As it stands today in India, local farmers the agricultural market is dominated by larger wholesale brokers/retailers that determine pricing and as a result help influence demand. Given their scale, resources, and clout, these brokers/retailers dictate ultimately the price of produce. The smaller local farmers have limited options available to sell their produce.
As we can see in Figure 1, the current model makes it very difficult for the Farmer to connect directly to the consumer.
Typically, the way it works, Farmers for the most part of forced to sell to Agents/Brokers that are part of the Agricultural Produce Market Committee (APMC Market). In this Market, Farmers tend to sell their produce at below market rates. While the Minimum price is enforced, Farmers are still forced to sell below market rates. Those farmers that do not want to sell at the APMC Market, sell to the Processing Units, again, at lower than market prices. As we can see, Farmers have a very difficult time selling directly to the consumer.
As a result, they are forced to either absorb losses by unsold produce or take significant pricing haircuts. Since they are not allowed to everyone, they are forced into certain below Market pricing. Since most farmers end up being priced out of the market, they practically give away their produce for the sake of avoiding total losses. It is this difficulty to operate in a level-playing field that has resulted in many farmers either committing suicide or defaulting on their debt. a
What benefit will Market Galee bring?
- Improve supply and demand transparency
- Expand the buyer-and-seller network
- Increase farmers’ revenues by providing them with demand information and more pricing options
- Reduce pricing for buyers as there will be more purchasing options
- Reduce food waste with more selling options
As an electronic platform aimed at providing market transparency, Market Galee will allow all participants to share information (pricing data, product type, quantity, product description) with not only the direct consumer, but with each other – refer to Figure 2. This will allow a more efficient market, especially for Farmers.
We are looking to launch the product using two mediums, one being the internet via a website, and the other being a 2-G app for the phone. Both methods will allow buyers and sellers to list their desired quantity at a chosen purchase price.
How does it work?
Market Participants would list their “supply” and specify the desired quantity, selling price and location for each product. Similarly, buyers would list their “demand” and specify the desired quantity, buying price and location for each product. Once a deal is negotiated between a participant, say a farmer, and a buyer, small transaction fee (~1% of total transaction) will be applied. The transaction won’t be finalized until the exchange of goods is made. For local farmers, they can interact with the consumer via the electronic platform and then deliver the goods at their local markets. We chose a 1% fee because we did not want to alienate smaller transactions, which can make a good portion of local farmer’s revenue.
The Indian produce market is grossly inefficient and has large price disparities, which only make the middlemen rich. An article published on The New Indian Express late June this year (2016) was titled “No country for farmers”. It stated that an agricultural household harvests a debt of Rs 3,000 every month and the majority of the suicides was due to debt burden. According to The Times of India, the total numbers of farmer suicides were 2,115 and 2,997 in 2014 and 2015 respectively. 116 farmer suicides were committed in the first 3 months of this year alone. Such severe social consequences call for immediate solutions.
Currently, the only competitor is the Indian government. However, our platform is the first in the produce market to connect buyers and sells directly and provide them with robust market information and analytics. Therefore, with wide and rapid outreach efforts in our plan, our company has a great advantage to go to market now to gain customers from the 138M farmers who will benefit greatly from our product to create a network effect.