help to develop confidence and encourage farmers to participate in the market, as well as help to remove the market's poor reputation.

With the right policies and support in place, FPOs can make a big contribution to the future of farming. They have the potential to increase farmers' incomes, improve food security, and promote sustainable agriculture.

FPOs have the potential to be change agents in India's rural economy. To reach that aim, they will need early aid in acquiring managerial abilities, as well as easy access to operational capital. Overall, FPOs, in my opinion, can be one of the numerous jigsaw pieces that must fall into place in order to reform Indian agriculture and better the plight of Indian farmers.

Read some case studies here .