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Investigating Pathways to Commodities Price Discovery Parable in Smallholder Indian Agriculture

Investigating Pathways to Commodities Price Discovery Parable in Smallholder Indian Agriculture. NCRI Workshop New Delhi 10 October 2007. Prof. J. George Chief Promoter, Strategic Economic Management Initiative in Governance (SEMIG) Chair, Faculty of Economics and Development Planning (FEDP)

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Investigating Pathways to Commodities Price Discovery Parable in Smallholder Indian Agriculture

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  1. Investigating Pathways to Commodities Price Discovery Parable in Smallholder Indian Agriculture NCRI Workshop New Delhi 10 October 2007 Prof. J. George Chief Promoter, Strategic Economic Management Initiative in Governance (SEMIG) Chair, Faculty of Economics and Development Planning (FEDP) Haryana Institute of Public Administration 76, Sector 18, Gurgaon-122001 jgfedp@vsnl.net jleocb@yahoo.co.in

  2. Syndrome of Duality in Commodity Price Discovery • Six Blind men and elephant syndrome • Iceberg syndrome • Supply Chain perceptions

  3. Once upon a time, there were six blind men from Indostan…

  4. Six Perceptions • One thought that the elephant looked like a snake • Another a leaf • Another a spear • Another a wall • Another a rope • Another a tree trunk

  5. Key Leverage but with whom? Rules People Resources Activities Power State Household WHAT? WHY? WHEN? WHERE? WHO? HOW? Market Community

  6. So what does that have to do with Price Discovery (PD)? • We approach PD from different perspectives and with different goals • Is PD: • A task performed by the top end players? • An esoteric science? • Sensors for computer security? • Part of spot incident for futures response?

  7. The answer to these questions is YES!

  8. The answer to these questions is YES! But…

  9. Price Discovery is not an elephant,it is a process of discovery! But, we just can’t seem to agree on what the process is… WHY?

  10. izkjfEHkd vuqekuINITIAL ASSESSMENT 10% ONLY 10% OF ANY ICEBERG IS VISIBLE. THE REMAINING 90% IS BELOW SEA LEVEL There is more to it than meets the eye…what is the way to know it? 90%

  11. Since Iceberg phenomena is applicable on human beings … the behavioural model of THE ICEBERG is also relevant for commodity price discovery ATTITUDE: Known - Unknown leqfnz; lrg & Kku o gquj% lc dks irk] lfZoZfnr SEA LEVEL= KNOWLEDGE & SKILLS: KNOWN TO OTHERS vfHkizsj.k & vUnj fd ckr] nwljksa dks ugha irk ATTITUDE: UNKNOWN TO OTHERS

  12. Iceberg Consumer Behaviour Retailer Perception/Feeling Middlemen Attitudes Stakeholders Beliefs Value Derived by Producers

  13. Food Supply Chain CONSUMERS RETAILERS PROCESSORS PRODUCERS CONTROL POWER

  14. Behavioural PD Models “There is Very Little Difference in different price discovery models But that Little Difference makes a Big Difference. The Little Difference is Attitude to small holder farmer. The Big Difference is Whether it is Positive or Negative.”

  15. Overview: All-India Pattern (%) of Land Ownership 80 % 36 % 18 % 49 %

  16. Overview: Pattern (%) of Land Ownership in Haryana 67 % 21 % 31 % 67 %

  17. The Bargaining Terrain High Cost or Value B’s opening position Cost or Value A B’s desired solution Offer limit for A B’s Expected Solution Acceptance limit for B A’s Expected Solution Final Offer Zone B A’s desired solution Bargaining terrain boundary A’s Initial position Low cost or value

  18. Traditional Resource Flow in Farming

  19. Modern Resource Flow in Farming Contract Farming Monopsony Integrators Labour

  20. Available Options 1/2 “Little Push Major Gains” 7-step strategy pivoted on Human Resources • Become demandeurs of trade related capacity building package from public institutions, GOI • Ensure greatest stake of producers in the supply chain of “farm to table” • Vigorously address non-tariff barriers, like food safety regulations

  21. Available Options 2/2 • Rely on the strengths of area led growth to yield led growth now shift to value-added led growth without compromising on sustainable development • Demand effective decentralisation: Softer IP protections like Utility Model, Section 86 of the Geographical Indications of Goods (Registration and Protection) Act (GIGA), PVPFRA • Reengineer state institutions to become market savvy and effective regulatory mechanism • Opportunity to overcome limitations of fiscal dependence

  22. Final Analysis • Bio-Technology and agribusiness models will increase farmer’s cost and firm concentration but will not promote sustainable livelihood options • Exploration into (With regional specificities): - Nature: biodiversity vs. exploitation - Rationale: price vs. income support - Contents:activities driven by livelihood - Institutional dynamics of technical change:Public vs. Private I 2 I protocol + IPRs + CBD.

  23. Thank You

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