Sustainability of Farmer Producer Organizations and Marketing Channels: Some Issues

Many marketing avenues, such as contract farming and futures markets, are often inaccessible to individual farmers, especially to small and marginal. Farmer Producer Organizations (FPOs), acting as aggregators of producer farmers, can access these markets. FPOs must diversify their marketing channels by exploring opportunities to generate revenue and profits and sustain itself in the long run. In this context, the study examines the sustainability of FPOs by analysing issues related to marketing channels. The study found that among all available marketing channels for FPOs, futures markets and contract farming help mitigate price risks. Additionally, the futures market protects against counterparty risk. Despite these benefits, the spot market remains the dominant marketing channel, which involves significant uncertainty. The importance of the futures market as a marketing channel was particularly highlighted during the COVID-19 pandemic when traditional supply chains were disrupted, leading more FPOs to choose this market to sell their harvest. However, it is observed that less than 1% of all FPOs engage in futures trading. Various factors contribute to this low participation, such as inefficient post-harvest management, inadequate access to finance for daily operations and maintaining mark-to-market settlements, and a lack of awareness and technical know-how, etc. Additionally, the ban on trading agricultural commodities on national exchanges has further reduced the participation of FPOs in the futures market. Therefore, to enhance the sustainability of FPOs, it is crucial to address these challenges and improve access to diverse marketing channels.