DRAFT

Concept notes on Linking Production Pocket

Areas with the Collection Centers to Develop a
Strong Market Chain with Sustained Business
Development Services

Source: Agriculture Marketing Manual, FAO and

Department of Agriculture, Nepal

8/15/2010

Prepared by:
Mr. Sichan Shrestha
Marketing Consultant, Nepal
1. Background

Most of the farmers currently are producing varieties of vegetables in their limited land
as subsistence farming and additional few quantities are sold in the local market.
Farmers incur a high cost of production, given low economics of scale, the high cost of
logistics and difficulty in pursuing activities in a remote region. However, this trend has
gradually been shifting towards commercial agriculture farming as few farmers1 have
realised its financial benefits. Vegetables being short duration crop will return in cash
within short duration with limited efforts.

To improve the economic status of farmers and support in overall marketing of

vegetables and other agriculture commodities one aspect is technical support in
cultivation and other important aspect is marketing which is very challenging in today’s
globalize market chain where locally grown vegetables not only have to compete with
the vegetables grown in other parts of Bhutan but have to be compete equally with the
vegetables that comes from India and Bangladesh. To improve competitiveness of all
agriculture produce in all aspects from cultivation, processing and finally marketing have
become a global phenomenon and Bhutan alone cannot stay aside. Competitiveness can
be achieved either by producing in a larger volume to reduce transaction cost and their
by reducing cost of production or by differentiating from others. To achieve large volume
of production farmers now have to work collectively in a group by commercial cultivation
of few selected vegetables and other agriculture crops that have huge market potential.
All vegetables and other agriculture produce can be aggregated to meet the buyer’s
requirement in terms of tons so that buyers (traders) can transport in a big truck full of
vegetables that can carry up to 10 to 15 tons of vegetables. If farmers can add more
value to their produce by involving in more than production activities and also involve in
processing for which market will be willing to pay a higher price.

Commercial production of vegetables will improve the economic status of Bhutanese

farmers which is only possible through working in a group. Working in a group will
realised economic of scale as well as increase bargaining power of individual farmers. A
physical space called ‘Collection Centre’ should be established in a proper location to
support farmer’s group with a better infrastructure with storage, weighing machine and
other space for administration works. Collection Centre should be located near to the
farmers pocket area where all agriculture produce can be easily transported but it should
be in a near by road heads which is again connected with the near by market centres
where traders can easily visit.

Flow chart for establishing collection centre

The figure below describes flow chart to establish a collection centre. Initially producers
group shall be established in a production pocket areas in each Geog. These producers
group representative should then be a member of Marketing Management Committee

1
Mr. Sonam, a farmer in Bhumtang earns monthly of Nu. 25,000 by only selling vegetables cultivated in 2 Acre land

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(MMC) who will then operate collection centre. The objective of establishing Marketing
and Management Committee is to collective market all types of vegetables and other
agriculture crops so that they are self sustained.

Producers Producers Producers

Dzongkhag and Geogs
Group Group Group

2 to 3 farmers from Marketing &

each producer Management
group will be a Committee (MMC)
representative of Farmers Group or
MMC Cooperative

Farmers aggregate their

produce; MMC takes
Collection initiatives in marketing and
sales to the traders or
Centre
producers group themselves
can sell

g Level Regional
Dzongkha Level

CONSUMER

Figure 1: Flow chart for setting up sustained market chain

2 to 3 each individual farmer from each producer’s group shall represents in a MMC.
Collection centre will be established with basic physical infrastructure such as storage
facility, shed, weighing machine etc. and will provide basic business services to the
individual farmers (read business services for more details). In the collection centre all
types of vegetables bought will be weighed and packaged as per the trader’s
requirement. Farmers will be immediately paid in cash with a prevailing market rate or
accumulated till the sufficient cash is deposited. There is a usual trend being observed is
that once the farmers received cash they will spend immediately purchasing unnecessary
things and they go home with no cash in hand. Before agriculture produce are bought in
the collection centre they should be provided with prevailing market rates so that they
can decide on whether to sell at the collection centre or other individual traders.

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 This collection centre will be provided with a support to facilitate logistics movement
to kick start the process of “leading by example” by demonstrating the aggregation and
collective transportation process to address the constraints arising from inadequate scale
due to fragmented production efforts.

The collected agriculture produce will then be sold to the traders by inviting them to
visit the centre in a regular basis from nearby market centre. They will build relationship
with few traders with whom they will regularly do business so that there is a trust and
feeling of social responsibility towards contributing to the poor farmers.

The collection centre will also positioned themselves as a full scale service provider to
their farmers and supporting them taking to the fairs, buyer-seller meeting, exhibitions
and other such efforts.

2. Roles and Responsibilities of Marketing and Management Committee

of Collection Center

Marketing and Management Committee shall operate with a structure as show below.

Chairman

Secretary

Treasurer

Member Member Member Member

 From the very beginning farmers will be made aware about the market and finally
the buyers. MMC will facilitate to the groups by orienting them to prepare a
cultivation plan according to the buyer’s requirements
 Provide market information to the farmers
 Motivate to involve more number of female members
 Conduct meetings within a group and support them with the details of selection of
crops, crops variety, areas of production etc.
 Conduct meeting every month and prepare its meeting minutes
 Promotion of agriculture commodities produced by the individual farmers to fetch
better market price with the group marketing approach
 Recruit manager and other staff as per the need

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  Building relationship with the market traders, Government service centres,
projects etc. for resource mobilization, knowledge, skills and other resources
 Establish a fund which will be utilized for welfare of farmers and regular operation
of collection centre. Fund will be deposited in the reliable bank with a provision of
signature from three persons (president, secretary and finance).

3. Business Services

Business services are services provided to the individual farmer, who regularly brings
agriculture produce in the collection centre. Following services are provided to the
farmers.

 Regular collection of all types of vegetables and other agriculture commodities

 Weighing scale
 Record keeping
 Seeds
 Water facility
 Training, workshop and interaction
 Storage facility – cold storage in advance type
 Office space for administration and meetings
 Sales of agriculture inputs
 Market information
 Linkages with the wholesale market traders
 Cleaning and sanitation
 One stop farmers shop – this is a new concept envisioned to provided all types of
seeds, fertilizers, pest etc. from the same place

4. Service Charge

For long term sustainability of collection centre service fee will be charged for few
services they offer.
 Price will be fixed for weighing every kg of vegetables and other agriculture
commodities bought in the collection centre
 Selling seeds
 Membership fee for new entry to the MMC
 Existing infrastructure will be used in other businesses such as collection of NFTP,
livestock etc.
 Consultancy services

Collection centre can be more than regular business service providers. Few collection
centres in Nepal are providing additional services such as providing health services to
the farmers and building rural infrastructure.
Source: Marketing Manual, FAO and Department of Agriculture, Nepal

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5. Points to be considered for selecting appropriate place for
establishing collection center
1. It should be near to the road heads.
2. It should be located near to the production pocket areas and located where there
is possibility of sufficient collection of vegetables so that one truck of load can be
managed.
3. Before finalizing location, there should be enough discussion between the farmers
and traders and other concern stakeholders and they should give final approval.

6. Management of Collection Center

Following points should be taken into consideration for effective operation and
management of collection centre
1. There should be discussion on buying and selling days, time and other process.
There should be regular interaction and reporting to the traders
2. To protect from heat and rain, there should be proper space for storage, parking
facility
3. To build infrastructure make use of locally available resources
4. Coordinate with other organisation for financial resources

7. Management of MMC

1. There should be democratic election to select 9 or 11 members

2. Representatives of agriculture marketing management committee, traders,
service centres and other geog level actors
3. Collection centre management committee should solely take responsibility of
management and preparation of operation policy guideline
4. Look after production pocket for space for collection and equal price,
standardization and grading
5. Make available of crate and weighing machine
6. Recruit knowledgeable person for networking
7. Calculate transportation cost using existing available vehicles
8. Management packaging and explore possibility of reduction in packaging loss
9. There are incidences that farmers adulterate by putting inferior quality products
in-between the packet. Farmers feel that they can easily cheat market people but
when such incidence is identified the whole other farmers will also suffer as the
buyers will reject products from all farmers. This type of behaviour should not be
promoted and strictly monitored.
10. Always target nearby market interact with the buyers about the market demand
and price information before the product is harvested.

8. What to do when there is more supply than the local demand?

1. Collect market information

2. Build relationships with all the market traders located locally or in India borders

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 3. To reduce transportation cost use existing available transport facility. In the
Eastern Bhutan there are frequent movement of truck transporting gypsum which
can be effectively utilized.

9. Conclusion

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