7/2/2020 Supply & Demand side findings from a baseline survey for Onion

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Purchasing from farmer directly on the field with 20% better pay than market rate

Supply & Demand side findings

from a baseline survey for Onion
Ravish Vasan Follow
Skilling Rural Youth | Strategy & … 42 36 0

We recently concluded our baseline survey on supply and demand side assessment for onion
in Gaya district of Bihar. We had very interesting inferences and observations from both ends
of the value chain and would like to share this with wider community here.
What we found out from our assessment on Onion can be applied to many other agro-
commodities with similar stress on demand or production. We are open for feedback/
opinion and happy to take questions in comments/ messages.
SUPPLY SIDE FINDINGS
 50% FALL IN ONION PRODUCTION: In Gaya district alone, total onion production has
witnessed production fall by around 50% in this year due to bad experience of market rates &
adverse climate from last 2 years. Most of the farmers were not even able to recover their
input costs and so they have discontinued onion production. Majority of them went back to
wheat-mustard combo or are leaving their land fallow to find work in cities during winters.
60% HIGHER PREFERENCE TO LOCAL VARIETY: More than 60% farmers are preferring local
variety of onion due to low seed cost and decent adoption by local traders. This variety has
higher bulb weight and higher sulphur content, but this can’t be stored for long time
compared to high quality onion. Thus the farmers have little incentive to hold the stock.
During peak time, the prices crash inadvertantly.
POOR HARVESTING STANDARDS: 75% farmers continue to harvest their crops in traditional
ways which reduces shelf life of crop significantly. The knowledge dissemination about best
practices for post-harvest management (PHM) of onion is still lacking penetration and needs
to be vigorously promoted. This adversely affects the quality of produce while harvesting and
make it unsuitable for storage.

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7/2/2020 Supply & Demand side findings from a baseline survey for Onion

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POOR STORAGE INFRASTRUCTURE: Except few major production hubs who can hold upto
50% stock, most of villages have limited upto 20% or no infrastructure to hold the stock
locally. Most of these growers are smallholder farmers and they lose their bargaining power
even before negotiations start with traders/buyers. There are efficient, low-cost, frugal
models for onion storage but the knowledge dissemination of PHM is the key here.
RAINS LEADING TO PANIC SALES: If it somehow rains during time of harvest (Apr-May)
when crop is lying in the farm, the damage to crop is significant. Until unless right crop
management practices are followed along with right storage conditions, crop loses its shelf
life significantly. No farmer takes the risk to hold such produce and immediately sells to
market, bringing the whole market prices down. This impacts even right quality produce as
well.
ONE WITH STORAGE HAS HIGHER BARGAINING POWER : Only those farmers or villages
having storage facility seem to have higher bargaining power with market. If market is able to
pay good rate (~10/kg) for standing crop, such farmers prefer to sell the crop right away.
However, if rate is very low (~5/kg), they store maximum produce in available space and wait
out for better rates in market, which usually arrives post-monsoon. Such farmers are only 5%
of the total producing community. Thus the benefit never gets passed on to the larger
community. In fact, many of such storage owners are part-time traders who purchase onion
from farmers during harvest time and hold the stock themselves.
DEMAND SIDE FINDINGS
UNNECESSARY MILES ON FOOD: All the supplies first go to city mandi and then turn back to
local markets even when it is a locally grown commodity. Even though it is explained in terms
of economy of scale, it seems unnecessary at first. There can be better models of grow local,
supply local by having storage set-ups to hold stocks for supplying local markets.
ROUTE-WISE KEY NODAL POINTS: It was observed that mid-sized markets on major routes
between two cities play key role in ensuring low-cost supply to multiple small
markets/villages between the two cities. 70% population still stays in villages and they are the
key to ensure sustained demand. Traders in such nodal points have connections with multiple
cities and they have good bargaining power on demand-supply equation. For example, Goh
is a key nodal point on Tekari-Aurangabad route due to some traders stocking up and
supplying small shopkeepers upto Dadreji, Daudnagar and Konch. Similarly, Kurtha is a
dominant market in Tekari-Jehanabad route due to presence of strong traders with linkages
to Gaya, Jehanabad, Patna and even upto Varanasi.

GRADED SIZE PREFERENCES: End-customers as well as traders prefer well-dried, medium size
onion whereas there is separate demand for large sized onions from restaurant owners, fast-
food cart owners etc. due to lower effort in peeling & chopping. This demand is currently
largely unmet in tier II,III cities and rural markets. Some customers are willing to pay little
premium for graded variety but market is largely unappreciative of the graded variant and is

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7/2/2020 Supply & Demand side findings from a baseline survey for Onion

mostly price conscious. The costs of grading and subsequent price escalation is unwarranted
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for market to pay. Due to this, many players started with grading but eventually went back to
mixed variant.
PREFERENCE TO CREDIT OVER CASH: Given a choice of 1 week credit or 1 rupee cheaper for
upfront cash, 75% respondents showed preference to credit. They make money to pay for its
purchase and very rarely want to invest from their own pockets. This tendency is highly
prevalent over packed merchandises but is now getting expected in commodities as well if it
a relationship-based business. Farmers have to visit markets multiple times to collect their full
dues, as very few traders do transactions in full upfront cash at time of delivery. Due to this,
most of the farmers now prefer direct from farm pickup with full cash payment, even if it cost
them a rupee less.
#The primary data points are taken by the author in a baseline survey through personal
interviews with stakeholders. The complete survey with data points is owned by the
organization (www.sumarth.org). It can be shared on request with a small payment to support
future baseline surveys.
*Views are entirely personal. Author doesn't intend to disregard or discredit any
organization/institution/legal body through his comments.

Published By
Ravis Ravish Vasan Follow
Skilling Rural Youth | Strategy & Op…
h
Vasan
Finally got the time to jot down some of the key findings from a recently conducted baseline survey and
experiences from last two seasons of onion production and procurement. Have a look and share your
opinion/feedback. Let me know what you think of this. #onion #agri-commodities #agri-marketing
#baseline-survey #report-findings #field-observations

36 comments

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Ravish Vasan
1y
Ravish Skilling Rural Youth | Strategy & Ops | Agripreneur | Acumen Fellow | IIM Ahmedabad | IIT
Guwahati
Vasan
My recent article on the Need of Introducing Organic Farming in Schools. Pls share
what do you feel about it. https://www.linkedin.com/pulse/need-introducing-
organic-farming-schools-ravish-vasan
Like Reply

Soumendra Mohanty
2y
Soumendra
Student at College of Agricultural Engineering and Technology ,O.U.A.T. BHUBANESHWAR
Mohanty
The case study is great sir
Like Reply

Ravishankar Natarajan
2y
Ravishankar
Agri- Inputs business, e-Markets in Agri and Commodity Trade Expert with experience in India
and Africa
Natarajan
Good to see young professionals venturing into this demanding dusty business of
farm trade. All the best !! Is onion traditionally grown in that area in that season or it
came up recently based on high market prices in preceding season ? Do you have
some analysis to establish price-production relationship of how much of volume
increase lead to how much of price drop and vice versa. General view is that as no
real time reliable data is available, drop is more than proportionate to volume
increase, and often corrects itself in a few days when farmers have parted with their
produce in a frenzy. what has been your learning or understanding on this.   
Like Reply 2 Likes 3 Replies

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Ravish Vasan
2y
Ravish Skilling Rural Youth | Strategy & Ops | Agripreneur | Acumen Fellow | IIM Ahmedabad |
IIT Guwahati
Vasan
Satya Deo Pathak you are right about onion being a funny crop but some
of your suggestions are little tough to apply in indian context. We are

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7/2/2020 Supply & Demand side findings from a baseline survey for Onion

working on storage solutions and that gives lot of bargaining power to

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farmers. But the processing on onion is quite difficult due to lack of
reception among indian customers. Even onion powder and flakes are
being produced by export oriented firms and sent to countries like
Germany, UK, Singapore etc. Cost of processing is high as well as very
limited adoption in indian markets.
Like Reply 1 Like

Ravish Vasan
2y
Ravish Skilling Rural Youth | Strategy & Ops | Agripreneur | Acumen Fellow | IIM Ahmedabad | IIT
Guwahati
Vasan
Shivaprakash L Ashwin Mahavadi Being yourself in agri space, pls share few words of
wisdom and feedback on what else should have been covered here.
Like Reply

Nipun Kapur Ph.D.

2y
Nipun
Kapur
Ph.D. Good detailed study at grass root level. Quick  clarification when you say market
rates and adverse climate has impacted the production of onions what exactly do
you mean ?  because these are two opposite phenomena (inversely proportional) in
conventional terms of demand supply.
Like Reply 2 Likes 1 Reply

Ravish Vasan
2y
Ravish Skilling Rural Youth | Strategy & Ops | Agripreneur | Acumen Fellow | IIM Ahmedabad |
IIT Guwahati
Vasan
What I meant - From last two years, farmers are getting low rates due to
excess supply at a particular time (apr-may). In some areas, they have
received low rate due to poor quality after damage to crop due to adverse
climate, either during harvest or while upkeep during monsoon rains. I
understand your concern and only those farmers who could save their
stock during rains and come out with minimal damage really take up
benefit of supply shortage during those times. Such examples are relatively
rare and very localised in few pockets. But, we need more such examples
going forward.
Like Reply 1 Like

V.B V.B Kasi

2y
International Commodities Trader on a long break
Kasi

With such a huge perennial demand base as in India, can onions not have a futures
market with properly regulated delivery mechanism? 
Like Reply 5 Likes 3 Replies

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Ravish Vasan
2y
Ravish Skilling Rural Youth | Strategy & Ops | Agripreneur | Acumen Fellow | IIM Ahmedabad |
IIT Guwahati
Vasan
Amanpreet Singh not easy to do given the length and breadth of
production zones in India along with incomprehensible trading practices
from top to bottom of supply chain. All these change with every 100km
zone. Would be tough to implement. Let's see.
Like Reply

Amanpreet Singh
2y
Amanpreet
Agtech | Agriculture Commodity Analytics | Rural Banking | FMCG Sales & Distribution
| Key Account Management
Singh
Well there are couple of organisations which wan this commodity
accredited to an exchange to look into two immediate advantages better
proces for the grower and empowering the essential value chain while
keeping the hoarders at a bay.
Like Reply

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