June 6, 2022
Although commodity markets have been around in India since 2002, agri commodities consist of only 12% of total trade in commodities. This is because of multiple issues; for instance, horticulture products are highly perishable in nature. In addition, there also is a lack of objective quality standardization. In addition, the highly fragmented supply side makes manual quality assessment difficult. This has increased the problem of information asymmetry. Despite India contributing 11% to total global agriculture and agriculture being the largest source of livelihood for most of the country’s population, the sector witnesses trade losses worth US$ 300 billion annually.
Why was Horticulture not traded?
According to reports, horticulture is a massive US$1.5 trillion market globally with 80 million growers. India’s share in the global horticulture produce is around 15%. Despite agriculture being one of the biggest sources of India’s exports and employment, this segment of horticulture products are not traded through spot trading and digital exchanges
Approximately 37% of farmers sell their harvest at a reduced rate, which lowers their already scant margins. In addition, if their produce is rejected, they bear the additional cost of transportation back and forth from the procurement centre or mandi.
Further, both growers and buyers must be at the same location to trade. This restricts the number of buyers and tilts the bargaining power towards local participants, hampering competition.
Fresh produce and horticulture commodities such as fruits, vegetables and spices are highly perishable, and movement restrictions and labour shortages that arose as a result of the pandemic-induced lockdown, led to huge wastage and food loss. The lack of objective quality standardization and high fragmentation at the supplier side made it difficult to aggregate and assess quality, which further compounds this problem.
For horticulture commodities to be traded, an electronic spot trading platform pre-supposes standardization of commodities to serve as an effective price discovery platform. Therefore, it is essential to achieve standardization before offering a commodity for spot trading on an electronic spot exchange. Even globally, commodity exchanges like the Tokyo Commodity Exchange (TOCOM) or the Chicago Mercantile Exchange (CME), trade futures and options on a range of energy commodities but not horticulture. This is because of the presence of wide quality variations in farm produce within a state, and even wider variations across states, pose a challenge to define common quality parameters before it is offered for trading. In addition, the traditional scientific assaying of commodities takes time before they can be recorded into an online trading system for trading.
Praman: Building a robust horticulture ecosystem
The first, and the most crucial step, to address this issue is the installation of quality assessment at every step of the value chain, starting at the procurement stage. Using proprietary Intello Labs AI technology into an agri-trade exchange platform for buyers, Praman eliminates information asymmetry, brings transparency and traceability, and creates an environment where sellers and buyers can discover trade and prices on the basis of quality This stops the whiplash effect in the postharvest supply chain and eliminates waste. The creation of a web of linked markets is dependent on objective real-time quality assessment. Traditional sorting of horticultural commodities is a manual process, which also makes it prone to errors. However, Praman leverages data science, Artificial Intelligence, and computer vision to create a multicommodity, multichannel sorting technology that can almost eliminate such issues while ensuring food safety and compliance with the toughest of regulations.
The agri-tech platform uses Intello Labs’ pioneering technology for spot-quality assessment, that are both digital and scalable, which are the benchmark for thousands of farmers, farmer producer organisations (FPOs), modern trade corporations, and general trade buyers across the country and the world seamlessly, globalising market linkage.
Since its launch in June 2021, the monthly transactions on Praman have crossed INR 400 crore, making it the largest B2B horticultural spot exchange in the world
Praman completely eliminates the need for on-location trading, and because auctions are conducted remotely, it lowers the barrier of entry as sellers and buyers from any location can participate. This has also increased farmer incomes by as much as 12 to 15%. In addition, due to the short market time, the cost of shrinkage is saved and the transaction costs are lowered. Every buyer has access to verifiable and quantifiable quality reports, which adds an elevated layer of transparency.
With Praman, farmers can benchmark their produce to similar lots in the market and quote the ongoing price. It hands the power back to growers, allowing them to negotiate a higher base price.
The horticultural supply chain is one of the toughest and most complicated that exists today. Join us as we use advanced technological solutions to streamline quality processes across the supply chain to create an equitable and symmetric trading market between buyers and sellers.