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Globalisation and Expanding Markets for Cut-Flowers: Who Benefits?

Globalisation and macroeconomic reforms have induced a number of discernible changes in Indian agriculture, including a greater policy emphasis on high value crop diversification. It has been argued that moving away from a cropping pattern oriented towards foodgrain production would enable land-poor farmers to sustain and improve their livelihoods. This paper examines issues related to high value diversification in agriculture by taking floriculture as a case study and finds that though the profitability of cut-flowers is substantially higher than that of the traditional crops, the participation of the smaller farmers in flower cultivation is lower compared to most of the other farm-size categories, primarily because of weak linkages with the market. The results indicate that risk aversion is an important impediment to crop-diversification, particularly for the land-poor category of farmers. Schemes to diversify crops are likely to face serious constraints unless resource-related and institutional barriers like access to markets are overcome.

Globalisation and Expanding Markets for Cut-Flowers: Who Benefits?

Globalisation and macroeconomic reforms have induced a number of discernible changes in Indian agriculture, including a greater policy emphasis on high value crop diversification. It has been argued that moving away from a cropping pattern oriented towards foodgrain production would enable land-poor farmers to sustain and improve their livelihoods. This paper examines issues related to high value diversification in agriculture by taking floriculture as a case study and finds that though the profitability of cut-flowers is substantially higher than that of the traditional crops, the participation of the smaller farmers in flower cultivation is lower compared to most of the other farm-size categories, primarily because of weak linkages with the market. The results indicate that risk aversion is an important impediment to crop-diversification, particularly for the land-poor category of farmers. Schemes to diversify crops are likely to face serious constraints unless resource-related and institutional barriers like access to markets are overcome.

SUCHARITA SEN, SARASWATI RAJU

IIIII
IntroductionIntroductionIntroductionIntroductionIntroduction

O
ver the last three decades, Indian agriculture has shifted towards a specialised cropping pattern that is primarily oriented towards the production of foodgrains. However, the external sector reforms in India, particularly after the post-Uruguay Round, are expected to usher in an influx of cheap food imports which have wide implications for such production regimes. Moreover, the wheat-paddy water intensive cropping cycle that is widely prevalent in the western part of Indo-Gangetic plains tends to exhaust natural resources in a manner that may be unsustainable [Saleth 1999; Agarwal et al 2004].1 Interlinked to this are the issues such as disappearing seed-varieties leading to reduction in biodiversity and a subsequent increase in seasonality of employment. Moreover, the south Asian region has also witnessed stagnating technological advancement and declining investment in agriculture in general and in irrigation in particular [Joshi et al 2002]. Under such circumstances, diversification of agriculture is seen as one of the more rational responses that can counter the emerging challenges associated with crop-specialisation.

Indian agriculture is also characterised by a sharp fall in the number of those classified as “self-employed” in agriculture, with this category declining in absolute terms between 1993-94 and 1999-2000. It has been argued that many small and marginal peasants lose their land due to the non-viability of their holdings and are forced to seek employment as landless labourers, leading to increased casualisation of labour in Indian agriculture [Chandrashekhar and Ghosh 2003]. The viability of the small holdings has thus become a major issue and it has been suggested that one of the ways to deal with this problem is to promote diversification towards high value crops [Vyas 1996]. In addition, the seasonality of employment that is induced by specialisation could to a large extent, be mitigated by introducing a larger number of crops in the cropping pattern that would offer fuller employment to agricultural labour round the year [Chadha et al 2004].

However, scholars have questioned the rationale of profitmotivated diversification away from foodgrains, particularly towards horticultural products, fearing that this may erode food security for households [Patnaik 1996]. This phenomenon, it is contended, may force smaller farmers into distress sales, since perishable commodities cannot be consumed or stored at the household level [Jha 1997; Shiva 2004]. Also, diversification towards high value crops would require a higher level of investment per unit area, both direct and indirect – the former in terms of higher cost of production, and the latter due to infrastructural and institutional changes required for producing and marketing many of the products that are mostly perishable or semi-perishable. Moreover, many of the high value products such as fruits, vegetables and flowers are characterised by highly volatile and speculative pricing structures due to the “small volume” of trade [Pingali 2004]. Diversification and risk are thus seen as closely interlinked as they expose producers to the greater volatility of both domestic and world prices.2 Risk aversion has been identified as a significant impediment to what would otherwise seem to be a rational allocation of land based on the relative profitability of alternative crops [Pingali 2004]. Incidentally, high value diversification has also been identified as one of the thrust areas in the 8th and the 10th Five-Year Plans directed towards increasing the income of the farming community, particularly that of the small and marginal farmers [Saleth 1997; GoI 2002: 540].

Given the different perceptions regarding the benefits of high value diversification, there is need to evaluate response of households in a changing global environment. This paper attempts to assess the impact of high value crop diversification towards floriculture on small and marginal farmers in terms of

  • (a) relative profitability of cut-flowers vis-à-vis competing crops,
  • (b) degree and nature of participation of the different farm-size categories in flower cultivation, and (c) the relationship between
  • farm-size and access to market in terms of both the average price received by the farmers and volatility of these prices.

    IIIIIIIIII
    Data and MethodsData and MethodsData and MethodsData and MethodsData and Methods

    Crop diversification may be perceived as a strategy for profit maximisation or risk minimisation but it is the former that is more relevant in the context of the post-economic reform era. In recent years, floriculture has emerged as a high growth segment within the agricultural sector.3 There has been a considerable shift in the composition of floriculture exports in favour of cut-flowers [Chengappa and Mysore 2005]. The concerted efforts at export oriented production of cut-flowers since 1991 could be attributed to this shift. Flower trade, especially in Delhi and other metropolitan cities, has grown manifold during the last decade. Much of this growth can be attributed to the post-reform policy changes that led to an appreciable expansion of the domestic and export markets for cut-flowers.

    The process of identification of villages to be sampled started with preliminary inquiries from sellers at the cut-flower wholesale market located at Hanuman Mandir Mandi in New Delhi. After some field visits to prospective villages, the village Gangdhari located in nearby district of Muzaffarnagar in Uttar Pradesh was selected for the primary survey because it satisfied two of our criterion: (a) the entire quantum of flowers from this village was sold at the above-mentioned mandi, and (b) a considerable proportion of farmers (more than 30 per cent of the total cultivating households) were engaged in floriculture.4 All the

    Table 1: Farm-size Distribution and Cropping Pattern of FlowerTable 1: Farm-size Distribution and Cropping Pattern of FlowerTable 1: Farm-size Distribution and Cropping Pattern of FlowerTable 1: Farm-size Distribution and Cropping Pattern of FlowerTable 1: Farm-size Distribution and Cropping Pattern of Flower
    and Non-Flower Cultivating Householdsand Non-Flower Cultivating Householdsand Non-Flower Cultivating Householdsand Non-Flower Cultivating Householdsand Non-Flower Cultivating Households
    1A: Farm-size Distribution1A: Farm-size Distribution1A: Farm-size Distribution1A: Farm-size Distribution1A: Farm-size Distribution

    Type of Household Marginal Small Medium Semi-large Large Total

    1 Non-flower cultivating 14 22 23 16 19 94 2 Flower cultivating 3 6 14 18 19 60* 3 Total 17 28 37 34 38 154

    1B: Cropping Pattern1B: Cropping Pattern1B: Cropping Pattern1B: Cropping Pattern1B: Cropping Pattern

    Cropping Pattern (Percentage of Gross Cropped Area) Type of Household Flowers Wheat Sugar Cane Others

    1 Flower-cultivating 23.89 19.52 37.23 19.34 2 Non-flower cultivating 0 25.41 50.02 24.57

    Notes: Marginal-0.1 to 5 bigha; small-5.1 to 10 bigha; medium-10.1 to 20 bigha; semi-large-20 to 30 bigha; large-30 and above. (1 acre=2.5 bigha). Six out of the 60 flower-cultivating households could not be included in parts of the analysis due to non-response to parts of the questionnaire.

    Source: Census survey of village Gangdhari, district Muzaffarnagar, Uttar Pradesh.5

    households of the selected village were surveyed to ensure complete coverage. The major flowers grown in the village were gladioli and tuberoses. The farm-size distribution of the surveyed households and the general cropping patterns of flower and non-flower cultivating households are reported in Table 1.

    IIIIIIIIIIIIIII
    ProfitabilityProfitabilityProfitabilityProfitabilityProfitability

    Profitability expressed in terms of net returns per unit area depends on three basic factors – yield, price and the cost of cultivation – and indicates the income of the farmer. Growth in the income of farmers due to diversification would largely depend upon the degree of profitability of the high value agricultural crops relative to the other competing crops. The analysis utilises the concept of paid-out cost since the farmers, while weighing relative profitability of different crops and making allocation decisions, rely more on paid-out costs rather than total costs.6

    The cost of cultivation, as expected, is much higher for flowers as compared to the other crops due to a number of factors. To begin with, there is a higher cost associated with inputs, with the cost of seeds creating a major divergence between the cost of cultivation of flowers and other crops (Table 2). In addition, there is wide variation in the input cost within different variety of flowers and in this regard gladioli are more cost intensive as compared to tuberoses. However, the substantially higher net return associated with the former provides incentive for adopting gladioli cultivation. Flower cultivation requires higher expenditure on hired labour, though irrigation cost may be lower due to reduced number of hours of watering required per unit of area. Nevertheless, the timing and dependability in case of flower irrigation is crucial.

    The farmers earn far more from flower cultivation compared with sugarcane or wheat or even a combination of fodder-wheat or sugarcane-wheat which are the other higher competing crop cycles in the village (Tables 2 and 3). However, in terms of netreturn, tuberose is relatively less profitable compared with gladioli. Though costs for improved varieties of flowers are generally higher from the point of view of both net return and incomecost ratio, they are the better options compared with the local varieties.7 For example, cultivation of improved variety of gladioli provides nearly eight times more return compared to the traditionally profitable combination of sugar cane (ratoon)-wheat. Only when the sugarcane (ratoon) and wheat combination competes with tuberose (single), are the net returns somewhat comparable. There seems to be little doubt about the relatively higher profitability of flowers compared with other crops.

    Comparison between flower cultivating and non-flower cultivating households reveals that the former group earns significantly more per unit of area as compared to the latter both in

    Table 2: Profitability Criteria for Flowers and Other Major CropsTable 2: Profitability Criteria for Flowers and Other Major CropsTable 2: Profitability Criteria for Flowers and Other Major CropsTable 2: Profitability Criteria for Flowers and Other Major CropsTable 2: Profitability Criteria for Flowers and Other Major Crops
    (((((
    Rs/bigha)

    Major Crops Gross Returns Input Labour Irrigation Total cost Net Return Income-Cost Ratio

    1 Gladioli local* 17971 5351 850 34 6235 11736 1.88 2 Gladioli improved* 44634 13126 882 25 14033 30601 2.18 3 Tuberose single 6721 2256 295 163 2714 4007 1.48 4 Tuberose double 12946 3198 283 114 3595 9351 2.60 5 Sugar cane (plant) 3381 848 524 549 1921 1460 0.76 6 Sugar cane (ratoon) 4133 405 524 596 1525 2608 1.71 7 Wheat 2167 381 199 326 906 1261 1.39

    Note: * Gladioli improved variety is multi-coloured and priced above the gladioli local variety, which is of a single colour. Source: Same as for Table 1.

    Economic and Political Weekly June 30, 2006 terms of gross as well as net return (Table 4). Thus, with a change in land allocation of about 24 per cent, which is the share allocated in favour of flowers in the village for flower cultivators, the flower-cultivating group is better off even after incurring a higher cost of cultivation (Tables 1 and 2).

    However, mean profitability is rarely the only consideration for land allocation decisions. The degree of variability of profitability across time for farmer/farmer groups, which is indicative of the risks involved in floriculture vis-à-vis other crops, is another factor. In absence of temporal data, the variability of profitability across farms is used to compare the degree of risk involved in flower cultivation. In this respect, the proportion of farmers making a loss in the business of flower cultivation is far greater compared with the other crops8 (Table 5). More than one-third of the farmers incur a loss in case of tuberose while the proportion of farmers having negative returns for sugarcane and wheat is negligible.

    The variability of profitability is a function of the variability of its various components such as productivity, price and cost of cultivation. The high variability of net returns of flowers visà-vis other crops is primarily due to the differences in the variability of productivity and price (Table 6).

    The yield of sugarcane, which is the other commercial option to the farmers, is remarkably steady across farms and this could be one of the reasons why farmers prefer sugarcane to flowers though the latter option is more profitable. Among flowers, productivity variation is clearly higher for tuberose (double) and gladioli (local). The price received for both sugarcane and wheat has a clear uni-modal distribution within the farmers of the village.9 The price of the flowers, on the other hand, is characterised by a high degree of volatility following highs and lows in demand and is often subject to even daily fluctuations.

    For income enhancement of the farmers, therefore, flowers may be considered as a more profitable option compared with not only the cereal crops but also other commercial crops like sugarcane. However, the degree of variability in profitability and hence the risk associated with flowers is far greater compared with both cereal and commercial crops. Thus, it becomes necessary to examine whether floriculture as an income-enhancing activity is available as an alternative to the smaller farmers, who are constrained in terms of access to both land and capital.

    IVIVIVIVIV
    Small Farmers and High Value DiversificationSmall Farmers and High Value DiversificationSmall Farmers and High Value DiversificationSmall Farmers and High Value DiversificationSmall Farmers and High Value Diversification

    High value diversification in agriculture has been recommended as one of the ways by which small farmers can increase their incomes. With a large number of incentives being given to floriculture in the recent years, it is important to understand the dynamics of flower cultivation particularly in the context of the benefits percolating to the poorer farmers. There is a variation associated with different types of high value diversification and floriculture, while being an extremely profitable venture, is also a highly risky operation both due to the extremely perishable nature of the product and its high price volatility. In this section, different aspects of participation of small and marginal farmers in flower cultivation vis-à-vis the other groups are examined.

    As may be observed from Table 7, while more than half the farmers with operational holdings of more than 20 bighas are involved in flower cultivation, a far less proportion of small farmers adopt flower cultivation. In size class categories 3 and 4, the share of cultivating households within the size class does not change significantly. The Chi-square tests between farm size and share of area under flower indicate a positive and significant relationship.

    The shares of number of households surveyed from different farm-size categories are more or less even with the small, medium, large and semi-large groups having shares of 29, 24, 22 and 24 per cent respectively. The composition of flower and non-flower cultivating households shows the dominance of larger farming households in floriculture. The smaller farmers, on the other hand, constitute a far larger share within the non-cultivating households.

    Thus, from the analysis of both within and across farm size classes, it is clear that (a) the smaller farmers do not take to flower cultivation as readily as larger farmers, and (b) larger the farm size, the greater is the participation in flower cultivation, though beyond a certain size the advantages that the large farmers have in cultivation of flowers does not seem to change (Table 7).

    Table 3: Relative Profitability (Net Returns) of FlowersTable 3: Relative Profitability (Net Returns) of FlowersTable 3: Relative Profitability (Net Returns) of FlowersTable 3: Relative Profitability (Net Returns) of FlowersTable 3: Relative Profitability (Net Returns) of Flowers
    in Relation with Other Competingin Relation with Other Competingin Relation with Other Competingin Relation with Other Competingin Relation with Other Competing
    Crop CombinationsCrop CombinationsCrop CombinationsCrop CombinationsCrop Combinations
    (Ratio of net-return: Flowers to other crops)(Ratio of net-return: Flowers to other crops)(Ratio of net-return: Flowers to other crops)(Ratio of net-return: Flowers to other crops)(Ratio of net-return: Flowers to other crops)

    Crop Wheat Wheat-Sugar Cane Wheat-Fodder Sugar Cane

    1 Gladioli local 9.30 5.87 4.50 3.03 2 Gladioli improved 24.26 15.30 11.73 7.91 3 Tuberose single 3.17 2.00 1.54 1.04 4 Tuberose double 7.41 4.68 3.59 2.42

    Source: Same as for Table 1.

    Table 4: Group Statistics and T-test for Equality of Means ofTable 4: Group Statistics and T-test for Equality of Means ofTable 4: Group Statistics and T-test for Equality of Means ofTable 4: Group Statistics and T-test for Equality of Means ofTable 4: Group Statistics and T-test for Equality of Means of
    Profitability for Flower andProfitability for Flower andProfitability for Flower andProfitability for Flower andProfitability for Flower and
    Non-flower Cultivating HouseholdsNon-flower Cultivating HouseholdsNon-flower Cultivating HouseholdsNon-flower Cultivating HouseholdsNon-flower Cultivating Households

    (Rs/bigha)

    Variable House-Number Mean Variable t Df Sig hold of Obser-(2-tailed) Type vations

    1 Grossreturns FCH 54 5709.65 Gross Returns 5.44 144 0.00 NFCH 94 2968.60

    2 Net returns FCH 54 4601.35 Net Returns 4.31 144 0.00 NFCH 94 2483.77

    Notes: FCH-Flower cultivating household; NFCH-Non-flower cultivating household.

    Source: Computed from survey data.

    Table 5: Profitability Status of Farmers for Flowers and OtherTable 5: Profitability Status of Farmers for Flowers and OtherTable 5: Profitability Status of Farmers for Flowers and OtherTable 5: Profitability Status of Farmers for Flowers and OtherTable 5: Profitability Status of Farmers for Flowers and Other
    Major CropsMajor CropsMajor CropsMajor CropsMajor Crops

    Profitability Status Tuberose (Single) Tuberose (Double)
    No of Farmers Per Cent No of Farmers Per Cent
    Loss 18 38.30 9 33.33
    Profit 29 61.70 18 66.67
    Total 47 100 27 100
    Gladioli (local) Gladioli (improved)
    Loss 4 18.18 3 12.50
    Profit 18 81.82 21 87.50
    Total 22 100 24 100
    Sugar cane (plant) Sugar cane (ratoon)
    Loss 2 1.89 1 1.04
    Profit 104 98.11 95 98.96
    Total 106 100 96 100
    Wheat
    Loss 1 0.75
    Profit 133 99.25
    Total 134 100

    Source: Same as for Table 1.

    While it seems evident that the small farmers’ participation in floriculture is less compared with the larger farmers, it is not clear whether they are late adopters, thereby benefiting from the process of high value diversification after the entire flower commodity chain which includes production, wholesaling and retailing stabilises over time.11 This issue assumes significance as the cut-flower segment in floriculture is a relatively new agricultural activity. However, it is also possible that the small farmers who diversify into flower cultivation may not be able to bear the risks associated with it and would tend to move out of the operation after a few years. The length of the period for which a farmer has been engaged in flower cultivation, that is, the continuity of flower cultivation across the different farm size categories, is a reflection of the quantum of risk experienced by these groups.

    The survey indicates that within the flower-cultivating households, the maximum allocation towards flowers is made by the small and marginal farmers as compared to the other farm-size categories. This could be due to the short-term sporadic nature of labour requirement for floriculture, which can be fulfilled primarily by the family labour. Moreover, a minimum amount of flower needs to be grown by any cultivator in order distribute its marketing over both lean and peak months to enable the absorption of losses due to sudden price troughs in the flower market.

    There is a substantial difference in the way the small farmers distribute their land within flowers compared with the other categories of cultivators. The former group primarily allocates land towards tuberose which is the less profitable option among the flowers, while the larger farmers distribute it among all flowers. However, within tuberose, the smaller farmers prefer the improved variety, which is associated with higher net return and income-cost ratio.

    The relatively high input cost of gladioli acts as a possible disincentive against allocating land in favour of this flower for the smaller farmers. In addition, there is a positive and significant relationship between farm-size and productivity (Table 9) which can be explained by factors such as the small farmers’ lack of access to capital that prevents them from using better seed varieties or forces them to recycle the same seeds for a period longer than the optimum period. For all the other crops, however, the farm-size productivity relationship is insignificant.

    Despite dedicating a relatively greater proportion of land towards flowers, small farmers have significantly lower mean years in flower cultivation compared with the other farm-size categories (Table 10). The maximum years that any small farmer has in floriculture operation is five compared to up to 15 years in flower cultivation for the larger size categories. It is to be noted that the mean years in flower cultivation are approximately the same from the medium size class onwards. This may be indicative of two possible dynamics. First, small farmers may be late adopters and started flower cultivation only recently. The second possibility is that despite of the relatively high profits, no small farmer is able to sustain flower cultivation beyond a certain period due to the associated uncertainties and high costs of cultivation. The latter phenomenon is supported by focused group discussions (FGD) in the field where many small farmers reported their intention of moving out of flower cultivation.

    Table 11 provides additional insight into the issue under consideration. While there are no farmers within the small farm size category with more than five years of sustained cultivation of flowers, there are a substantial proportion of farmers within the higher farm-size categories who have cultivated flowers for more than eight years. In this respect, the medium farmers are even better off compared with the semi-large and the large farmers. This is explained by a lot of new entrants within the category of large farmers cultivating flowers.

    The flower cultivating households in the medium, semi-large and large categories of farm-size are more or less evenly distributed across the various cultivation periods indicating that farmers have been steadily adopting flower cultivation and also that the ones who had adopted flower cultivation earlier are staying on in the operation. On the other hand, most of the farmers in the marginal and small size-class are new entrants. The likelihood that the small farmers are late adopters does not seem probable given the fact that flower cultivation started about 15 years back in the village.

    Table 6: Coefficient of Variation of Major Components of NetTable 6: Coefficient of Variation of Major Components of NetTable 6: Coefficient of Variation of Major Components of NetTable 6: Coefficient of Variation of Major Components of NetTable 6: Coefficient of Variation of Major Components of Net
    Return across Farm HouseholdsReturn across Farm HouseholdsReturn across Farm HouseholdsReturn across Farm HouseholdsReturn across Farm Households

    (In per cent)

    Variable Tuberose Tuberose Gladioli Gladioli Sugar Cane Wheat (Single) (Double) (Local) (Improved)

    1 Net return 244 234 182 179 49 61 2 Input cost 94 73 82 88 68 58 3 Productivity 103 145 128 105 31 48 4 Price 44 30 75 41 Neg Neg

    Source: Computed from survey data.

    Table 7: Proportion of Flower and Non-flower CultivatingTable 7: Proportion of Flower and Non-flower CultivatingTable 7: Proportion of Flower and Non-flower CultivatingTable 7: Proportion of Flower and Non-flower CultivatingTable 7: Proportion of Flower and Non-flower Cultivating
    Households across Farm Size CategoriesHouseholds across Farm Size CategoriesHouseholds across Farm Size CategoriesHouseholds across Farm Size CategoriesHouseholds across Farm Size Categories

    Farm-Size Category10 Flower Non-Flower Total

    Cultivating Cultivating Households Households (Per Cent) (Per Cent)

    1 Marginal and small 20.0 80.0 100.0 2 Medium 37.5 62.5 100.0 3 Semi-large 52.9 47.1 100.0 4 Large 51.3 48.7 100.0

    Notes: FCH-Flower Cultivating Households; NFCH-Non-flower Cultivating Households.

    Source: Same as for Table 1.

    Table 8: Land Allocation Decision of Flower CultivatingTable 8: Land Allocation Decision of Flower CultivatingTable 8: Land Allocation Decision of Flower CultivatingTable 8: Land Allocation Decision of Flower CultivatingTable 8: Land Allocation Decision of Flower Cultivating
    HouseholdsHouseholdsHouseholdsHouseholdsHouseholds

    (Per cent of gross cropped area)

    Crops Small Medium Semi-large Large All Households

    1 Gladioli local 3.8 7.0 7.3 7.1 7.0 2 Gladioli improved 0.0 2.2 6.1 3.1 3.6 3 Tuberose single 10.9 5.7 6.0 4.5 5.4 4 Tuberose double 23.7 9.2 9.9 5.8 8.4 5 All flowers 34.6 24.1 29.3 20.5 24.3

    Source: Same as for Table 1.

    Table 9: Correlation between Farm-size and ProductivityTable 9: Correlation between Farm-size and ProductivityTable 9: Correlation between Farm-size and ProductivityTable 9: Correlation between Farm-size and ProductivityTable 9: Correlation between Farm-size and Productivity

    Crops Correlation Number of T-value Sig (2-tailed) Coefficient Observations

    Gladioli local 0.385 27 2.09 0.05 Gladioli (impr) 0.592 21 3.20 0.01 Tuberose single -0.155 42 0.99 0.33 Tuberose double -0.022 33 0.12 0.90 Sugar cane -0.06 115 0.64 0.52 Wheat 0.031 132 0.35 0.72

    Economic and Political Weekly June 30, 2006

    The two apparent reasons due to which the smaller farmers

    Figure: Fluctuations in Flower Prices across MonthsFigure: Fluctuations in Flower Prices across MonthsFigure: Fluctuations in Flower Prices across MonthsFigure: Fluctuations in Flower Prices across MonthsFigure: Fluctuations in Flower Prices across Months
    may be averse to continuing flower cultivation are variability 50in productivity and prices (Table 6). However, analysis of the

    40

    survey data indicates that variability of productivity is more or

    less similar across the different farm-size categories. FGDs during

    the survey reveal that small farmers find it difficult to sustain

    Rs/dozen

    30

    20

    flower cultivation due to the uncertainties of sale prices and

    10

    problems of transportation.12 A deeper analysis of the functioning of market and prices is required to explain the relative lack 0 of participation of the smaller farmers in flower cultivation.

    VVVVV

    JanuaryFebruaryMarchAprilMayJuneJulyAugustSeptemberOctoberNovemberDecember

    Price and Its VariabilityPrice and Its VariabilityPrice and Its VariabilityPrice and Its VariabilityPrice and Its Variability

    Access to market networks is crucial in determining the level of benefits that a seller can obtain, particularly when the market is driven by buyers. Availability and access to transportation facilities and direct contact with the market may be considered as important factors influencing the prices that the farmers receive

    Table 10: Mean Years in Flower Cultivation across FarmTable 10: Mean Years in Flower Cultivation across FarmTable 10: Mean Years in Flower Cultivation across FarmTable 10: Mean Years in Flower Cultivation across FarmTable 10: Mean Years in Flower Cultivation across Farm
    Size CategoriesSize CategoriesSize CategoriesSize CategoriesSize Categories

    Farm-size Category Average Years in Minimum Maximum Numbers Flower Cultivation of Hhlds

    1 Marginal and small 2.44 1 5 9 2 Medium 6.50 1 14 16 3 Semi-large 6.24 1 12 18 4 Large 5.13 1 15 20 5 Total 5.40 1 15 63*

    Note: * Indicates the number of farmers who cultivate/cultivated flowers in the village.

    Source: Same as for Table 1.

    Table 11: Flower Cultivating Households Cross-classified byTable 11: Flower Cultivating Households Cross-classified byTable 11: Flower Cultivating Households Cross-classified byTable 11: Flower Cultivating Households Cross-classified byTable 11: Flower Cultivating Households Cross-classified by
    Years in Flower CultivationYears in Flower CultivationYears in Flower CultivationYears in Flower CultivationYears in Flower Cultivation

    (In per cent)

    Farm-Size Categories Years in Flower Cultivation Below 2 2-5 5-8 above 8 Total

    Marginal and small 55.6 44.4 100.0 Medium 31.3 18.8 12.5 37.5 100.0 Semi-large 29.4 17.6 23.5 29.4 100.0 Large 30.0 35.0 10.0 25.0 100.0 Total 33.9 27.4 12.9 25.8 100.0

    Source: Same as for Table 1.

    Table 12: Correlation of Average Prices of Flowers, SizeTable 12: Correlation of Average Prices of Flowers, SizeTable 12: Correlation of Average Prices of Flowers, SizeTable 12: Correlation of Average Prices of Flowers, SizeTable 12: Correlation of Average Prices of Flowers, Size
    of Holding and Area under Flower Cultivationof Holding and Area under Flower Cultivationof Holding and Area under Flower Cultivationof Holding and Area under Flower Cultivationof Holding and Area under Flower Cultivation

    Variables Statistics Operating Area Area under Flower

    1 Tuberose (single) Pearson Correlation

    0.3330.3330.3330.3330.333
    0.248 Average Sig (2-tailed) 0.033 0.118 Price N 47 47

    2 Tuberose (double) Pearson Correlation -0.258 -0.160 Average Sig (2-tailed) 0.154 0.382 Price N 27 27

    3 Gladioli (local) Pearson Correlation -0.163 -0.022 Average Sig (2-tailed) 0.408 0.913 Price N 22 22

    4 Gladioli (improved) Pearson Correlation 0.234

    0.6090.6090.6090.6090.609
    Average Sig (2-tailed) 0.282 0.002 Price N 24 24

    5 Tuberose (single) Pearson Correlation 0.206

    0.3520.3520.3520.3520.352
    October Sig (2-tailed) 0.208 0.028 Price N 39 39

    Note: The figures in bold are significant at 5 per cent level of significance. Source: Computed from survey data.

    GLD(L)

    GLD(I)

    TRS(D)

    TRS(S)

    for their flowers in the domestic markets.

    Two aspects relating to price required investigation (a) the average price (average across months) received by farmers, and

    (b) variability of these prices across farm-sizes. The former is expected to vary across different size classes as the prices received would depend on the volume of the flowers marketed by the farmer and his interaction with the market. Our FGDs revealed that most of the large farmers were present in the market when the flowers were sold by the wholesalers. In addition, a large number of medium and large farmers were licensed to directly sell flowers in the mandi. The farmers having larger land allocation under flowers and thus better market linkages had greater access to information about price fluctuations as compared to the ones selling a lower quantum of produce. The fluctuations of prices of the flowers are marked across seasons, months and even days.13 Thus, the high variability could act as disincentives for farmers to adopt flower cultivation.

    There seems to be a significant and positive correlation between the average prices received and (a) size of operating area (of flower cultivators) and (b) area under flower allocation in this study.14 The last two variables are also positively and significantly inter-correlated.15 For some of the flowers it is observed that average prices received for the entire season is significantly lower for smaller farmers compared with their larger counterparts. This is true both for tuberose (single) and gladioli (improved) (Table 12). For tuberose (single), a positive and significant relationship is observed between prices in October and area allocated under flowers – this is the period during which the price of this variety of flower is higher compared to the rest of the year (see the figure).

    The relationship between farm-size and flower prices is somewhat different for tuberose (double). While for most of the months the correlation between these two variables is insignificant, for the months of January and February the correlation between size of operational holding and the monthly prices received by the farmers is negative and significant. This is a deviation from the general result that the larger farmers tend to receive higher prices.

    An examination of the variability of prices received by the different categories of farmers is necessary as this influences the risk faced by the producers. Table 13 reveals that the smaller farmers tend to face higher price variability across different months compared with larger farmers except for tuberose (double). This result supports the earlier finding that, among all the flowers cultivated in the village, the small farmers tend to adopt tuberose (double) possibly due to its lower price variability. Thus, the small farmers have some choice in releasing this variety of flower in the market at favourable times that enables them to avoid the price troughs.

    VIVIVIVIVI
    ConclusionConclusionConclusionConclusionConclusion

    In any poverty alleviation strategy, the enhancement of the income of small and marginal farmers is an important policy component as they constitute more than three-fourths of the farming community in India. This paper has attempted to examine the effectiveness of high-value diversification in increasing the income of the small farmers in the specific context of floriculture. The survey indicates that the small farmers do not participate in flower cultivation as actively as the larger farmers and, even if they do so, they do not pursue it for a long duration. Moreover, there is some evidence to suggest that the smaller size groups adopt flower cultivation later than the larger ones.

    Small farmers tend to allocate a greater proportion of land to flowers as compared with larger farm sizes. However, given the resource constraints, the smaller farmers allocate comparatively less land to the more profitable flowers due to their high cost of cultivation and the variability in their prices16 . The latter factor appears to be more relevant for allocation decisions of the small farmers as they are guided by profitability criteria of the crop provided that it has lower price variability. Due to the combination of flowers cultivated there is no significant difference in net returns of flower cultivating and non-flower cultivating households for the smaller farm size groups, whereas for the two larger farm-size groups the flower cultivators are significantly better-off.

    It would seem that the resource-constrained small farmers are averse to diversifying, particularly if the high-value crop in question is perishable, risky and whose price is subject to high degree of fluctuations. Even when diversification is attempted, they are not able to benefit substantially due to their inability to absorb risks associated with the pattern of more profitable high value products combined with lower volume of products traded. The latter factor acts as a constraint both in terms of access to information about market behaviour and direct participation in wholesale trade. The results of the survey lend qualified support to the argument that the potential for diversification towards high value crops like vegetables or fruits is rather limited in the current institutional set-up, particularly for smaller holdings [Saleth 1997; Verma and Mishra 1997; Subrahmanyam and Sudha 1997].

    High value diversification as a strategy to increase small farmers’ income levels, particularly in context of flowers, is not likely to be successful unless it incorporates elements such as institutional credit for the profitable crops and farmers’ direct participation in the market. However, even an improved credit/ marketing system along with a supporting extension system geared to encourage high-value crops among small farms is

    Table 13: Coefficient of Variation of Prices across MonthsTable 13: Coefficient of Variation of Prices across MonthsTable 13: Coefficient of Variation of Prices across MonthsTable 13: Coefficient of Variation of Prices across MonthsTable 13: Coefficient of Variation of Prices across Months

    Farm Size Tuberose Tuberose Gladioli Gladioli
    (Single) (Double) (Local) (Improved)
    1 Marginal and small 51.1 28.7 57.1 64.3
    2 Medium 54.5 39.9 39.0 29.3
    3 Semi-large 43.7 27.1 50.9 23.2
    4 Large 37.8 33.2 27.0 22.1
    5 Total 45.7 31.6 39.6 27.7

    Source: Computed from survey data.

    unlikely to remove the internal constraints faced by the small holders emanating from the lack of a strong income and employment cushion.

    Though better economic performance of a diversified crop enterprise justifies the rationale for crop diversification as a strategy for improving economic prospects of small farmers, it needs to be recognised that the land allocation strategies within this farming community are strongly influenced by factors like farm-specific resource endowment and household specific consumption needs. Crop diversification schemes are likely to face serious infrastructural and institutional obstacles and ensuring access and linkages with markets is important in this context. Further, lower-risk options of diversification into livestock assets as well as into the non-farm sector as a means to provide initial income and employment protection also have to be incorporated in any strategy directed towards the rural poor.

    rr;

    Email: ssen@mail.jnu.ac.in

    NotesNotesNotesNotesNotes

    [The authors are thankful to the respondents in the surveyed village for spending their valuable time for the survey which interrupted their busy work schedules on many occasions. An earlier version of the paper was presented in the South Asian Regional Conference on ‘Globalisation of Agriculture in South Asia: Has It Made a Difference to Rural Livelihoods?’, Hyderabad in March 2005. The authors are thankful to the participants for their valuable comments.]

    1 These negative externalities impact include lowering of groundwater table, water logging and salinity, etc, rendering both land and water resource use in agriculture unsustainable.

    2 The increased volatility of prices is particularly relevant in the context of trade and macroeconomic reform designed to align domestic prices more closely with international prices.

    3 Export of flowers and its products has shown a significant increase during the last decade, from Rs 14.4 crore during 1991 to Rs 123 crore by 2000-01 and Rs 164 crore by 2003.

    4 The MA second semester students of the Centre for Study of Regional Development, Jawaharlal Nehru University conducted this survey as a part of their compulsory course-work under the supervision of the authors from December 6-26, 2000.

    5 Unless otherwise mentioned, sources for all the data presented in the paper pertain to the field survey.

    6 That does not, however, imply that we undervalue the unpaid family labour, particularly that of the significant number of female members of the households.

    7 Tuberose (double variety) compared with tuberose (single variety) on one hand and gladioli (improved or multi variety) compared to gladioli local are considered to be superior both due to quality considerations and the price that they fetch in the wholesale market.

    8 Loss here is measured by negative net return, ie, gross return minus cost of cultivation (paid out cost)

    9 The price received for sugar cane is usually Rs 90 per quintal, while that for wheat is Rs 600. The farmers without any intervention of the middlemen sell the sugar cane directly to the Khatauli sugar mill. The demand for sugar cane generated by sugar mills located in the area is much larger than production in the adjoining villages. However, the flowers are marketed to Delhi and a large number of farmers have to depend on middlemen (larger farmers from the same village) for transport and sale. Also, the demand for flowers fluctuates heavily across months and even within days leading to high fluctuations in price.

    10 Farm size categories have been derived in the following manner: below 10 bigha – small; 10 to 20 bigha – medium; 20 to 30 bigha – semi-large; above 30 bigha – large. Operational holdings have been used for farm size categories.

    11 Literature shows that small farmers were late adopters with respect to green revolution, though in the initial years, large farmers took to the then “new technology” more readily. Further, it has also been noted, that while mechanical technology is scale biased, bio-chemical

    Economic and Political Weekly June 30, 2006

    technology, which was more directly linked with the green revolution is size-neutral.

    12 It may be noted that there is no significant correlation between farmsize and years in flower cultivation. Such a result is supported by the evidence that there is no significant difference in the status of flower cultivation between the very large (owning above ten bighas of land) and the small farmers.

    13 Data, however, was collected for average prices across months, as reported by the farmers.

    14 Capturing the fluctuations of flower prices across days was outside the scope of our study.

    15 The correlation between size of holding and land allocation under flower is not as strong as expected. This is because smaller farmers who cultivate flowers tend to allocate higher proportions of land to flower. Also, the participation in flower cultivation of those farmers who have more than 30 bighas of land declines, both in terms of percentage of farmers who are flower cultivators to total farmers and proportion of land allocated to flowers by flower cultivators.

    16 In our specific context, small farmers allocate more land to tuberose compared with gladioli.

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    Chadha, G K, S Sen and H R Sharma (2004): Land Resources: State of Indian Farmer, a Millennium Study, Department of Agriculture and Cooperation, Ministry of Agriculture, Academic Foundation, New Delhi.

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    Subrahmanyam, K V and M Sudha (1997): ‘Enhancing the Viability of Small Farms: Diversification through Horticultural Crops (Present Status and Future Scope)’, Agricultural Situation in India, April, pp 29-33.

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    Vyas, V S (1996): ‘Diversification of Agriculture and Food Security in the Context of New Economic Policy’, Indian Journal of Agricultural Economics, 51(4), pp 636-43.

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