Why going direct to source is transforming farmers’ incomes

By simplifying supply chains and buying direct from small farmers, companies in India are paying fairer prices and improving livelihoods.

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Smallholder farmers face a number of challenges. Among these is a lack of access to formal markets at fair prices due to the structure of supply chains, often dominated by middlemen. They also don’t have any market information.

But several innovative models are addressing these issues, helping farmers improve their profit margins and livelihoods. One example is HR Food Processing, a dairy company operating in the east Indian states of Bihar and Jharkhand, and procuring milk from over 20,000 small dairy farmers. Traditionally, this would be done through a network of village collection centres, managed by agents called ‘dairy promoters’ – but this system affects quality and price transparency, as well as delaying payments to farmers. Instead, the company has piloted a new approach, buying the milk directly from the farmers. It also involves analysing the quality of the milk using a sensor-based machine, and collecting this data through a cloud-based system. Farmers (and the company) are then notified directly about the payments due, and these are processed immediately after receiving the milk and paid into farmers’ bank accounts within 24 hours.

With this new direct procurement model, payments to farmers have increased by a significant 46 per cent. Farmers are naturally more willing to bring their milk to the company’s collection centre, and the new payment set-up has brought them into the formal banking network.

  • Who

    HR Food Processing (Osam Dairy)

  • Where

    India

  • What

    • Osam Dairy work with over 20,000 dairy farmers
    • The firm's direct procurement process increased payments to farmers by 46 per cent

46 %

Osam Dairy's direct procurement process has increased payments to farmers by 46%

Also in India, online grocery company bigbasket helps farmers secure market access for higher-value crops like fruit and vegetables. It buys from 9,500 farmers, many of them smallholders, across six states.

Like HR Food Processing, bigbasket is improving the transparency of the supply chain and increasing the prices farmers get. It finds the midpoint between the local market price and the figure consumers in large cities are willing to pay, and then passes some of the difference to the farmers. On average, the farmers earn 10-14 per cent more than local market prices – and these higher prices, combined with cost savings, can translate into a near doubling of their daily income. 83 per cent of farmers report that bigbasket gives them the best price for their produce.

Since our founding, we’ve made more than 400 investments in the food and agriculture sector, totalling over £6 billion. Current areas of focus include investing in technology and innovation that has the potential to transform agriculture; and investing to tackle the issues that hinder farmers’ productivity.

  • Who

    bigbasket

  • Where

    India

  • What

    • bigbasket works with 9,500 farmers, many of them smallholders
    • The company pays farmers 10-14 per cent more than local market prices

83 %

of farmers report that bigbasket gives them the best price for their produce

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