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July 27, 2009

Trends in Corporate Farming

Businessworld has an article on the progress (or the lack of it) of the agri-initiatives of various corporate houses.



Take Jain Irrigation, which derives Rs 300 crore of its revenues from agri business by aggregating 7,000 acres of farmland to grow white onions and mangoes for Cargill, the global seed company. The fruits and vegetables are processed and shipped to Cargill, which in turn supplies them to retail companies around the world. “We work with 1,500 farmers, and have been working with them from the seed input stage,” says Anil Jain, MD of Jain Irrigation.

Aggregation was easy for the Jains given the proximity of farm lands to processing factories that have a capacity of 20,000 tonne per day. But what makes Jain Irrigation’s model of contract farming different is that there are no formal signed contracts with the farmers. The arrangement is based on the strong relationship built by the company by selling drip irrigation systems to these farmers.

A similar business model is followed by Vista Foods, a food processing company that supplies to McDonald’s. The company works with over 500 farmers in Ooty, Tamil Nadu to source iceberg lettuce. Another little known company Desai Fruit and Vegetable in Gujarat works with over 2,000 farmers aggregating over 5,000 acres of land. Most of the produce it contracts — bananas and mangoes — end up in Europe. The Bharti joint venture with processing firm Delmonte aggregates another 2,000 acres.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in