Investigating Pathways to Commodities Price Discovery Parable in Smallholder Indian Agriculture 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 NCRI Workshop New Delhi 10 October 2007

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

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

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

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

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?

The answer to these questions is

But…

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

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

ATTITUDE: Known - Unknown Since Iceberg phenomena is applicable on human beings … the behavioural model of THE ICEBERG is also relevant for commodity price discovery 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

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

Food Supply Chain CONSUMERS RETAILERS PROCESSORS PRODUCERS CONTROL POWER

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. Behavioural PD Models

Overview: All-India Pattern (%) of Land Ownership Size Group (Hectares) Op. Holding Number Number Op. Area Area Marginal (less than 1.0) Small ( ) Semi-medium ( ) Medium ( ) Large (10.0 & above) Total Numbers + Area (million) Avg. Size 1.57 hect hect. hect. 80 % 36 % 49 %18 %

Overview: Pattern (%) of Land Ownership in Haryana Size Group (Hectares) Number Number Area Area Marginal (less than 1.0) Small ( ) Semi-medium ( ) Medium ( ) Large (10.0 & above) Total Numbers + Area (million) Avg S hect. 67 % 21 % 67 %31 %

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

Traditional Resource Flow in Farming

Modern Resource Flow in Farming Contract Farming Monopsony Integrators Labour

Available Options 1/2 Little Push Major Gains 7-step strategy pivoted on Human Resources 1. Become demandeurs of trade related capacity building package from public institutions, GOI 2. Ensure greatest stake of producers in the supply chain of farm to table 3. Vigorously address non-tariff barriers, like food safety regulations

Available Options 2/2 4. Rely on the strengths of area led growth to yield led growth now shift to value-added led growth without compromising on sustainable development 5. Demand effective decentralisation: Softer IP protections like Utility Model, Section 86 of the Geographical Indications of Goods (Registration and Protection) Act (GIGA), PVPFRA 6. Reengineer state institutions to become market savvy and effective regulatory mechanism 7. Opportunity to overcome limitations of fiscal dependence

Final Analysis Bio-Technology and agribusiness models will increase farmers 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.

Thank You