Role of Private Sector in Improving Information for

Smallholders THE CARGILLS’ WAY

Janaki KuruppuCargills (Ceylon) Ltd

Cornell International Workshop on Agriculture Education and Information Systems

Zambia, 2007

• Island Nation in the Indian Ocean, tropical weather throughout year, wet and dry zones, fertile soil

• 19.8 million people• 15.6% youth• 72 % live in rural Sri Lanka • Per Capita Income US$ 1355 • 19% live below the poverty line• GDP Growth of over 7% led by Service

sector • Agriculture sector contributes 17% of GDP

and employs 33% workforce

Source: Dept. of Census and Statistics

SRI LANKA

Cargills (Ceylon) Limited since 1844

(A 100% Sri Lankan company no connection to Cargil USA).

Largest Food Company in Sri Lanka

Engaged in Modern Retail, Manufacturing and Restaurants

Unique backward integration model with strong presence

in Rice, Fruit, Vegetable, Dairy and Livestock sectors

The Cargills’ Way • We are present in 19 of the 22 districts• We source all fresh produce directly from a 10,000

strong farmer network• 80% of our 5000 strong work force are from rural

Sri Lanka• 70% of our team is below the age of 25

Cargills Case Study 1

Fresh Produce Backward Integration

Close to the Farmers:

Islandwide Collection centres

Our Out Grower NetworkCollection Center Qty in MT No. of

Farmers

Thambuttegama 2000 500Nuwara Eliya 1800 800Bandarawela 1000 700Norochchelai 1350 100Dehiattakandiya/ Ambilipitiya 1500 2000Hanguranketha 750 750Gampaha/ Kalutara 3000 1000Dairy Project 20000 ltrs 4500Rice Project 1500Total 11,850

Agri Business Human Resources Development

12,000 farmers reached through 9 collection centres, 3 factories, 2 central warehouses, 4 regional packing and storing depots

Our Agribusiness Team • Headed by Snr Agriculture consultant, Snr. Dairy consultant• Snr Managers from agriculture, livestock and dairy• Agriculture graduates heading the depots and at Executive

level at head office• Over 140 graduates hired in 2007 alone, majority qualified

in agriculture• 25 field officers and 300 outgrower staff who work as agriculture extension officers

Results

Currently, 40% of the country’s agriculture produce is wasted due to:

– Conventional packaging– Lack of market orientation by farmer– Inferior quality produce – Uncertainty of returns to the farmer– Market dominated by the middlemen

At Cargills we have managed to reduce this to 5% by addressing exactly the above issues

Results - Benefits to the farmer

• Better price

• Guaranteed market

• Technical know how

• Financial assistance

• Free from middlemen

Results - Bridging the Gaps

• A win-win for Farmers and ConsumersCargills gives farmers a guaranteed purchasing price 20% higher than the generic market model and a lower price to the consumer

Extract from “Production Resources in Lagging Regions”, World Bank Report : Case Study- Sri Lanka, June 2007

Extract from “Production Resources in Lagging Regions”, World Bank Report : Case Study- Sri Lanka, June 2007

Our Consumer Promise: Cost of Living Reduction

Cargills Case Study 2

Cargills Rice Project

Cargills Rice Project Model

• Sri Lankan’s staple diet is rice and on average a Sri Lankan consumes 250g of rice per day.

• We are almost self sufficient in rice in terms of quantity.

• However, the paddy farmer in Sri Lanka is still suffering with low quality of living standards and economic instability.

Cargills studied the process and identified the problem areas. • Rice still remains a commodity with unbranded rice contributing to over

50% of sales even in supermarkets.• There has been no significant effort towards value addition in production

nor in marketing.• The farmer is not sufficiently aware of market trends or consumer demands, the millers and everyone else in the chain does not see the opportunity in producing high quality rice. • They are not convinced to take the risk of producing new varieties, or investing in technology for quality enhancement due to lack of market.

Cargills Rice Project Model

Cargills supermarketChain and mass

market distributionchannel for sales

and marketing

Cargills:Overall

Coordinator

Rice Millers associationof SL with over200 members

Over 1500 paddyfarmers

from all major geographic regions

Rice Research Instituteand

Post Harvest Institute ofTechnology

Ministry of AgricultureAnd

University of Peradeniya

Cargills Rice Main objective • To increase overall national rice consumption, while also

providing a nutritious carbohydrate source to Sri Lankans.

Specific objectives• To boost paddy farming by giving a fair and fixed price and training

on quality processes and there by improve quality of life paddy farmers.

• To improve the rice quality standard and production capacities and there by provide a sustainable wheat substitute to the country.

• To facilitate food security by import substitution of wheat

Cargills Case Study 3Cargills Case Study 3

Cargills AgInfo & Knowledge Cargills AgInfo & Knowledge SystemSystem

Cargills AgInfo & Knowledge Cargills AgInfo & Knowledge SystemSystem

The ConceptA centralized Information Management System through a two-way information transfer network between the farming community and the market.

Objective • Improve and strengthen the economic stability of the

farmers through organized cultivation based on scientifically forecasted market demand.

• Improve the quality, variety and quantityStrategy

• Give farmers a source to access the latest information on market demand and price trends

• Educate the farmers by providing knowledge and advisory services on Soil, Fertilizer, Seeds, Irrigation, credit etc.

Cargills AgInfo & Knowledge SystemCargills AgInfo & Knowledge System Project ModulesProject Modules

– Farmer Registration ModuleFarmer Registration Module

– Forecasting ModuleForecasting Module– Order ForecastingOrder Forecasting

– Crop ForecastingCrop Forecasting

– Price Controlling ModulePrice Controlling Module

– Farmer OffersFarmer Offers

– Harvest Monitoring ModuleHarvest Monitoring Module

– Order Distribution ModuleOrder Distribution Module

– Payment ModulePayment Module

Cargills AgInfo & Knowledge SystemCargills AgInfo & Knowledge System Project Module IntegrationProject Module Integration

Farmer Offers Module

Forecasting Module1. Order Forecasting2. Crop Forecasting

Registration Module

Price Controlling Module

Phase 1

Harvest Monitoring Module

Order distribution Module

Payment Module

On-Line Purchasing

Phase 2

Phase 3

Farmer Registration ModuleFarmer Registration Module

Appearance of the Registration Appearance of the Registration System Front-endsSystem Front-ends

• System LoginSystem Login

• Different Menu Items to SelectDifferent Menu Items to Select

Appearance of the Registration Appearance of the Registration System Front-endsSystem Front-ends

Appearance of the Registration Appearance of the Registration System Front-endsSystem Front-ends

Appearance of the Registration Appearance of the Registration System Front-endsSystem Front-ends

Appearance of the Registration Appearance of the Registration System Front-endsSystem Front-ends

Modes of Information Transfer

• First stage is a web based system connecting over 140 Cargills outreach points. Implementation started.

• A pilot through mobile phones being discussed

• A locally transmitted TV/ radio network project being implemented.

Profiling the Sri Lankan Farmer

Farmer Age

Age Group %Less than 20 1.2

20-41 29.641-60 51.6Over 61 17.6

Cont…

Farmer Demographics

Almost 30% in the 20-40 age group indicates a growing occupation

Farmer Income

L ow (les s thanR s .5000/m onth) Medium (les s than R s .

5000 toR s .15000/m onth)

H ig h (over R s .15,000/m onth)

31.8647.25

19.780

10

20

30

40

50

F armer inc ome%

Access to Basic facilities

Over 62% having access to mobile phones and 95% access to electricity, shows potential for new technology

Source of information about Agriculture

60.4

29.67

95.6

68.1349.4548.36

30.76

3.213.18

020406080

100120

Mostly needed informationCredit information

8%

No need information11%

Information about Agro chemical and fertilizer

4%

Information about Post Harvest operation

5%

New technology on Agriculture

6%

Pest & Disease control9%

Marketing Information 26%

Crop cultivation information

23%

New varieties, Seeds & Planting Material

3%

Livestock Information5%

Marketing Information Livestock InformationNew varieties, Seeds & Planting Material Crop cultivation informationPest & Disease control New technology on AgricultureInformation about Post Harvest operation Information about Agro chemical and fertilizerNo need information Credit information

Preferred Source of Agriculture Information for future

other methods4%

Ag.Inputs sales center

4%

Neighbour Farmers

2%

Community base

Organization8%

No idea about the source

4%

T.V, Radio, News Papers,internet and Telephone

25%

Government Extention officers

31%

Training Programme

22%

T.V, Radio, News Papers,internet and Telephone Government Extention officers

Training programme Community base organizationNeighbour Farmers Ag.Inputs sales center

No idea about the source other methods

Women Empowerment/ Involvement• In the Cargills model, women are

involved in the last segment of the chain: in value addition.– Ie. In packing houses, quality

control functions– Their ability to give attention to

detail has been a success factor• Women are also involved in market

information gathering and price monitoring work.

• CBO models in Sri Lanka has shown that women have better administration capabilities and more commitment to care about the sustainability of projects– World bank examples in water,

electricity and other basic infrastructure projects managed by CBO’s

How can we take this forward?

• There is a youthful, futuristic generation that is interested in taking farming and agriculture forward in Sri Lanka.

• They are open to and positive towards new technology and information based approach to the sector.

• However, if we are to use very high tech methods, a lot of hand holding, grooming and mind set change needs to be done.

• We conclude that rather than just providing information (which will be a first step anyway), there is a need for leadership and Agri-Entrepreneurship development.

The Future………The Future………as Cargills sees it……….as Cargills sees it……….

Cargills Agri Business University-

Rationale To develop rural agriculture and bridge regional

deficiencies there is a clear need for a

• Shift from ‘Agriculture’ to ‘Agri-Business’• Movement towards modern technology,

systems and processes.• Orientation towards global-market opportunities

and challenges

It is therefore necessary to develop professionals in Agri-Business sector empowered with academic excellence and practical know-how in the spheres of agriculture and business management.

Why Us?• Cargills has consistently drawn on market-based

mechanisms to create positive change in all domains. Specifically livelihood empowerment to bridge socio economic deficiencies between regions.

• The Albert A. Page Institute of Food Business was conceptualized by Cargills to address- Unemployment and Under-employment- Short fall in profession-oriented skills among rural youth- Upgrade stature of agriculture related professions

• Next level- Building professionals geared with advanced academic, technical and technological know-how to challenge global issues inter-related to poverty and food security.

Cargills Agri Business University

• MBA in Agribusiness

• Partnered by US Universities

• Vision: To be a globally recognized model Agri-Business School/ University which builds the next generation of Agri-Entrepreneurs.

• Objectives:- Develop productivity, profitability and sustainability in Agriculture sector- Add value to Agriculture-based professions - Positively impact rural-agriculture based poverty- Build the next-generation of skilled change-makers to challenge all global issues inter-related to poverty and food security.

How are Cargills AgInfo & How are Cargills AgInfo & Knowledge Initiatives going to be Knowledge Initiatives going to be different to others?different to others?• It is an inclusive model developed by the users for the users.

• It is a “bottom up” and not a “top down” approach

• The request/ demand for it came from the “first kilometer” level

• The stakeholders at all stages of the chain are involved from inception to final implementation. Research institutes, universities and academic institutions are all involved for design inputs and the client is the farmer! which a first for Sri Lanka!

How are Cargills AgInfo & How are Cargills AgInfo & Knowledge Initiatives going to be Knowledge Initiatives going to be different to others?different to others?• Since the end user is involved from inception, they get familiar with the

high technology delivery methods.

• The agri extension officers get involved in “teaching the farmers to fish” rather than “giving them fish”. They can put their knowledge to much better use of collection of content and enhancing their careers too.

• It is part of the business and not another CSR project for the farmer (to sell and develop his products) and for Cargills. Hence long term commitment and sustainability.

The Future………..• Cargills is taking the Lead Role only

• After successful implementation of the first stage is over, the project will be opened to anyone in SL. Discussions already on with the following parties.

– Vidatha centers (project incubation centers set up by the Ministry of Science and Technology to promote innovation, over 200 centres)

– Nanasala centers (another project of the same ministry to improve internet and computer usage. Over 500 centres)

– Other marketers, other institutes who can contribute, benefit from the information. Replication of similar value chain models for the benefit of the agriculture sector in Sri Lanka or anywhere else in the world.

Ayubowan

May you have long Life!