After a hiatus, I am back. I have been quite busy lately with travel, work and family. And, this is a long overdue post…
In my previous post a while ago, I had mentioned that I would touch upon the social impact of mobile technology. While there are many dimensions to this, in this post, I would like to hit upon the impact of mobile technology on agriculture. Specifically, the producers or the farmers.
Agriculture has been with us since times immemorial. A lot of our current agricultural practices come from knowledge that’s been culled for centuries. In a way, that makes agriculture really unique. That said, farming is a tough profession as it is quite labor intensive with a lot of risk involved for the farmer. The farmer is at the mercy of many elements starting from the weather, pests, seed quality, soil quality, water for irrigation etc. Assuming that he has a decent harvest, he has to then sell his crop at a decent enough rate that covers his cost at the very least.
From a cash flow perspective, there are months of constant expenditures followed by, may be few months of cash-in. And then the cycle starts all over again. If the farmer has a large area under cultivation and if he practices crop rotation, then he may be better off due to cultivation of a minor crop during off-seasons.
I am writing this post with essentially developing countries in mind, specifically India, which is still primarily an agrarian nation where close to 60% of the rural working population engages in agriculture. Farmers in India, like in many other developing nations, have small land holdings and depend to a large extent on credit and bank loans to support their farming operation. Financial risk is perhaps the biggest risk that this farmer undertakes. A few years of bad crop or lousy prices could essentially sink the farmer. There are other factors that also contribute to failures – such as lack of interest of progeny in farming, worker migration, progressively smaller land holdings with each generation etc.
Despite the fact that agriculture in India is a mainstay profession, the market has not been efficient for the farmer in terms of pricing. The farmer generally gets a fraction (20 to 25%) of what the end consumer pays for produce. In comparison, in the developed world a farmer gets about 40 to 50% of the end consumer price. And that is because of myriad middle men that operate the wholesale distribution of produce or commodities. They control the pricing to the farmer. Soon after harvest, when there is an oversupply of produce, the intermediaries quote the farmers low prices. The farmer, who for the most part does not have access to a warehouse or cold-storage, cannot wait beyond a certain point, since he risks spoilage of his produce (mainly in the case of fresh vegetables). A grain farmer can afford to wait longer, but he has to sell his inventory at some point in order to realize cash to cover his expenses and hopefully some more.
Long story short, the middlemen control pricing. Since the middlemen have warehousing/cold-storage capabilities, they are also able to control food supply to the market. Meaning, they are able to get favorable pricing on both fronts. That said, India is also a country of regulations and government interventions. Meaning, as an alternate channel, the government (state/local) in many cases sets prices for the farmers and purchases directly from the farmers and warehouses food supply as a countermeasure to the free market. But since not all farmers are able to sell to the government and since government warehouses have limited capacity, often the farmer has to sell to the middleman.
It also turns out that information asymmetry plays a role in the farmer not being able to get favorable pricing. A village could have several middlemen offering a range of prices. And the farmer, due to many reasons could be selling to the middleman who’s offering him the worst price. Further, just a few villages away, the government could be holding an auction where the prices are much more favorable.
And this where mobile technology comes into play.
The penetration rate of the mobile phone in India is in the high 80%. More than 800 million people in India have mobile phones, making it one of the largest mobile phone markets in the world. Now, bear in mind that most of these phones are feature phones and a lot of farmers in India have mobile phones or have access to them. Further, it must be noted that in India since the 2000s, there have been several initiatives both private and government led, to offer farmers information pertaining to their crops, pricing, weather etc. ITC’s (Indian Tobacco Company) e-Choupal is initiatives that come to mind. But not every farmer had access to this information at all times, since the delivery mechanism for this information (in the case of e-Chaupal) was the PC/internet that was deployed through manned kiosks. While this effort has yielded success and is certainly commendable, the net it cast was not as wide as expected.
In late 2007, Reuters launched the Reuters Market Light (RML) service which was the first mobile phone based, easy to use, professional information service specially designed for the Indian farmer community. Information provided by RML enabled farmers to take informed decisions and reduces their production and marketing risk thereby directly enhancing their livelihood. It is estimated that over a million farmers in 15,000 villages have used this service. Through sharing, it is estimated to have been used by over a million farmers in over 15,000 villages. RML is a very affordable service that costs subscribers around $5 for 3 months and more often than not, this service is shared by farmers.
More recently, Tata Teleservices launched a service called ‘Mandi Bhav’ in early 2009 to push commodity pricing to its subscribers.
Deployment of this information via the mobile phone as reduced barriers to information that is vital to the farmer. This has allowed the farmer access to commodity pricing information published by either the government or private parties. The farmer can now choose the best price for his crop and also the right time to sell. To access this pricing and other relevant information, the farmer subscribes to an SMS based service. In India, where many things are still manual, where the roads are still dusty and where the first rains release the wonderful aroma of mother earth, pricing information is collected by agents from various sources on a daily basis. The information is then entered into a database and pushed out to subscribers via SMS. This price is guaranteed for a day. When the farmer decides to sell, he takes his commodity to the buyer his choice and sells at the published price. Before the sale takes place, the commodity is evaluated for quality and graded. The price the buyer pays is also based on the grade of the commodity sold.
In some cases, warehousing is also provided as an added level of service. In this case, after harvest and curing, the farmer deposits his commodity in a central warehouse where again, the commodity is graded. It is then stored (for a price/wt) at the warehouse until the day the farmer decides to sell. Here again, SMS messaging is used to communicate daily pricing to the farmer. When the farmer decides to sell, the sale price he receives is less that of warehousing costs.
While the SMS based system described above is not used by each and every farmer in India, it does highlight the impact of mobile technology in democratizing information and in this case enabling farmers improve their livelihoods.