The Farmer Opportunity in India

July 14, 2010, 11:36 AM IST
By Sandeep Singhal

In the last three years, Nexus has invested in two agriculture-focused companies. Suminter India Organics contracts with small and medium-sized farmers to grow organic produce that it then processes and exports. Sohanlal Commodity Management provides warehousing and logistics services to farmers, commodity exchanges and agriculture processors.

Based on my experience while sitting on these boards, there are a number of opportunities for entrepreneurs and companies that want to build business models aimed at farmers.

Here are some of the encouraging trends I see:

–Corporations want to deal directly farmers.


Associated Press
There are a number of opportunities to build business models aimed at the farmer Companies like PepsiCo, ITC and Godrej have been creating integrated supply chains for the last decade but have typically focused on specific products (e.g. Pepsi with potatoes and tomatoes, ITC with wheat.) In recent times, organized retail chains like Reliance Fresh and Food Bazaar have set up integrated procurement systems that directly reach the farmer instead of working through intermediaries. They also have increased the range of products they procure. Global trading companies like Cargill and Glencore have increased their procurement in the Indian market and have set up some presence in mandis, or local markets.


–Farmers are getting more information.

This information ranges from the most current procurement prices at regional mandis to marketing committee locations (provided by the National Spot Exchange and others) to weather reports and forecasts from mobile operators and specialist providers like Weather Risk Management Services. ITC has been providing this information at its eChoupals (kiosks that provide price information) for some time. Others have similar offerings.

–Recent policies aim to increase efficiency. For example, the “Warehouse and Distribution Act” calls for accreditation of warehouses, which will improve post-harvest management and reduce spoilage. It will also reduce the cost of intermediaries in the procurement process by facilitating warehouse receipt financing and by providing subsidies to build warehouses.

The new nutrient-based subsidy policy also helps optimize the use of fertilizers and improve soil quality. The earlier subsidy policy only covered a few products but the new policy gives a subsidy based on the nutrients in the fertilizer. This lowers the price of complex fertilizers and allows the farmer to choose the right fertilizer for their crop and soil type.

Agriculture is a large and disorganized market. So, there are many inefficiencies which require smart solutions. Farmers are increasingly more open to cooperating with private players as long as they are convinced of increased revenue, lower costs, and/or sustainability. The farming community is driven by word-of-mouth marketing and that can help an entrepreneur scale a business over time.

–Sandeep Singhal is co-founder Nexus Venture Partners, a venture firm with $320 million under management. Nexus has an active portfolio of over 20 companies across several Indian industries including technology, consumer services, media, outsourced services, the Internet and mobile, alternate energy and agribusiness.