My friend, Bheem forwarded a recent news article covering a farmer who got [Rs 2 for his 512 Kgs of onions](https://timesofindia.indiatimes.com/videos/toi-original/maharashtra-farmer-sells-512-kg-onion-gets-paid-rs-2-in-post-dated-cheque/videoshow/98216952.cms). I won't spend too much time on the specifics of the issue because in a supplement report by [CNBC](https://www.cnbctv18.com/india/maharashtra-farmer-travels-70km-to-sell-512kg-onions-gets-cheque-for-rs-2-16031901.htm), they mention the reason for our farmer, Chavan receiving such low price. > Nasir Khalifa, the trader at the Solapur APMC who bought the onions from Chavan, explained the logic behind the low price. > He said the onions brought by Chavan for auction were of low quality. Earlier, Chavan had brought high-quality onions that were sold at Rs 18 per kg. The low-quality onions did not get a good price as they are usually not in demand, he added. > The trader said the APMC has a computerised process of issuing receipts and cheques because of which Chavan's cheque was post-dated. The best part is that this is not uncommon. Our previous company, [Subjimandi.app](www.subjimandi.app) has bought onion for Rs 2/ Kg as well. This is where [grade comes into picture](https://buttondown.email/ontheside/archive/solving-for-novel-uncertainty/).  The farmer brought a very low grade of onion. He brought 10 Bags (50 Kgs each)of Onion to Solapur APMC Mandi. He travelled 70KMs to reach the mandi. The first mile logistics cost is Rs 30/bag for this distance and the cost to unload each bag in Rs 5. So, a princely sum of Rs 350(my guesstimate) was spent before the farmer started auction itself. He was expecting to receive a reasonable price to recoup the money spent. Let us here from [Chavan](https://www.cnbctv18.com/india/maharashtra-farmer-travels-70km-to-sell-512kg-onions-gets-cheque-for-rs-2-16031901.htm) himself: > "I got Re 1 per kg for the onions. The APMC trader further deducted Rs 509.50 from the total amount of Rs 512 towards transportation charges, head-loading and weighing fees,"… The actual cost of this specific consignment would have been different. Such ordeal of farmers when selling at mandi(s) is covered by [Sneha in her post ](https://medium.com/@snehadhandhania/a-mandi-visit-ed7c662c354c). > I was quite wrong. The role of the mandi stops at providing a physical roof under which the farmers can keep their bags of onions. Imagine 1000 odd gunny bags of onions coming through the night under a tin roof in a 2000 sq.ft space. The other role was to make sure that only traders registered with the mandi were allowed to buy produce from farmers. … > At 10 am the bell rang, indicating the start of the show. What followed was mayhem. A group of traders start walking from one end of the mandi, moving from one farmer to the other. Imagine a GOT/ LOTR scene with the king/queen walking down a crazily crowded street to meet the common folks (minus the pretty backdrop). They point their fingers at a random bag which they like, the farmer is forced to cut that open and spill the onions for the Lord to see. This is in addition to a “sample” bag that has already been split open before the great Lord arrived. The shouting and screaming was so loud that I could barely hear what was going on. I wondered who was keeping track of which lots have been sold, for how much and sold to which trader. The experts told me to jump on to a few bags of onions piled on top of each other, so I could get to a vantage point. From there, I saw one small gentleman was making some scribbly notes on a piece of paper. This was the recording of the three questions I mentioned above. This goes on for a couple of hours. I have spent enough time in agri-space that tears don't come while cutting onions, now. They start trickling down every time some one presents such simplistic narratives. Our journey in this space for the interested, [[Masterclass in produce marketplaces]]. ### Benevolence in agri Janette Barnard who writes Prime Future newsletter wrote a much eloquent post dissing the whole benevolence narrative in agriculture, [I don't want to feed the world anymore](https://primefuture.substack.com/p/i-dont-wanna-feed-the-world-anymore/comments). > Founders love to pitch their startups under this context as proof that their startup will be a multi-billion dollar business. Venture funds raise capital based on this. Agribusiness loves to use this framing to recruit talent and rally the troops. Trade associations love to use it to make their members feel good about themselves. > 1. **The market’s job is to solve for m-o-r-e through price.** Markets have 1 job, and this is it. Nobody needs to suggest producing more, the market will do that. I would highly encourage you to read the entire [post](https://primefuture.substack.com/p/i-dont-wanna-feed-the-world-anymore/comments) because she said most of what I will attempt to say in this post. But, much better. I was jumping with joy when this post came out. It was a huge relief knowing that more people in the agri-ecosystem have these principles in place. It may look like you are not helping the ecosystem if you are talking about business instead of noble pursuits like eradicating world hunger by helping farmers. But trust me, talking business is the most productive contribution to agri ecosystem. If you are farmer and find a startup pitching itself to help you, I suggest, run as far away from it as possible. ### Market problem Produce marketplaces are cause for occurrences like Chavan's plight with low prices for onion. They are thin markets masquerading in an archaic system (APMC) distant from our modern world. Everyone can know the price of onion on their phone but no one can ascertain what price their onions will sell for in a Mandi. This is because produce markets are access market and information asymmetry is least of our problems. I wrote specifically about it in a previous post, [navigating the problem space.](https://buttondown.email/ontheside/archive/navigating-the-problem-space/). Referring to it over here without any further indendation. *** > The often stated knowledge about produce markets comes with a lens of fairness being at its core. This leads to perverse incentives and benevolent nature of functioning. > We focus on being beneficial to the people involved which doesn’t correlate to better price. The Local Mandi(s) operate in a fixed structure of price discovery and produce sale. The information flow of price to other mandi(s) propagate and demand is generated by the consumption mandi. This is what we call trader driven logistics.  We wanted to build a marketplace that is more than fair. It should be beneficial. Just like how produce comes in different shapes and sizes , farmers who grow this produce come in different needs and wants. > Being beneficial forces you to being empathetic of your customers as a market place. > Which led us to our biggest gap that we could fill, Produce markets need a marketplace that serves its actual customers compared to a local Mandi run on outsourced trader network. In order to build a marketplace to serve the actual buyers and producers. We needed to share a referential information for both to trade between themselves. This was the core tenet behind buying and selling gradewise. We invested extensively in building the graded produce knowledge which was known to all but not standardised among them.  **** ## Closing this rant I will start by instilling the type of marketplaces that are required in produce market to thrive. Beneficial marketplaces may look unfair to the outsiders but will strive to benefit everyone in the trade.  In the case of our famous farmer, Chavan. If his onions were sold grade wise. Every farmer's onion of similar grade at that particular mandi would have been sold at Rs 1/Kg. Atleast, he would have felt it to be fair. Next, produce markets are plagued with cyclicality of production surpluses and deficiencies. If you are selling during the wrong cycle, losses are possible. The nature of produce also brings added complexity. So, it is in our best interest to share the risks and possible benefits with them during the start of the season.  Startups tend to expect loyalty from farmers because they have bought their produce once. But if the next time, the produce is not up to the standards. Startups reject the produce but inadvertently they are also rejecting the farmer. Interlinking these two limits the scale of startups growth and deplete trust in farmers with new businesses. Lastly, produce markets are to be looked as micro economies. Different conditions lead to different demands.  Janette also mentions it in her post,[I don't wanna feed the world anymore.](https://primefuture.substack.com/p/i-dont-wanna-feed-the-world-anymore/comments): > Maybe it seems petty to pick on an idea that sounds so noble at face value. But the nobility of feeding the world is an outcome of what happens at a micro and macro level, not a driver. > I'm calling this out because it confuses what we wish were true with what is actually true...and you know Prime Future isn't about that mess. Particularly when it comes to those who are innovating and solving problems in agriculture, to confuse the context around the problem with the problem itself is to build around faulty assumptions. ## Epilogue Next time you come across a story similar to our onion farmer, Chavan. Just go to google and type 'farmer earning lakhs with coriander' and you will find multiple stories [similar to this one](https://timesofindia.indiatimes.com/city/pune/coriander-farmers-in-junnar-make-lakhs-in-a-week/articleshow/67478211.cms). > “I have hit the jackpot,” said Savleram Nana Kute, who made Rs 13.5 Lakhs just in a week's time from selling coriander he had grown on his 8-acre farm in Pimpri Pendhar village. All this from an investment of Rs 2 Lakhs. **** Original Published Date: 27-02-2023 Tags: #published #ontheside #agriculture #farmers