Do you know what are the five fastest expanding crops in India today? They are cotton, rapeseed, corn, gram and wheat. And that says a lot for what is happening in our villages and on our farms right now.
All the above are crops grown by the farmer not for home consumption but for sale in the market at a profit. Even wheat is a commercial crop in Punjab, Haryana, Gujarat, Madhya Pradesh and western UP. It is grown for sale to the highest bidder in the mandi. Add to this list sugarcane, rubber, spices, tea and coffee, and you have a country where 60% of the arable land is wholly under commercial for-profit agriculture. That's a really big deal.
More importantly, it points to some very big trends you need to keep an eye on.
One, the price of farm land is going to rocket and so will the farm land leasing business. To be successful, commercial farmers need a biggish piece of land. He is no longer satisfied by the hectare or two inherited from dad. As profit-driven incomes rise, more farms will exchange hands and at ever-spiralling costs. So if you plan to buy land in rural India for warehouses, mandis, retail chains or even your post-retirement cottage, double your budget.
Two, commercial farmers are more aggressive and more aware of latest trends in crop management. Where literacy is poor, word-of-mouth marketing fills in the gap beautifully. Like any successful business, commercial farmers want economies of scale. For this, they are willing to invest in better inputs, seeds, irrigation. They know the value of credit, insurance, timely irrigation, market linkages, roads, trading and information dissemination. And will be willing to pay for them. Therein lies your hot new business opportunity.
They also know they have a voice. And they will not hesitate to use it. As in the case of sugar cane and wheat, we will see farmers growing commercial crops in a contiguous area become a larger political force as incomes fuel aspirations. As the Budget shows, the UPA government realises that all too well.
Three, the popularity of these five crops say a lot about the way and what we are consuming. Cotton is popular because of game-changer BT seeds as well as huge global demand for clothing and textiles. Corn is popular because we are eating more chicken and eggs. Rapeseed (along with soyabean) are popular because we are eating more fats and more meat. Wheat and gram are popular because processed foods are becoming an important part of our diets. India is now eating outside the home and on the go more often than before. That has pulled up demand for starch, fats, maida and besan.
Four, commercial farming also indicates which commodity futures will see the biggest increase in terms of hedging, money inflow, open interest and depth. As the cash or physical markets for these crops expand, there will be a manifold ripple effect on their futures markets too. Moreover, while price discovery would still be India-focused, these commodities are likely to become even more closely integrated with world market prices.
Five, commercial farming makes it easy to identify the new pockets of prosperity in rural India. From mobile phone companies and shampoo brands to healthcare and credit card companies, every one will zero in on areas where business is guaranteed. Better get there fast, and hopefully first.
Truth is if I were a rural sales manager, I'd be tracking commodity prices far more closely than anything else. At the start of the marketing season of each commercial crop, I would watch how prices and net farm realisations behave. That would tell me what kind of budget my potential customers have and tailor my prices/offers accordingly. I would also closely watch mandi arrivals to know exactly when do farmers in each area have cash in hand to spend. And beat my competitors to their doorsteps.
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