Saturday, December 8, 2018

Cost management highly Required for Farmers Series 1


Before I begin I would like to highlight that I have segmented the subject so that one can get a better conceptual idea of the various angles of the Indian farm production and farmers problem and cost management requirement. When farm commodity prices fall and costs of production rise, farmers can get caught in a “farm price-cost squeeze. 

Despite having various programmes where farmers can make a profit and sustainable growth from farm production we are still at the point where too many producers don’t understand their cost structure Farmers struggle for better pricing and cost management does not seem to end. 

The farm waiver has become now habit to save from cost and low price burden for the end product. Lower commodity prices have forced many farmers to eat away at working capital. If the farmer’s cash flow is negative and one run out of working capital, one has a real problem.

Farmers are just waiting for another waiver to be declared soon as elections are around the corner. This has become the most common thing for the farmers where they very well that farmer loan waiver is the best tool used by the Indian political system to win votes. The biggest immediate suffers are the NBFC and the Banks and in the long term, the biggest suffers will be the taxpayers. The problem with the farmers is the pricing of the products which are available and based on that designing the product mix accordingly. We find that product mix concept is lacking as well as target-based production and pricing link is missing.

Another factor which is affecting the farmers is that the low prices for the farm output. When this happens they look for waiver schemes.   Waiver of loans has impacted the Indian economy in many ways where the deficit is being met from the common people who pay taxes. The Union Budget reflects this story in many ways.

In some cases, it is being found that farmers are doing less production due to irrigation or poor farm prices. The government is just not able to get any justification as the political war is just busy focusing on highlighting the issue and not on the solution. As a result, many farmers have stopped production of many crops and hence price has gone up. The government is still silent despite prices going up since they want high prices for these crops so that middlemen could have their shares.

This is game which needs the attention of the pricing strategy of crops so that this loan waiver could be avoided. The Indian government has come up with the new policy aims to double the nation's farm exports to $60 billion by 2022 and gives a "greater thrust" to value-added products, promotion, and branding of India's produce. All restrictions on the export of organic and processed food items will be lifted. These include mandi (wholesale) taxes, minimum export prices, duties and quota restrictions.

Now for doubling the farm production and giving them space export market is no doubt is winning situation but how many farmers are literate enough and how many of the farmers can really en-cash the opportunity is going to be the next hurdle for the growth. From government to technocrat all are failing to understand that the education level of the farmers in terms of export needs to be uplifted. If the level of knowledge is restricted and controlled by a few knowledgeable farmers then the whole motive behind freeing up the framers from the clutches would go for a toss.

I find apart from educating the farmers for export-oriented production the cost management strategies should be imparted. Cost management lessons will improve the production efficiency which leads to improved efficiency in profit margins. In my research, I find that efficient knowledge about crop mix and production mix would be the key way to survive from the plummeting prices of producing any one crop.

The economies of production need to be identified so that every farmer gets proper valuation of its production. A farmer uses various types of ingredients to produce crops. Now cost management You have to understand all of your cost categories, then look at where you have excess. Is it equipment, family living? Should you seek off-farm income, or add custom farming?


As farm production is always volatile hence cost management becomes an imperative tool. As commodity prices began to tumble after 2014, more farmers came to the conclusion they needed better financial skills and hence learning the cost management have become a necessity.

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