Smot- School of Business

7&8, 2nd cross street,

nehru nagar,
perungudi
(near taramani railway station)
chennai-600096
Ph-044 43593570
CORPORATE FARMING
OVERVIEW
 INTRODUCTION
 FARMS +CORPORATE A NEW SUPPLY
CHAIN
 CORPORATE FARMING VS FAMILY
FARMING
 FOOD PRODUCTION AND CURRENT
SCENARIO
 CASE STUDY
 SCOPE OF CORPORATE FARMING IN
INDIA
 COMPANIES INVOVLED IN CORPORATE
 Corporate farming
 Corporate farming is a term that
describes the business of agriculture,
specifically, what is seen by some as
the practices of would-be mega
corporations involved in food
production on a very large scale
INITIATIVE OF CORPORATE
FARMING
 National Agricultural Policy (NAP) of Govt. of
India announced in 2000 envisaged that
“Private sector participation in Agriculture shall
be promoted through Contract Farming and
Land-leasing arrangements (Corporate
Farming) to allow accelerated technology
transfer, capital flow and assured markets for
crop production.
Corporate Farming

 This is a system for the production and

supply of agricultural / horticultural
produce under forward contracts
between producer / supplier and buyers.
 Essential to this is the commitment of
the producer/seller to provide an
agricultural/horticultural commodity of a
certain type, at a specified time and a
price and in the quantity and quality
required by a known and committed
buyer.
REASONS FOR CORPORATE
FARMING
 Consolidation of small farm lands into
larger land holdings

 Increase in agricultural productivity

 Introduction of value added products

 The farmer/producer will be required
to plant contractor’s crop on his land,
harvest and deliver a quantum of
produce (based on anticipated yield)
to the contractor.
 He shall provide land and labor
necessary for this. The contractor
shall supply all required inputs for the
production of the said crop
FARMS + CORPORATE A NEW
SUPPLY CHAIN IN INDIA
 Collaborative partner ship
 Oilseeds , cotton and horticulture
 new agri business
 Knowledge intensive farming
 Better solutions for farm related
problems
 More opportunities
CORPORATE FARMING

VS

FAMILY FARMING
 WHAT IS FAMILY FARMING ?

Ø A family farm is a farm owned and

operated by a family, and passed
down from generation to generation.
It is the basic unit of the mostly
agricultural economy of much of
human history and continues to be so
in developing nations.
Ø Many remember the years when
farming was a way of life.  When you
grew all your own food...eggs, pork,
beef, poultry, gardens full of bountiful
 ALERT
INDIA.
.?
W H Y I S T H E FA M I LY FA R M
DISAPPEARING?

Ø Many farmers feel this is in the plans either by the government

or by big corporations.  If they run most of the farmers off of the
farms, big corporations can take control of agriculture
completely,  thereby eventually being able to set their own price
for agriculture products.

Ø Today's prices are driving farmers out of business. 

business. What
occupation do you know of that still receives the same wages
received in 1972?

Ø How many products sold in the world today has someone else
setting the price the producer receives for it?  A farmer can not
say I want $2.50 per bushel for corn, as that is what it cost me to
raise it.  Someone else sets a price, and there's nothing a farmer
 DIFFICULTIES IN FAMILY FARMING:

ØFarming is not an easy job.  Fighting the weather is a constant

situation.  Either it's too dry, too wet, too cold, too hot, too windy,
not windy enough.  Every aspect of the weather affects farming.
Fields can be destroyed by INSECTS, PEST like grasshoppers or red
spider mites.  Weeds can become out of control and drastically
reduce yields

ØFarming is a HUGE gamble and  even if farmers work as hard as

they can, are as honest as they can be, their lives are controlled by
others.  Their livelihood is in jeopardy constantly.

ØFarming is a 'labor of love' for most farmers.  Why

else would they be doing this for the prices they are getting in
today's market?
Some day soon, it will be too late to save the Family Farm. 

ØWake up INDIA !!  The Family Farm is about to go.  When

this does happen, big corporations will ask whatever price they
need for crops to make a profit.   This, in turn, will increase your
cost at the grocery store tremendously.  By then it will be too late. ”
WHY ARE FAMILY FARMS IMPORTANT?
Ø
In addition to producing fresh, nutritious, high-quality foods, small
family farms provide a wealth of benefits for their local
communities and regions.

ØPerhaps most importantly, family farmers serve as responsible

stewards of the land. Unlike industrial agriculture operations,
which pollute communities with chemical pesticides, noxious
fumes and excess manure, small family farmers live on or near
their farms and strive to preserve the surrounding environment
for future generations. Since these farmers have a vested interest
in their communities, they are more likely to use sustainable
farming techniques to protect natural resources and human
health.

ØThe existence of family farms also guarantees the preservation

of green space within the community. Unfortunately, once a family
farm is forced out of business, the farmland is often sold for
development, and the quality land and soil for farming are lost.

Øthe current situation, for the "family farmer" to regain any sort
of practical economic independence, it would seem necessary that
the entire food industry be restructured. Furthermore, given the
extreme number of defunct family farms, it is not so much a
 W h a t i s C O R P O R AT E
FA R M I N G ?

Corporate farming is a term that describes the business of agriculture,

specifically, what is seen by some as the practices of would-be
megacorporations involved in food production on a very large scale. It is a
modern food industry issue, and encompasses not only the farm itself, but
also the entire chain of agriculture-related business, including seed
supply, agrichemicals, food processing, machinery, storage, transport,
distribution, marketing, advertising, and retail sales.
Corporate farming is often used synonymously with agribusiness
(although agribusiness quite often is not used in the corporate
farming sense), and it is seen as the destroyer of the family farm.

CONTRACT FARMING:

"Contract farming" is a form of vertical integration where the farmer is

contractually bound to supply a given quantity and quality of product
to a processing or marketing enterprise.

(The buyer agrees in advance to pay a certain price to the farmer and
often provides technical advice and inputs (the cost of the inputs
being deducted from the farmer's revenue once the product has been
sold to the buyer).

 
Benefits of Corporate Farming
The core argument for the methods criticized as corporate farming is
essentially: "This is the way to keep up with population growth, and to
make inroads into feeding billions of people to developed nation
standards—this is the only way to feed the world.“

Indeed, rapid technological development and large-scale global

production management are responsible for an unprecedented
abundance of inexpensive, widely available, attractive, "safe" food.

By lowering the cost of raw food inputs, creating sophisticated long-

distance distribution networks, producing processed convenience foods,
and making food available year-round in vastly stocked supermarkets,
corporate farming has presented consumers in the wealthiest regions of
the world with an immense variety of food, at relatively low cost. Today,
in North America, only about 10% of average income is spent on food.
By this measure, provided these methods are sustainable, corporate
Corporate farm vs family farm

One major difference between independent farming and corporate

farming is that a corporate farmer is usually a contracted employee
, rather than the owner of the farm.

However, ownership itself does not mean independence. An owner-

operated farm today faces many constraints that are completely
out of the owner's control.

Most of these can be seen in light of increasing concentration of

ownership, not only of farms, but of the equipment and inputs
necessary to farm, and the available sales channels.
PRODUCTION

AND
Introduction

 CORPORATE farming encompasses the

production of all crops as well as allied
activities including processing of seeds and
businesses relating to pesticide, fertilizers,
agricultural machinery/equipment used and
related research activities
 The average agricultural growth rate over
last 40 years was 4.3 per cent which
reflects good performance. Population
growth rate averaged around three per cent
over the last 40 years which is slightly
below the growth rate of agriculture sector.
Current scenario

 With the advancement in technology

and awareness, the trend of food
consumption is changing towards high
nutritional and hygienic foods. This is
also widening gap between demand
and supply. Food crisis is being
observed now-a-days which is likely to
persist in future
 In this scenario, a higher growth rate
of agriculture sector is needed so that
the domestic needs could be fulfilled
Contd…

 The scope of horizontal expansion in

agriculture production has become
limited
due to shortage of irrigation water
.
Solution for the scenario

 The scope is now in vertical expansion

through improving farm productivity levels.
This can be accelerated through corporate
farming.

Measures and actions

 There is a need to make quality seeds and
fertilizers available at competitive cost;
improved pest/weed management; transfer
of agriculture-related technology and
providing technical knowledge to farmers
together with the requisite funds needed by
them and introducing well-planned
marketing mechanism.
Policies and laws

 In addition to improving facilities given

to small growers, the government should
formulate policies for initiation of
corporate farming on persuasive basis.

 Agriculture research and extension

department needs to be revamped and
its policies and programmes re-designed
so that they may play vital role in
bringing a revolution through corporate
farming
 There is a need to make stringent laws in
respect of adulteration of
pesticides/fertilisers to enhance crop
yield and protect farmers financially
 Investment in agriculture sector needs to
be increased significantly
 The govt should ensure that any genuine
and legitimate request in respect to
corporate farming is not turned down by
any financial institution.
 Higher and sustainable economic growth
cannot be achieved unless we succeed
in doubling our agriculture production in
the next 10 years.

The govt has to encourage banks to
invests in productive sectors like
agriculture and industry
 A case study…
KUPPAM PROJECT IN A.P
Location: Kuppam, Chittoor district, A.P
Project start date: June,1997
Why Kuppam?
 Kuppam area is part of Drought Prone
Areas Program(DPAP) block and
chronically drought affected
 Eighty-five percent of the population
in the area live below the poverty line
 Only 10% of the gross cropped area is
under assured source of irrigation
 Saline lands
 Soil composed of gravel and stones of
varying sizes with low level of organic
matter
A Pilot demonstration project
 The Kuppam Pilot Project was
primarily undertaken by the
Government of Andhra Pradesh
through its Rural Development
Department to promote and
demonstrate Corporate Agriculture
 Demonstrate use of corporate farming
 Area coverage 170 acres of land
 Corporate: M/S. BHC Agro (India) Pvt.
Ltd
Estimated project cost
Objectives

 To develop a new concept and view

for agriculture production (based on
modern agricultural methods and
equipments)

 Making the farm as a commercial

Demo-farm which is managed by
one hand (Corporate farming)
Investments made

 Total investment 10 times more than

those of rich farmers adopting
modern cultivation practices

 Technology transfer from Israel for the

purpose
Management

 Lands taken from farmers managed

by the corporate body- M/s BHC Agri
India Pvt. Ltd.
 Every farm operation including
Marketing, is managed by Corporate
body
 Employed heavy mechanization
except for harvesting and cleaning of
produce
 Corporate control from stages of
Costs for farming & Income

 Average cultivation cost Rs.20,000

per acre (agro-chemicals 23%,
fertilization 18.1%, power and fuel
26%, seeds 8%, labour about 25%)
 The company claimed that after an
average period of 1.5 years, an
income of Rs. 150 lakhs was realised
and so far Rs. 29 lakhs income was
distributed to the farmers @ Rs.
17,000/- per acre.
Labour

 mostly for machine operators or for

field supervision and used only to a
limited extent for harvesting and for
shifting of pipes
 Family members, whose lands have
been taken over, are engaged as daily
laborers.
 educated persons have been given
supervisory/managerial role on the
farm
Cropping

 The major crop was gherkins ( with a

net income of Rs. 12,000 - 15,000 per
acre)
 The local food crops have almost
been eliminated
 main guiding principle in deciding the
crop was maximisation of crop
income.
 Farmers were never consulted while
deciding on the crops to be grown.
Sustainability

 Any system of production to be

sustainable- in the first place, the
energy (inputs) needed for production
must be generated by and within the
system itself. In the second place,
since the system has to support and
provide for those maintaining it, such
a system must be able to generate
more energy (outputs) than what it
needs for its own growth.
 the Kuppam project is not sustainable
in net energy terms.
PAYMENTS TO FARMERS

 It is only the government and not the

company, which is making payments
to the farmers for the lands taken
over for the demonstration
 payment for the land is , surprisingly
not uniform
 Farmers were not happy with the
payments because of the big gap
between what was promised at the
time taking over the lands and the
actual payment.
SOCIAL IMPACT

 Lands of many farmers were taken

against their will
 Good cultivated lands, which were
supporting cultivation of sugarcane,
rice and other food crops, were also
taken over
 Farmers became totally dependent for
a living on the corporate body losing
their earlier independent livelihoods.
Positives

 Drip irrigation which is a

hallmark of the Demo
Corporate farm

 Proper power supply to the

farms toward operating the
machineries
 SCOPE OF
CORPORATE FARMING?
Current situation:
 Total cultivable area: 160 million
hectare
 People involved: 60 crores
 Total output: 200 million
tons
Future estimates:
 Total cultivable area: 100 million
hectares
 People involved: less than 60
Benefits

 Increases out put

 Reduces fragmentation

 Increases export performance

 Technology
 Sharad joshi says that “The state
should facilitate the exit of small and
marginal farmers from farming by
buying their land at market prices and
provide them capital and training to
go for non-farm occupations. Only
those who have the mindset,
technology, management, and
financial resources to face the
challenge of the Second Green
Revolution should be permitted to do
farming as an agribusiness “
Limitations

 It makes farmers landless

 Undermines local production

 Failure of corporate farming in many

countries
Few Cases Of Corpotate farming in India
PEPSICO

 Pepsi's tomato farming project was primarily responsible for

increasing India's tomato production.

 Production increased from 4.24 million tonnes in 1991-92 to
5.44 million tones in 1995-96 due to the use of high yield
seeds.
 Pepsi offered its contract farmers advanced equipment

such as transplanters and seeding machines to help them

carry out their task efficiently and speedily.

 Contract farming has been encouraged by Pepsi.
 In late 1990, the company finally met its commitment to set up agro
research centers in Punjab and Karnataka.
 Pepsi imported superior technology from china and transferred it to
the farmers in Punjab and Gujarat and as a result the Yield per
hectare improved from 1 tonne to 3.5, 4.5 tonnes.
 Company had invested 18 billion by 2000 in India.

 Agri-program had been successful because of its unique laboratory-

farm-factory approach.
 In 2000, company‘s export added up 3 billion. The item exported
included food, basmati rice , gaur gum and soft drink concentrate.
 Pepsi met the soft drink requirements of many of its plants world wide
through its Indian operation.
 Pepsi had done so much for country’s agriculture sector although It
was not bounded to do so after change in regulatory framework.
 In 2002, join hands with Punjab Agri-Export corporation to process
citrus fruit.
 Pepsi is also in talks with Heinz India to supply tomato paste for
ketchup production and is negotiating similar deals with
Hindustan Lever and a few other FMCG majors for farm
products like tomatoes, potatoes and citrus fruits
 It grows potatoes for sister company Frito-Lays India’s chips
and maize for ‘Kurkure’. It also grows basmati rice for Pepsi’s
Season’s Harvest brand sold entirely in the Gulf.
 For UB, Pepsi will cultivate 20,000 acres with barley, and plans
to scale up to 1 lakh acres.
THANK YOU
SAVE ME…!

EITHER BY
FAMILYY
FARMING OR
CORPORATE
FARMING