Value chain analysis of black pepper in Kerala
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Date
2020
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Department of Rural Marketing Management, College of Co-operation Banking and Management, Vellanikkara
Abstract
Agriculture value chain analysis is an inclusive analysis to assist farmer-producers of less developed and developing countries to stimulate economic growth of poor and it is a way for poverty reduction and social development. Further, it analyses the necessity of farmer integration, agriculture viability, and collaboration across chain actors and importance of rural advisory and support services to farmers, especially in case of market information and innovative production and processing techniques. It gives equal importance to strengthen the value chain relationship between farmer-producers and other actors in the chain through mutual benefit and cooperation. Black pepper is mostly cultivated as an inter crop in the homestead gardens in Kerala. At present, Kerala has 85,141 ha of total area under black pepper cultivation with a total production of 37,995 MT, in which Idukki and Wayanad districts together contributes 74 percent of the total black pepper production in Kerala from 65 percent of the total area under black pepper cultivation (GoK, 2019). The research work entitled “Value chain analysis of black pepper in Kerala” was undertaken to map the value chain of black pepper in Kerala, to examine the governance influence on value chain actors, to evaluate the producer farmer’s linkages with other value chain actors, to analyse the opportunities and constraints faced by value chain actors and to suggest appropriate strategies to upgrade the performance of value chain actors of black pepper. The study area was confined to Idukki and Wayanad districts of Kerala, since these districts accounted for the first and second position under the area under cultivation of black pepper in Kerala. The sample respondents were selected from Vandiperiyar panchayath of Azhutha block and Rajakumari panchayat of Nedumkandam block in Idukki district and Mullenkolly panchayath of Panamaram block and Vellamunda panchayat of Mananthavady block in Wayanad district. Thirty black pepper farmers were selected from each panchayat at random and thus a total of 120 farmers were selected for the study. The other value chain actors were identified using snowball technique and the size of the sample was limited to a maximum of one hundred actors, including nurseries (6) input suppliers (7), hill produce dealers (38), wholesalers (32), retailers (6), exporters (3), marketing cooperative societies (2), registered companies (2) and IPSTA Brokers (4). Expert interviews were carried out with Officials in Spices Board, Agriculture Officers in Krishi bhavan, Principal Agriculture Officer (District level), and NGOs. The data analysis was done by using Value chain mapping tool (global approach), percentage analysis, index method, modified market efficiency (Acharya’s approach) and Kruskal Wallis test. After conducting the value chain mapping of black pepper in Kerala, the results revealed that the major core processes included in the value chain were input supply, production, procurement or collection, wholesaling, processing, exporting and retailing. The main actors who actively participated in the value chain were input suppliers, black pepper farmers (organic farmers and conventional farmers), hill produce dealers, wholesalers, marketing cooperatives, exporters (under NGOs), commission agent, farmer producer company, retailers and IPSTA brokers. The identified collectors of black pepper farmers were hill produce dealers, exporters (under NGOs), marketing cooperatives, farmer producer company and other registered companies. From the hill produce dealers the black pepper was transferred to wholesalers, and the exporters (under NGOs) carried out the major value addition activities to convert the black pepper and fresh raw pepper to quality black pepper, white pepper and green pepper. The total establishment cost per acre incurred by the conventional black pepper farmers in Idukki district and Wayanad districts were ₹1,00,950 and ₹1,02,870 respectively. In Idukki district, the establishment cost incurred by the black pepper farmers in first, second and third year were ₹ 43,650, ₹ 29,600 and ₹27,700 respectively, whereas in Wayanad district it was ₹43,775, ₹29,350 and ₹29,745 respectively. The major inputs required for the maintenance of organic black pepper was human labour, farm yard manure, organic manure, organic plant protection materials and harvesting bags. The total annual maintenance cost per acre incurred by organic black pepper farmers in Idukki and Wayanad district was ₹80,540.38 and ₹76,822.07 respectively. The major inputs required for the maintenance of inorganic black pepper in one acre was human labour, farm yard manure, organic manure, fertilizers, plant protection chemicals and harvesting bags. The annual maintenance cost of inorganic black pepper per acre was computed as ₹73,047.06 for Idukki district and ₹72,767.10 for Wayanad district. Thus, the total cost of production of organic black pepper was arrived at ₹ 344.50 per kg in Idukki district with a comparatively less cost of ₹337.00 per kg in Wayanad district. However, the total cost of production per kilogram of inorganic black pepper was worked out as lower than the cost of production or organic black pepper in both districts. The cost of production of inorganic black pepper in Idukki district was ₹311.00 per kg and in Wayanad district it was ₹309.00 per kg. Five marketing channels were found in the value chain of the three selected products in the study: black pepper, white pepper and green pepper. The identified marketing channels are: 1) Marketing Channel I (MC-I) Farmers Exporters (Organic) 2) Marketing Channel II (MC-II) Farmers Marketing Cooperatives Buyers in Kochi (Inorganic) 3) Marketing Channel III (MC-III) Farmers Farmer Producer Company Commission Agent Buyers in Kochi (Inorganic) 4) Marketing Channel IV (MC-IV) Farmers Hill Produce Dealers Wholesalers Buyers in Kochi (Inorganic) 5) Marketing Channel V (MC-V) Farmers Hill Produce Dealers Retailers (Inorganic) In both districts, the marketing cost incurred by the exporters in the production of value added organic products were very high compared to the marketing cost incurred by the other channel members in the marketing of inorganic black pepper. It was exposed that in both districts, the black pepper farmer has got the highest price in the marketing channel with shortest length, i.e. farmer to exporter. In Idukki district, the farmers who are supplying black pepper to exporters were registered organic certified farmers and the organic black pepper fetch ₹378.50 per kilogram. The total marketing margin of Channel I was ₹131.50kg for black pepper, ₹395.00 per kg (highest margin) for white pepper and ₹251.50 per kg for green pepper. While in Channel V, the retailer (exclusive spice outlets) captured the highest margin of ₹379.41 per kilogram of black pepper and the lowest margin was obtained by Channel II (₹32.21 per kg). Among the different marketing channels in Wayanad districts, the farmers got highest price (₹370.70 per kg) in the marketing channel of organic black pepper. The total marketing margin computed for each product in Channel I was ₹139.30 per kg of black pepper, ₹417.80 per kg of white pepper and ₹278.30 per kg of green pepper. In the marketing channel of inorganic black pepper, the highest marketing margin was obtained by Channel V (₹342.00 per kg of black pepper) and the lowest marketing margin was obtained by Channel III (₹44.25 per kg of black pepper). An examination over the value chain governance in the black pepper value chain exposed that the price of the black pepper remains a significant factor that decides the “market type” governance structure of the value chain. Hence, the conventional farmers in the value chain and their chain actors fell under the market type governance structure. “Modular” type of governance structure was identified between the farmers and the NGOs, the farmers supplied the required product to the NGOs where the technology and knowledge has transferred from the NGOs to the farmers and encouraged farmers to undertake additional investment in agriculture. “Relational” type of governance structure was observed between the registered companies where the interaction between farmer and buyer were complex, but the mutual dependence existed between them were prominent and the firm collected the desired quality product from the farmers. The analysis on linkages in value chain exhibited that there exist cent percent linkage between farmers and fellow farmers, farmers and hill produce dealers, farmers and commercial banks, farmers and krishi bhavan and farmers and local administration. Three factors were identified to obtain the level of formality in the linkages like, informal, verbal arrangement and formal written contract. Business linkages or relationships can be formal or informal, accordingly, the formality in linkages between farmers and other actors in the value chain has identified. Trust and linkages are interconnected within a value chain, and linkages creates trust in the relationships. Hence, it is exposed that the formality and trust existed in the linkages is on the basis of the type of business relationship between the actors. Black pepper value chain is predominantly a buyer driven value chain, therefore the black pepper farmers had less price negotiation power. Furthermore, the farmers were exposed to different type of constraints in various activities included in the value chain, like pre-production constraints, production constraints, marketing constraints and other associated constraints. The low price of black pepper, price fluctuations of black pepper in the market, low quality of black pepper, import of black pepper from other countries were reported as the severe constraints by the majority of the actors involved in the black pepper value chain. Producing the value added products of black pepper, to improve the quality of black pepper and direct selling of black pepper to processors or exporters were the major opportunities identified by farmers. There is an opportunity for the conventional farmers to shift to organic farming practices and to become a certified organic farmer after three years, but the result revealed that conventional farmers were not interested to shift to organic farming. Because most of the conventional farmers cultivates cardamom in their farms, and according to them organic cultivation of cardamom and some other crops will not be viable and practical. The strategies identified to upgrade the performance of value chain actors includes: 1) to increase the productivity of black pepper, 2) need for farmer producer organizations for value addition, 3) upgrading of products and processes in the value chain 4) need to change government policies and if, the import of black pepper cannot be stopped, strict action should be taken to avoid the commingling of imported black pepper with the black pepper produced in Kerala in different nodes of value chain, which ultimately degrade the value of black pepper in the Kochi market. To conclude, the competitiveness of Kerala’s black pepper in the international market is diminishing day by day, as the price of black pepper is showing a decreasing trend from 2017 in the country. To get a reasonable income for the farmers from the black pepper cultivation they have to go for value addition activities. While in the current circumstances, a single farmer cannot undertake the production of value added products like white pepper and green pepper. Hence, the farmers has to group together to carry out these activities in the black pepper value chain in Kerala to capitalize the opportunities ahead, by taking into consideration of the actual constraints faced by them. Side by side, the institutional support machineries for enhancing the agriculture production in the state should focus on the farmer producer organizations like marketing cooperatives or farmer producer companies, so that a share of the noticeable profit grabbing by the actors, who undertakes value addition of black pepper and its value added products like white pepper and green pepper in the value chain can be transferred to the black pepper farmers.
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PhD