From import to export of frozen French fries Benefits of contract farming

Why in the NEWS?

• India has become a leading exporter of French fries, thanks to companies buying potatoes directly from farmers, thereby increasing their incomes and strengthening India's global presence.

Key Points:

• Imports start in 1992: 
  • US Company Lamb Weston began supplying frozen French fries (FF) to Indian star hotels.
• Entry of McCain Foods: 
  • In 1996, McCain Foods entered India as the sole supplier to McDonald's.
• Growth of imports: 
  • Imports of frozen French fries grew to over 5,000 tonnes by the mid-2000s.
• Highest level of imports: 
  • Imports peaked at 7,863 tonnes in 2010-11.
• Change in exports: 
  • Imports almost stopped by 2023-24, and India exported 135,877 tonnes of FF worth Rs 1,478.73 crore.
• Export growth in 2024: 
  • Exports in April-October 2024 were 106,506 tonnes, worth Rs 1,056.92 crore.

What will you read next in this topic? 

1. What is Contract Farming Model? 
2. Key features of contract farming model:
3. Example of Contract Farming Model for Potato:
4. From Seed to Shelf: The Impact of Contract Farming

What is Contract Farming Model? 

• It is an agricultural practice in which there is an agreement between farmers and agricultural production companies.
• Under this agreement, farmers grow agricultural products under prescribed conditions, and later sell those products to a company at a fixed price.
• This model provides a secure market for farmers and assurance of high quality products for companies.

Key features of contract farming model:

• Agreement between farmer and company: 
  • There is a written contract between the farmer and the company, which clearly mentions the price, quality, terms of supply and other aspects.
• Communication and guidance: 
  • The company supplies guidance, technical support and raw materials (seeds, fertilizers etc.) required for agricultural production to the farmers.
• Controlled price: 
  • Under the contract, the farmer gets a fixed price of agricultural products in advance, which gives them relief from market uncertainty.
• Focus on production and quality: 
  • The company wants high quality products from the farmers, and for this quality standards are fixed.
• Transparency and Security: 
  • This model provides greater transparency to the farmers, and the company also gets a reliable supplier for its produce.

Example of Contract Farming Model for Potato:

Hyphen Foods' Investments:

• Hyphen Foods, which recorded sales of Rs 1,320 crore in 2023-24, has invested around Rs 700 crore to produce 17 t/h FF, 2.7 t/h Specialty and 3.6 t/h Potato Flakes at its plants in Mehsana district of Gujarat.

Raw Material Availability:

• More challenging than creating processing capacity is ensuring adequate availability of raw materials. Contract farming plays an important role for this.

Potato Procurement and Contract Farming:

• Hyphen Foods procured 300,000 tonnes of potatoes from 6,000 farmers in Banaskantha, Sabarkantha, Gandhinagar and Mehsana districts of Gujarat in 2023-24.
• The company aims to procure 1 million tonnes of potatoes from 20,000 farmers across 80,000 acres by 2027-28.

Price and benefits to farmers:

• The company is procuring potatoes from farmers at a rate of Rs 13.8 per kg for potatoes with a diameter of more than 40 mm. Smaller-sized potatoes are accepted at Rs 8 per kg.

Benefits of contract farming for processing:

• The contract farming model provides financial security to farmers, as well as allows them to achieve higher yields by focusing on quality.

From Seed to Shelf: The Impact of Contract Farming

• Supply of High-Quality Seeds to Farmers:
  • HyFun Company provides its contracted farmers with good quality, disease-free seeds in the form of mini-tubers.
  • These seeds are grown in tissue-culture laboratories by companies such as ITC Technico Agri Sciences, Mahindra HZPC, and KF Biotech.
• Seed Production Process:
  • Seeds are first grown in HyFun’s corporate farms, then these are grown in two generations in Punjab, Haryana, and UP through contracted seed producers.
  • The third generation seeds are used by farmers for their commercial potato products.
• Future Plans:
  • HyFun Company plans to set up greenhouse facilities for the production of mini-tubers using technologies such as aeroponics and sterilized cocopeat media, which will reduce the cost of planting material by half.
• Reducing farming costs:
  • Farmers like Patel increase the amount of organic carbon and nutrients in their soil by growing green manure legume crops such as guar and dhaincha during the monsoon.
  • HyFun improved the seed-potato planting method through “HyFarm Pathshala”, which reduces seed, fertilizer, and water consumption without affecting yields.