Transcript Investigating Commodities Price Discovery Parable in

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
[email protected]
[email protected]
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
Key Leverage but with
whom?
Rules
State
People
Household
WHAT?
WHY?
WHEN?
Community
WHERE?
WHO?
HOW?
Resources
Activities
Power
Market
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
The answer to these questions
is
But…
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?
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INITIAL 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%
Since Iceberg phenomena is applicable on human beings
… the behavioural model of THE ICEBERG is also relevant for
commodity price discovery
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SEA LEVEL= KNOWLEDGE & SKILLS: KNOWN TO OTHERS
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ATTITUDE: UNKNOWN TO OTHERS
ATTITUDE: Known - Unknown
Consumer
Behaviour
Retailer
Perception/Feeling
Middlemen
Attitudes
Stakeholders
Beliefs
Value Derived by Producers
Food Supply Chain
CONSUMERS
RETAILERS
CONTROL
PROCESSORS
PRODUCERS
POWER
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.”
Overview: All-India Pattern (%) of Land
Ownership
Small (1.0-2-0)
Semi-medium
(2.0-4.0)
Medium (4.010.0)
Large (10.0 &
above)
Total Numbers
+ Area
(million)
61.6
18.7
12.3
6.1
1.2
15.0
17.4
23.2
27.1
17.3
115.58 Avg. Size
1.57 hect.
Area
1995-96
36 %
59.4
18.8
13.1
7.1
1.6
Op. Area
1990-91
49 %
Marginal (less
than 1.0)
Number
1995-96
80 %
Op. Holding
Number
1990-91
18 %
Size Group
(Hectares)
17.2
18.8
23.8
25.3
14.8
1.41 163.3
hect. hect.
Overview: Pattern (%) of Land
Ownership in Haryana
Small (1.0-2-0)
Semi-medium
(2.0-4.0)
Medium (4.010.0)
Large (10.0 &
above)
Total Numbers
+ Area
(million)
47.14
19.58
19.0
11.94
2.32
1.727
6.2
10.3
21.3
37.9
24.3
Area
1995-96
21 %
37.3
19.6
20.9
17.7
4.5
Area
1985-86
67 %
Marginal (less
than 1.0)
Number
1995-96
67 %
Number
1985-86
31 %
Size Group
(Hectares)
8.27
12.87
24.91
33.25
17.97
Avg S.
2.13
3.676
hect.
The Bargaining Terrain
Cost or Value
High Cost
or Value
B’s opening
position
B’s
desired
solution
A
Offer limit for
A
B’s
Expected
Solution
Acceptance
limit for B
A’s desired
solution
A’s Initial
position
A’s Expected
Solution
Final Offer Zone
B
Low cost or
value
Bargaining
terrain
boundary
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
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
1.
2.
3.
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 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.
-
Thank You