Problems and Issues facing Farmers groups and cooperatives in Agricultural marketing

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Posted by admin | Posted in Agri Knowledge | Posted on 07-07-2016

A special write-up by Dr Mandeep Pujara
Co-Chair – Agri Science Initiative
Project Director ATMA- Sustainable Agriculture Development Agency,
Govt. of Punjab, India

 Farmers group and cooperatives: A farmer group/ cooperative is a business organization owned and controlled by its members for their mutual benefit. Members finance their cooperative through equity investments. Control comes via membership rights to vote for and become directors. The directors hire the manager and establish the policy under which the manager operates. While the manager and directors have little direct control over the external environment, they do have control over and the responsibility for how the cooperative adjusts to a continuously changing world environment.

Groups and  Cooperatives face many problems and issues, both internally and externally, in seeking to adjust to these national and global changes.

Advantages of marketing from a group

  • Collection in one place to bulking of produce so that volume of produce can be achieved and the traders will be attracted to visit the farmer’s place;
  • Regular supply is possible if proper planning and management is done;
  • Price fluctuation can be managed if there are practices like contract farming, agreements etc.
  • Easy in communication for dissemination of information about price, volume and others;
  • Cost of production can be reduced by procuring all necessary inputs using big transport;
  • Collection of produce and transport to reduce marketing cost;
  • Access to fund without collateral with group as a guarantee;
  • Easy access of funds and other support services by the government and donors;
  • More funds can be gathered from the members if big plans are envisioned;
  • Post harvest loss can be minimized;
  • Provision of capacity building and training from the processing company;
  • Bargaining power improved

Problems and Issues

 1. Lack of marketing skills

 Most of the groups or cooperatives usually do not have marketing skill. They are managed by someone from the members of a group who do not have any knowledge on marketing and managing business as such. Groups or cooperatives will have to use marketing strategy to run their business. Some of the innovative strategies followed are: fair price shop, branding etc. They should advocate Government to support them in providing services and finance as a seed capital to start their business.

2. Lack of cooperation

Past experiences have shown that the group approach works only when the member of the group have similar problems. The most common problems with the farmers are marketing of their produce and receiving all types of inputs regularly. Farmers are reluctant to share their land or work in a common land for growing agricultural commodities. Group has worked in the land to grow vegetables and collectively sell in the local market. So, it is better to work in a group for collectively purchasing inputs such as seeds, fertilizers, pest, etc. so that the cost will be reduced and also for marketing of their produce. It is evident that the single farmer will not be able to fulfill the large order placed by the market traders. Farmers can join hands working together by bringing their produce at the collection centres to sell the traders.

 3.Weak economic status

Most of the cooperative societies are not financially strong enough to deliver vibrant products and services to ensure their market share. This is a basic challenge before the cooperatives. They should be made financially self sustained by increasing the members and their contribution as a share capital.

4.Access to local market

It is very difficult to manage and is costly in marketing of produce far from the cultivation. There aremore market opportunities if people can identify local market needs of the consumer and farmer can easily make a profit by selling it

 5.Poor management

Cooperatives are efficiently managed by experienced, trained and professionally qualified staff under the supervision and control of democratically-elected boards of directors. Organisation should be led and managed by energetic, professional and dynamic persons. Business should be conducted in accordance with modern management principles. The managers of cooperative business should be more professional in their market operations. They should be active enough to trace new marketing opportunities as and when they appear and make use of them for their further growth. They should make brilliant purchase decisions by studying the market trends. For example, investing more in fast moving products may increase the returns. Quality should be the key in cooperatives and steps should be taken to reduce the wastages and cost of goods sold. In short, the manager / secretary of a cooperative store should deliver his service in a professional way to prove himself competent and his business successful.

 6.Leadership and understanding

Leadership and understanding between the team members are the success factors. If there is understanding between the members then it will be easy for visioning and planning of activities.

There will not be any dispute and will be an attitude of helping each other. Leaders should take care of providing marketing services to their members without his selfishness.

 7.Lack of communication and participation among the members

Interaction between the members and the management committee of cooperative is very less and takes place when there are only economic activities. This has caused difficulty in understanding their problems and issues. Experience has shown that success of cooperatives is due to strong relationship and trust with their membership, which has been built over years through effective marketing support, services support and transparency of the exchange process.

 8.Absence of common brands

To make cooperative businesses successful there is a need of more common brands which is absent today. For example, dairy products in India have individual names in each state, and they are well-known as cooperative products to people of that particular state only. Instead, if we could integrate them under a common brand it will be more successful and beneficial. It will be recognized as the cooperative product  of India not only by Indians but also by the people abroad. This will reduce the marketing overheads, including promotion costs and will also result in high reach as a single advertisement serves the purpose.

 9.Poor management of Storage facilities

There is a common understanding that when there is oversupply produce can be stored and marketed later when price rises. Most agricultural crops are suitable for short-term storage, maybe for few days. Storage is usually expensive and spoils its freshness and quality. In most situations, when the produce is brought out of the store it has to compete with freshly arrived produce. Finally, farmer will get less price, and in addition they have to pay for the storage costs as well. There are few crops suitable for long term storage. Storage in production areas is often not successful because the storage facilities are under utilized for most of the year and are uneconomic.

 10.Middlemen makes excessive profits

Why farmers do not get the retail market price?

If the retail price of tomatoes is set at Rs.20 and if the same information is made available in the chart, farmers may not get the same price. There will be variation in the price received by the farmers due to various quality factors.

Traders are blamed for making more profits. Usually traders are the middlemen, who  link the farmer’s produce with the consumers. Sometimes they also build linkages with the different market far away from the production area. Many times, they are neglected and tried to sell directly in the market. Actually, the profit margins for the farmers are more than 60 per cent but due to low quantity of transaction, farmers are not benefited. For examples, if farmer sells 10 kg of chilli at the rate of Rs. 80 per kg then will get total of Rs. 800. The retail price of chilli is Rs. 100, which shows that farmers have received 80 per cent margin where as traders margin is only 20 per cent. Traders still make good money taking advantage of selling in volume. If he sells 8 tons, which is one mini truck load and makes profit of Rs.160 thousands.

 11.Groups and cooperatives formed only for the sake of getting government and donor’s support.

Groups or cooperatives should be managed in a more business-like manner – these are not social clubs or charity organisations. They should provide advice to the farmers on planting suitable crops, which earn them higher income. Regular dialogues among farmers, cooperatives and market authorities should be undertaken to resolve problems. For success, the farmers’ orientation should be on improving productivity and quality. Farmers will have to take the risk at different stages of production until the marketing. So risk management strategies at various stages of marketing from production until the marketing will help to manage risk.

 12.Old traditional business activities

There are many cooperatives, which do not take care of market trend and follow the same old business principle. They are not able to adjust themselves by providing knowledge on business techniques adopted by other professionals to their members.

 Points to be considered for successful management of cooperatives and groups

 For successful management of cooperatives and groups a capable manager is required. Capable manager should be recruited and trained for successful operation of regular business operation.

  • Cooperatives should do networking and coordinate with the other cooperatives. Few similar activities shall be done together to minimize cost and to expand market.
  • Cooperatives should be capable to update themselves with the market information.
  • Should be able to prepare marketing plan and implement activities
  • There should be transparency in activities, responsibility, and cash transaction.
  • There should be proper management of accounting, asset, etc. and proper communication to all members.
  • There should be regular monitoring of progress and achievements.

 

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