Commercialization of Agriculture: Opportunities and Challenges

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Commercialization of Agriculture Opportunities
and Challenges
Krishna Prasad Pant
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Context

• WTO to facilitate trade
• Trade facilitation means more competition and
  more opportunity
• Competition needs efficiency
• Agribusiness Promotion Policy 2063

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What hinders efficiency?

• Fragmented or loosely linked enterprises in the
  commodity value chain
• low reliability in business relationships (in
  terms of quantity, quality and price)
• Regulatory requirements (health, sanitary,
  phytosanitary and quality)
• government-mandated
• industry/supermarket
• buyers
• High costs of production,
• small scale of production
• poor coverage low quality of infrastructure
• inadequate public support
• Large proportion of isolated farms

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Isolated farms

• Cause and result of subsistence farming
• geographic isolation
• isolation from market
• isolation from public support
• technological isolation
• information isolation
• Isolated farms find difficulty in
• starting a business
• selling their outputs
• purchasing for their daily needs
• WTO is very far for them

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WTO and Agribusiness

• Scale sensitivity
• Standards (quality, quarantine)
• Technology transfer in agriculture
• Plant variety
• Biotechnology
• Agro-chemicals
• Processing techniques
• Service openings
• Effects of policy changes abroad
• Food prices and production
• Competitiveness

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Check-list for export competitiveness

• Whether the product has export market or not?
• Whether the quantity is large enough for scale of
  economy in export?
• What about the quality of the product?
• Can it pass through the SPS/TBT measures imposed?
  
• Do we have a competent laboratory and
  certification system in place to certify the
  quality in the ways acceptable to the importing
  country?
• Is the certification economical to make the
  product compliance?
• Can the aggregated product be traced back?

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Supply-side Problems

• Highly fragmented businesses
• low economy of scale,
• limited commercial farming
• uneconomical to invest for research in product
  development and market promotion,
• difficulties in the collection of the products,
• heterogeneity of the aggregated production,
• difficulties in product tracing back to the farm,
  
• high expenditures on testing and certification as
  these services are charged on the basis of the
  services rendered rather than the quantity of
  transaction,
• Poor export infrastructure within the country and
  in transit
• Limited public supports in the exploration of the
  export market
• Traders reluctant to start the export business,
• Risks of trade deflections or low quality
  consignment

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Demand-side Problems

• Highly competitive
• Need to reveal product information
• production conditions
• quality of product
• other relevant information (Codex Alimentarius
  Commission, OIE, IPPC)
• Need to use some specified technology
• Requirements for grades and standards are ever
  increasing
• Certain products require health certificates,
  safety test marks, or standards certification of
  the importing country
• Heat or chemical treatment
• Product modifications
• Labeling, marking, packaging
• Several pesticides are banned
• If not, MRLs are fixed
• tracking the level of pesticides applied to the
  crops in the field
• Government is made responsible for food and
  quarantine regulation

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National Agriculture Policy 2061

• Increase competitiveness in regional and world
  markets developing foundations of commercial and
  competitive agriculture
• Large Production Packets with infrastructures
• Insurance
• Organic farming
• Attraction to youths
• Cooperative farming
• Contract farming

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Agribusiness Policy 2063

• Help to produce market oriented and competitive
  agriculture
• Promotion of domestic marketing and exports
  through the development of agro-industries
• Commercial production area
• Organic production area
• Export area

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Packaging in AB Policy (1/2)

• 1. Infrastructure
• Agriculture road
• Rural electrification
• Irrigation
• Market network, auction
• Assistance for collection center, processing
  plant, slaughter house
• 2. Inputs
• Agricultural inputs (seeds, fertilizers)
• 3. Land
• Lease hold pasture, herbs farming,
• Land ceiling exemption

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Packaging in AB Policy (2/2)

• 4. Services
• Technology and technical services human
  resource development, service center in PPP
• Loan project mortgage and group assurance,
  repayment
• Insurance
• Information e-commerce, PPP
• Cold storage 25 rebate on electricity
• Export import certification, organic
  certification
• 5. Mechanization custom duty rebate of 75 for
  10 years, interest subsidy on trucks
• 6. Processing contract farming, local raw
  material,
• 7. FDI

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What the government can do?1. Quality control
regulation and statutory law

• Quality control, disease-pest control and
  quarantine control, certification
• Support private sector for quality control and
  certification of agricultural products.
• Technical guidelines for quality control
• A reliable system of quarantine control and food
  testing should be established to ensure the
  export market that the products originating from
  Nepal does not have risk of sub-standard quality
  and disease-pests.
• Legislation (food, quarantine, contract farming,
  land contract)

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Government2. Investment and promote investment

• Infrastructure
• Long-term raw material development plan
• support measures requiring the agro-industries to
  plan and develop supply of raw materials from
  domestic sources
• incentives to agro-industries using the domestic
  raw materials.
• Encourage private investments on local
  resource-based and export oriented businesses
  (far reaching and predictable measures)
• domestic
• foreign
• Pay certain fraction of premium for agricultural
  insurance

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Government3. Access to the market

• Ensure preferential access and country of origin
• Lower tariffs on key agribusiness inputs like
  packaging materials, farm green houses,
  machineries, implements and cold chain equipment,
  mother machines, etc.
• Rationalizing tariff structures on import (from
  all the countries)

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Government4. Technical backups and marketing

• Technical backups for enhancement of productivity
  and the quality
• Technical teams managed by the commodity
  associations
• Encourage private sector to supply technology
• Marketing systems that can aggregate and link
  small produce to traders and larger markets while
  maintaining the traceability of the products.
• Training to and interaction among agribusiness
  operators, traders and exporters
• Collection of agriculture enterprise related
  data, analysis, projection and dissemination

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Government5. Knowledge generation

• Technology generation, verification
• Linking the livelihood concerns of small farmers
  to the export market
• Market exploration
• Technical and managerial means of reducing the
  cost of production and handling
• Post-harvest technology, preserving and storing
• Machinery and equipment
• Encourage private sector in research

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Input-push based agricultural policyfocusing on
government expenditure

• Market-pull based policy
• focusing on private investment

Business Creation A problem of many people is an
opportunity for some
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What producers processors can do?1. Investment

• Identify the competitive area for investment
• Scale of production, suitable technology
• Invest in quality control and certification
• Establishing backward-forward linkages is
  necessary to achieve the efficiency
• Invite foreign companies (in joint venture) to
  invest for value addition and exports

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Producers processors2. Quality control

• Every input used in the value addition should be
  as specified by the requirements of the export
  market.
• Every step of the value addition needs to be
  tested by an accredited laboratory and certified
  by the competent authority.
• Adherence to technical guidelines for quality
  control.
• Operating manuals to demonstrate quality control
  as required by export markets
• Testing and certification as business
• register and operate under the government testing
  and certification system
• SPS/TBT requirements of export market need to be
  learnt by the agribusinesses.

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Producers and Processors3. Technical
specifications

• Specify the terms of quality for the product,
  including size, appearance, and other factors
• Product and process requirements should be known
  before production planning.
• PP should be based on the contracts made with the
  traders.
• PP should visualize all the problems and
  prospects of production including the
• input use,
• variety requirements,
• pesticides and MRLs,
• inspection and quality control,
• farm households involved in the production
  process including their consumption requirements
  during the crop season.
• Packaging labeling should be as required by the
  export markets
• Treatment of biological packaging materials

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Producers and Processors4. Cost of compliance

• Agribusiness should compare a priori the
• costs required for quality compliance
• expected benefits from export
• level of risks involved

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What exporters can do?1. Market explorations

• Explore the niche products
• Have information about the tariffs and non-tariff
  barriers in importing country
• Know the pre-shipment inspection requirements of
  the importing country
• Find quality, testing, treatments and
  certification requirements and pass on these
  information to the producers and processors
• Know if the product is eligible for entry to the
  country of export
• treatments and conditions required
• health certificates, safety test marks, or
  standards certification
• Have full information of the product quality,
  quantity, production conditions of your export

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Exporters2. Meeting the requirements

• Beware of low quality products or products
  imported from elsewhere without having required
  value addition in the country.
• For getting a favorable treatment on export, the
  goods should be produced wholly or there should
  be sufficient value addition within the country.
• Provide information asked by importers
• Get the feed-back from the consumers abroad
• If you face any problem in export market, inform
  to the government
• Give inputs to the government for trade
  negotiations

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Thanks

• kppant_at_yahoo.com