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January, 2005 |
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SME Focus |
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Brighter Farm Organic
Growth Contrary to popular perceptions, organic farming is more profitable than by using chemicals as this firm has proved. The commercialisation of agriculture has been increasing, though in a modest way. Vegetable farming and floriculture are two prominent examples. Even foreigners have started investing in these fields through various ways as the existing law does not permit direct foreign investment in agriculture.
Two examples of such investment have been provided by some Israelis who are contracting farmers to grow vegetables and exporting them to East Asia, and secondly by some Saudi Arabians who are doing the same and exporting vegetables to Saudi Arabia. These are in addition to the initiative taken by the Salt Trading Corporation which has already started exporting vegetables to the Gulf. In this scenario, small vegetable farming companies, who were using chemical fertilisers, have now started organic farming because it was found that going organic made economic sense. How are the experiences? When Kedar Buddathoki, in 1999, started growing tomatoes in his family owned land, which was excellent for paddy growing, his neighbours had declared it a stupid step. They, however, changed their minds when, three months later they learnt that Buddathoki earned Rs. 75,000 per ropani, which was much more than what he would have earned by growing paddy. Now the entire village of Charghare, Chobhar, which lies on the outskirts of Kathmandu, has turned to vegetable farming. The people grow cauliflower and, after harvesting it, tomato. A year later Buddathoki expanded the business by leasing some 20 ropanis (about 1 hectare) of land at Nakhu, Lalitpur. The results were excellent. Merchants from as far away as India came to him to purchase his entire production. Also the price he was getting was very good—Indian Rs. 15 per kilo at the farm while the retail price at the local market was only around Nepali Rs. 10. The reason being the good quality of tomatoes he grew. That was possible because Buddathoki himself is an experienced agricultural scientist specialising in vegetables and currently working with Nepal Agricultural Research Council (NARC). He expanded his farm to 150 ropanis the following year but could not send the product to India because the Indian buyer by then was afraid of the Maoists. That forced him to diversify from tomatoes to other vegetables. He concentrated only on off-season vegetables as the margins were higher in such products. He was using chemical fertilisers until then but there were frequent experiences of spurious chemical fertilisers causing a decline in productivity. That forced him to turn to organic farming. The result was amazing. ‘I had as much as 40 kilos of tomatoes from a single plant,’ he claims and adds, ‘In fact, if you use chemical fertilisers, you will not be able to recover your costs. People are still using it because they do not calculate all the costs.’ Sales were even better as the taste of the vegetables grown organically was better and people were also becoming conscious of the benefits of organic vegetables. Buddathoki has also started investing in organic field research. One difficulty was that one cauliflower plant requires 25 grams of nitrogen while one kg of cattle dung has only five grams of nitrogen. Though it is not difficult to get five kgs of animal dung to ensure that the plant gets 25 grams of nitrogen, it causes extra costs in terms of labour time needed to prepare a pit big enough to hold five kgs of animal dung. Now Buddathoki’s farm (Brighter Farm) is recording an annual turnover of Rs. 15 million. Contrary to the general perception, Buddathoki has proved that organic farming is in fact less expensive and more profitable provided the farmers can spend some amount on research and development. It also shows that there is good market in India for organic vegetables. At the same time, it also shows that there are problems in exporting to India.
However, the problem is not related to quarantine, as is generally perceived, but to the lack of ample homework by the Nepali government in exporting vegetables to India. Working with Nepal Agriculture Research Council (NARC), the apex agricultural research institute of the country, Buddathoki has first hand knowledge about the issues related to this field. He says that the government should do two things. First, it should certify that Nepali vegetables being exported are free from chemicals, and second, it should give India a product list that it is going to export in the following year. But it has done neither of these. The market for organic vegetables is gradually developing in Nepal but it is not enough. ‘We must be able to export if we really want to utilise our potential. The export will be profitable only if the vegetables we export are organic. In order to do that we need the certification which in turn requires the national standards to be set,’ he informs. This is, however, likely to take long. According to him, NARC has already recommended a set of standards, but the government is yet to endorse the same. After the standards are endorsed, a certification agency has to be designated. However, such certification will be good for domestic sales only. For exports, the certificate should be issued by some international certifying agency. There are seven people in Nepal who are trained to check if the vegetables are chemical free, but the testing cost is quite prohibitive—US dollars 600 per lot. So it is going to be economical only if the volume is really big. Though the regulatory regime may take time, Buddathoki is marching ahead on his own. He has now started growing vegetables and ginger at places as far as Baitadi in the far-west and Salyan in the mid-west. The plan now is to have one farm in each of the three ecological zones of the country so that he would be able to ensure continuity in supplying economical quantity of vegetables required by the buyers. Another plan of Buddathoki’s is to open his own showroom at Kalimati, the main vegetable marketplace in the capital. He hopes that it will be open by January 2005. It makes a better economic sense if the marketer concentrates on marketing and the grower concentrates on the farming, thus each becomes specialised and professional. Therefore, contract farming is a good model for agricultural commercialisation. However, Buddathoki says that an ideal model of the contract is still to evolve in Nepal. Recounting his experiences in contract farming, he says that there is the risk of breach of the contract by the farmer if the market price of the commodity at the time of the harvest goes higher than what is specified in the contract. ‘The sense of commercial farming is yet to dawn upon the Nepali farmers. So I’m trying to develop a model contract that may be satisfactory to both the grower and the marketer,’ he informs. Meanwhile, he is continuing with leasing land from farmers and growing commodities on his own. The next point in his plan is to concentrate on post harvest activities. Though it will be easier when the model contract is developed, Buddathoki has already started researching areas which would be beneficial to him. For example, he has already experimented with the production of desiccated vegetables and vegetable powders. The samples were sent to some foreign buyers who have already placed orders. Now he is making calculations as to how much green vegetables are needed to make the required quantity of desiccated cubes and powder and how much land he needs to grow that amount of vegetables. ‘It will take time because I must ensure quality, quantity and regularity of supply to the buyer.’ However, there must be a local market base to support the exports. All grades of commodities cannot be exported, therefore the local market should be developed to exhaust one part of the production. Though the vegetables consumption habit of Nepali people is gradually increasing, it is still far less than the 200 gram per day per capita as recommended by the nutritionists. This feature on SME has been sponsored by Laxmi Bank Ltd. |
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