Predicting what’s on our future thalis (aka Demand visibility for farmers)

One of the first things I teach in business strategy is the importance of understanding market demand and customer needs — both for end-customers and direct-customers.  So how do farmers know what to grow, when they have no inkling of what the rest of us eat or want, and sell to entrenched intermediaries who are not particularly inclined to share such market information?

Long-term food expenditure trends in India show a clear move away from cereals and towards fruits & vegetables, dairy, eggs and meat.

The contents of the Indian Thali show a clear long-term trend away from cereals and towards fruits, vegetables, dairy & meat. This trend is not just an urban middle-class trend; it is happening in urban India, in rural India, among the rich and among the poor.

Reduction in cereal consumption in India cuts across economic strata, both rural and urban

In fact, GOI now says it is quite confident that India will continue to be a rice exporter (the situation for wheat is borderline with India exporting wheat most years and importing in some years).

The demand for lentils continues to grow, as does demand for fruits, vegetables, nuts, oils.

India produces 12-15 million tons of pulses and imports another 2.5-4 million tons per year, from countries such as Canada, Tanzania and Kenya. This represents 15-30% of the pulses we eat!  We are the biggest importers of pulses in the world, per GOI data.

Paddy is grown in rectangular batches in a nursery

Yet our farmers continue growing more and more rice, and barely breaking-even in the process.  I used to love driving through rural India with lush fields of paddy as far as the eye can see.  But now, every time I see paddy fields I wonder if this farmer made the right choice.

In fact, the demand-supply mismatch is driving some of the inflationary pressures in non-cereal foods in the Indian food basket.

This is why it is important to bring better demand visibility to farmers, going beyond providing info on today’s market prices or market linkages.

Some readers might argue that even Fortune 500 companies don’t know exactly what the demand for their product will be, so why should we expect farmers to do this (or do it for them).  Of course, one can never predict demand with perfect accuracy (business operations would be so much simpler if we could, wouldn’t it?).  But still, successful companies attempt to forecast demand as best as they can, to understand long-term market trends, and to have risk mitigation plans in case of unexpected changes in demand.  For perishable products such as fruits and vegetables this is even more important.

In fact, we can take this line of thinking further and explore different mechanisms for enabling demand-driven cultivation…. which is one of the four focus areas I am working on now.

This entry was posted in Agriculture and farming, Economics and public policy, Research studies and surveys. Bookmark the permalink.

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