value addition and processing of agri-products

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Value Addition And Processing of Agriproducts: Opportunities and Challenges BY: Surabhi Mishra Department of Biochemical Engineering and Food Technology, H.B.T.I., Kanpur
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    13-Sep-2014
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a short analysis of value addition and agri-business in india

Transcript of value addition and processing of agri-products

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Value Addition And Processing of Agriproducts: Opportunities and ChallengesBY:

Surabhi Mishra Department of Biochemical Engineering and Food Technology, H.B.T.I., Kanpur

SUMMARYPresent scenario of agriculture in IndiaPost harvest losses & the global pictureValue- added agricultureStrategies for value additionAgri-businessSubsectors of agri-businessEmerging areas of agri-businessPolicy initiatives and taxation policiesSupporting institutionsIndian corporates in agri-businessAn example of corporate-farming: Harrisons Malayalam LtdPresent scenario problemsKey strategies at national levelConclusions

PRESENT SCENARIOFood production in the country is adequate but it is not accessible to all. Inadequate income earned by about 25% populationHigh post harvest losses on farm and in the supply chain linking farmers to markets (estimated annual loss of Rs. 44,000 crore)Inadequate livelihood opportunities in the production catchments and rural sector

3PRESENT SCENARIOHigh level of food wastage due to shortage of storage spacesMismatch between agri-exports and agri-importsHuge quantities of under-utilized crop residues and processing by-products leading to loss of income and environmental sustainabilityLow levels of agro-processing and value addition4PRESENT SCENARIOIndian wastes more fruits & vegetables than are consumed in UKCumulative waste is about $ 6.7 billion which is equivalent to 40% of the total horticulture producePoor infrastructure and logistics supportRough and unorganized handlingIndia has 70% more arable land but produces 30% less than China5PRESENT SCENARIOIndia ranks first in the world in cereal and milk production and second in fruits & vegetables and in five producers of groundnut, rice, wheat, tea, coffee, sugar, spices & oil seeds.Even with an industry size of US $ 70 billion,we process less than 2%.The industry has about 1.6 mn direct employees and accounts for about 13% of the countrys exports and 6%of the industry investment.6CROP% Loss, minimum% Loss, maximumCEREALS3.9(Sorghum)6.0(Wheat)PULSES4.3(Chickpea)6.1(Blackgram)OILSEEDS2.8(Cottonseed)10.1(Groundnut)FRUITS5.8(Sapota)18.0(Guava)VEGETABLES6.8(Cabbage)12.5(Tomato)POST HARVEST LOSS : SUMMARYLoss (%) at National Level in different operations/channelsS.NCROPTOTAL LOSS IN FARM OPERATIONS (%)TOTAL LOSS IN STORAGE (%)OVERALL LOSS (%)1Cashew0.90.21.12Sugarcane7.80.98.73Turmeric6.70.77.34Egg4.91.76.65Marine fish1.81.02.86Meat1.40.92.37Milk0.70.10.8Global PictureHigh income countries add US$ 180 worth of value to one tonne of agricultural produce98% of agricultural produce in high income countries undergoes industrial processingAbout 30% only is processed in developing countriesAverage value added per tonne in developing countries is only US$ 40

If we realize with honesty we will have toaccept that Post harvest processing and value addition isabout 1.5 percent in India as against 30%post harvest processing in some countries Production to consumption chain of agro-processing activities

Production To Consumption Chain Of Agro-processing Activities Agenda Of Agro-processing FacilitiesPrimary/ secondary processing of main produceBy-products utilizationSupply/cold chain managementCustom hiring servicesProduct quality and safetyMarketingWhat is Value-Added Agriculture?Adding Value Process of changing or transforming a product from its original state to a more valuable state

Add value to wheatBy processing it into a product (flour)Desired by customers (bread bakers)12PrioritiesExpanding the level of processing in the food grains, fruits & vegetables and dairy sectors on priority,Raising the level of processing from primary/ secondary to secondary/ tertiary for all commodities,Modernizing the food processing sectors using the efficient equipment and processes for cost competitiveness and better quality products,Ensuring adequate training of workers, supervisors and managers in food processing industries to ensure efficient operations and product quality,Providing skills and knowledge to farmers for ensuring quality of produce through adoption of GAP, andPromoting seamless value chain including post harvest management and value addition in production catchments to obviate the quantitative and qualitative losses.Adding value to products can be accomplished in a number of different ways, but generally falls into one of two main types:Creating ValueInnovationIndustrial InnovationCapturing ValueCoordination

CREATING VALUEOccurs with actual or perceived value to a customer for a superior product or serviceInnovative new productsEnhance a products characteristicsEnhance servicesCreate brand namesDevelop unique customer experiences

CAPTURING VALUEChanging the distribution of value in the food/fiber production chain. Meant to capture more of the consumer dollar through:Direct MarketingVertical IntegrationProducer AlliancesCooperative Efforts

Selling products directly to the consumerSelling beef animals on the hoof Selling homemade soaps & lotions to the general publicThink eBay!

http://images.google.com/imgres?imgurl=http://www.insidefurniture.com/insidefurniture/images/marketing_cartoon_1.jpg&imgrefurl=http://www.insidefurniture.com/insidefurniture/blogservation/index.html&h=224&w=309&sz=24&hl=en&start=16&tbnid=KN8RhgvhDYw8NM:&tbnh=85&tbnw=117&prev=/images%3Fq%3Ddirect%2Bmarketing%2Bcartoon%26gbv%3D2%26svnum%3D10%26hl%3Den%26client%3Dfirefox-a%26channel%3Ds%26rls%3Dorg.mozilla:en-US:official%26sa%3DGDirect Marketing17 One producer or business owns the product from beginning to end. This producer or business doesnt sell the product until the consumer purchases it:Tyson Chicken -

Vertical Integration 18Individuals / companies from the same level of the food chain consolidate in order to produce and market a superior product

Producer Alliances19Individuals or companies pool their products in order to increase bargaining power.

Cooperative Efforts20Form valueLocation valueTime valueOwnership/Possession valueInformation value

6 Key Strategies for Adding Value21ADDING VALUE: FORM

Converting raw materials into finished or semi-finished products -Increases the usability of the product -Processing and packagingMaintaining product quality -Cleaning, grading, sorting, cooling

Adding Value: LOCATION

Provide product at a desired placeProviding assortment Examples Door-to-Door delivery Mail order Convenience stores Truck stop fast food Internet sites

Adding Value: TIME

Providing product at a desired timeMarket windows--using seasonalityStorage, scheduling, transportation, processing

Adding Value: OWNERSHIP or POSSESSION

Cost and risk holder Insurance, hedging, optionsCredit agreements Loans, letters-of-creditLease agreements Rent-to-Own

Examples U-pick farmsEquipment rentals, contract harvesting or land clearingShipping insuranceVisa/MasterCard and other credit cardsFutures marketsAdding Value: INFORMATIONTo inform & educateTo persuadeDone through marketing functionsAdvertising, promotion, packaging, and labelingExamplesWeekly adsLabels and brandsGeographic identityPackagingThird party certificationPoint-of-purchase materials

R&D ORGANIZATIONS IN AGRO-PROCESSING SECTOR, INDIACFTRI, Mysore; CIPHET, Ludhiana; IARI, New Delhi; NDRI, Karnal; DFRL, Mysore; CIAE, Bhopal; IIT, Kharagpur; GPBUA&T, Pantnagar; IGMRI, Hapur; TNAU, Coimbatore; PAU,Ludhiana; GAU, Anand; RAU, Udaipur; BCKV, Kalyani; OTRI, Anantpur; PPRC, Thanjavur;MERADO, Ludhiana; MPKV, Rahuri; ILRI, Ranchi;IVRI, Izatnagar; NIRJAFT, Kolkata; CIRCOT, Mumbai;IISR, Lucknow; IGFRI, Jhansi; KVIC Mumbai; HBTI, Kanpur; PHT Institute, PuneVisible benefits

WHAT IS AGRI-BUSINESS?John H. Davis (1955) Agribusiness is emerging as a specialized branch of knowledge in the field of management sciences. In this context, agribusiness can be defined as science and practice of activities, with backward and forward linkages, related to production, processing, marketing, trade, and distribution of raw and processed food, feed and fibre, including supply of inputs and services for these activities Agribusiness Concept revolves around activities of commercialization of agriculture, which refers to market orientation of agricultural production and marketing process. Transition from subsistence to commercial agriculture. The agribusiness system is made of thousands of businesses ranging from the small producers to large corporations It is the management that drives and directs the firms , farms and food companies that come together in the whole agribusiness system. Each of these businesses have managers responsible for assuring successful completion of the functions, tasks and activities.

The agribusiness system includes many facets: Not only production (e.g., farmers, hatchery managers), alsoOrganizations which provide inputs (e.g., fry, chemicals, feed)Processes the output (e.g., processing plants)Manufacturers (e.g., shrimp microwavable products)Transporters/Sellers/Brokers (e.g., retail grocery stores, seafood wholesalers, etc.)The Agribusiness SystemInput SectorProduction SectorProcessing-Manufactoring SectorAgribusiness SystemNote: the success of each part depends upon the proper functioning of the other two!The Input SubsectorProvides farmers with all things needed for production: feed, fry, credit, equipment, fuel, chemicals Example- Raasi Seeds, National Agro Industries (seeds cum fertilizer drills, Advanta India (seeds)Relatively few input businesses compared to production or processingThe Production SubsectorCorporate farmsNew technologies have resulted in increased specialization of productiongenetically altered animals specific pathogen-free stocks Example- Monsanto (new seeds), Mc. Cain India (frozen potato foods), Pepsi Foods India, ITC.The Processing-Manufacturing SubsectorIncludes all business that turn raw materials into finished (or partially-finished) productsAlso includes packaging, distribution, and sales, places and forms desired by consumers Marketing bill represents 70% of total amount spent by consumers on food!!! Firms in this sector are very large (again, gathering economies of scale); very responsive to consumer tastes/ preferencesExamples: ADM (grain processing), Zapata-Haynie (fish meal), Tyson Foods (feeds), ABT industries (export and import), Heinz India

Enabling Environment for Agribusiness in India Agribusiness in India Based on the vision document for the Ministry of Food Processing Industries (2005-2015), the industry targets are as follows:

Industry should aim to increase processing of perishables 20%. Increase value addition from the present level of 20% to 34%. Share in global trade up from 1.6% to 3%. The national policy aims to increase the level of food processing to 25 % by 2025 Emerging Sectors in AgribusinessIT in agriculture and rural developmentPost Harvest management and value additionHorticulture and food products marketing NGOs in agriculture and rural developmentAgriculture Extension Services Consulting and other knowledge based activitiesBiotechnology research and commercializationCorporate farming and farm management Agriculture supply chain management Rural and agri-foods retailingAgri-business opportunitiesKEY OPPORTUNITIES AREA Land Preparation Seed Sowing Nutritional Application Crop Protection Irrigation Harvesting Storage Transportation Farmer Market Equipment Services Warehouses Post Harvest Treatment Biological Services Seeds & Seed treatments Fertilizers, micronutrients, pesticides Irrigation Systems Trading Infrastructure Packaging Marketing TransportationPOLICY INTIATIVESUse of foreign brand names is now freely permitted. After the enactment of the proposed Food Safety and Standards Bill, 2005 in India, the food processing sector would be governed by only one law and one regulator, instead of 13 different lawsTAXATION POLICIESA 100 percent tax deduction on profits for five years and 25 percent for the next five years especially to the upcoming agro-processing industries. The government has proposed a comprehensive goods and services tax (GST) by 2010. This will serve to integrate the economy and make India a single common market. Industry players are of the opinion that the GST will provide a relief to the food and beverages sector against the multiple taxes imposed at various levels today.Duty-free import of goods for development, operation, and maintenance of SEZ units 100-percent income tax exemption on exports from SEZ units for the first 5 years, 50-percent exemption for years 6-10, and a 50-percent exemption of reinvested export profits for years 11-15 External commercial borrowing by SEZ units up to $500 million/year, without restriction, through recognized banking channels Exemption from central Government sales and service taxes Exemption from State sales taxes and other State leviesSUPPORTING INSTITUTIONSAPEDA- Agricultural And Processed Food Products Export Development AuthoritySmall Farmers Agri-business Consortium -ENTERPRENUERIAL TRAINING INSTITUTEAgri-Clinics And Agri-business CentersIIE, GuwahatiNISIET, HyderabadNIESBUD, New DelhiINDIAN CORPORATES IN AGRICULTUREHARRISONS MALAYALAM LTD.PUNJAB-PEPSI PARTNERSHIPITC-E CHAUPALHARYALI KISAAN BAZAARMAHINDRA SHUBH LABHCARGILL FARM GATE BUSINESSTATA KISAN SANSAR

AN EXAMPLE OF AGRIBUSINESS-CONTRACT FARMING A contract to purchase a specified quantity of produce at a pre-agreed priceFixed price Market linked price Quality of produce specified in contract or benchmarked to certain agreed standards Penalty for default usually specified in the contract but rarely enforced Relationship generally built on Trust

Harrisons Malayalam Ltd.HMLs predecessors Malayalam Plantations Limited and Harrisons & Crosfield Limited sterling companies incorporated in England history of 150 years. In 1979, these companies incorporated as Indian Companies under the names Malayalam Plantations (India) Limited and Harrisons & Crosfield (India) Limited. In 1984, the two companies merged to form Harrisons Malayalam Limited. HML became part of the RPG Group in the year 1989. RPG Group - one of Indias largest industrial conglomerates, with over 20 companies in its fold, spread over 6 business sectors with an annual turnover over USD 3.25 Billion Winner of the maximum number of awards at The Golden Leaf India awards (TGLIA) for quality teas

Vital StatisticsLargest plantation company based in South India. Single Largest Private Sector Employer in Kerala. HML has 25000 hectares of land under its fold 6000 hectares - in Tea, 8000 hectares - in Rubber Single largest producer of Natural Rubber in the Country, Second largest producer of Tea in South India. Largest Corporate grower of Pineapple Presence and other horticulture crops banana, passion fruit, cocoa, coconut, arecanut and spices Largest exporter of Tea in South India Some Important customers : Twinings UK, Saralee Netherlands, Elink Schurmann Rotterdam, May Co Russia, Baeshan Saudi Arabia , A F Jones Sri Lanka

THE HML WAY:Caring for People and environment An equal Opportunity employer with 7700 men and 8800 women workforce Winner of FICCI awards thrice for corporate initiatives in family welfare as a result of its Comprehensive Labour Welfare SchemeAimed at improving the quality of life of the employees and their dependents. Pioneer in corporate social responsibility in Kerala with initiatives such as Rakshita a centre for development of children and adults with multiple disabilities Providing free medical aid for underprivileged in Rural Kerala. The only company in this sector to bag the Kerala State Pollution control award for its factory on more than one occasion emphasizing the responsibility and initiative taken by the company in preserving the natural resources for future generation.PRESENT SCENARIO PROBLEMSIncreasing nutritional requirements and decreasing available landShortage of food grainsDeclining rate of food production and increasing populationDecreasing crop productivityOne of the Largest producers of fruits, vegetables, meat, milk, eggs, fish but low cost producers, low farmer incomes, poor exports, lack of storageIndias current share in world trade of processed foods is only 1.6%KEY STRATEGIES AT NATIONAL LEVELDevelop national comparative advantageDevelopment appropriate policy networkDevelopment appropriate marketing and management skills networkEstablish comprehensive rural financial market Create market driven agricultural technologiesDevelop alternate investment to expand rural well- beingEnhance sustainable use of resources

CONCLUSIONSIndian Agribusiness is at an interesting crossroads facing huge growth opportunities. It must gear up for and facilitate agriculture revolution through farmer- corporate partnership. Focus on market orientation is must. Reduce loss through bringing all operations on single platform. Need for wealth creation for farmers & investors, infrastructure development ,critical commitment and discipline could provide Global leadership. Transformation from seller-buyer relation to strategic partnership between corporate and farmer for a win-win outcome. Exposing traditional Indian agriculture to modern technologies, creating large scale processed food manufacturing and food chain facilities and consequently generate employment and export earnings.

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