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BW Businessworld

Small Yet Sustainable

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A kha Khedi village in Madhya Pradesh’s Agar district is an odd amalgam of motorcycles, mobiles and marginal farmers. Its 700-odd inhabitants have always been keen on embracing novelty in any way possible — be it accessing Facebook and WhatsApp on their mobiles or going for the latest motorcycle brand on offer.
 
The fascination with novelty spills over to their mainstay — soy farming. Of the 90 small farmers in Akha Khedi, 68 are part of Responsible Soy, a global certification programme that is helping farmers increase yields and earn a premium on their crop. Benefits that, for farmers drawing 70 per cent of their income from soy, are indeed a big deal. Besides, the farmers who have enrolled are typically those with holdings of 1.5-2 hectares. 
 
The programme entails growing soy according to standards that are environmentally sound, socially equitable and economically viable. That small farmers have signed up is testimony to the fact that sustainability in soy cultivation is not just for the big farmers in developed markets. Rather, it is something that even subsistence farmers can practice.
 
As the demand for sustainably produced agricultural goods grows—soy is the latest to join the list, the Indian farmer too is waking up to the benefits of following good agricultural practices and obtaining global certification that, in addition to significantly increasing his yield and income, also help him get access to world markets.
 
In this ‘sustainable’ endeavour, the Indian small farmer is helped by NGOs, agricultural companies, global certification standards and audit agencies. 
 
In fact, he has little choice but to adopt ‘sustainable’ practices. By 2025, India will be the world’s most populous country, with just 2.6 per cent of its land and 4 per cent of its renewable water resources, says Shatadru Chattopadhyay, managing director, South and South-east Asia, Solidaridad, a Netherlands-based NGO. “This is likely to trigger competing claims on land that is already stressed, to produce more food, fibre, feed and bio-fuel,” he adds. Solidaridad works to bring together supply chain actors under 12 commodity programmes, each concentrated in a different region of the world, to devise strategies for improved and sustainable production.
 
The focus on crops like soy makes eminent sense. “It helps tackle issues of food security and nutrition in three of the country’s populous states, cut down our edible oil imports, meet the growing demand for fodder, in addition to allowing farmers to grow two more crops in the same year with minimum water,” explains Chattopadhyay.
 
India is emerging as one of the fastest growing soy markets. With an installed capacity of 25 million tonnes, units possess the ability to crush and process twice the current level of produce. Therefore, farmers need to produce more not just to keep their heads above water, but to cater to the demand within and outside India for certified soy.
 
Back in Akha Khedi, farmer Ram Chandra Sharma, 59, shares his happy experience with other villagers at the central meeting ground. Having practised ‘sustainable’ farming for the fourth year running, he is enthused by the yield from his 2.5 hectare plot. His soybean output has shot up from the 12-15 quintals earlier to 38 quintals. Sharma now makes over Rs 1.5 lakh from his soy produce, a five-fold increase from Rs 30,000 in 2009. Of course, a part of this gain is due to the increase in soy prices —Rs 4,200 a quintal in Indore, one of the biggest trading hubs situated 100 km from the village but the uptick in his fortunes is unmistakable.
 
In adjoining Rajgarh district, 40-year-old Kanwar Lal Yadav has been growing soy for the past 20 years. But his best efforts yielded only 2.5 quintals per bigha. In 2009, he began following ‘sustainable’ agricultural practices. In a year’s time, he was producing close to twice his earlier yield, and was able to buy his own thresher and a buffalo.
 
Yadav and Sharma are at one end of the ‘sustainable’ soy ecosystem. At the other are companies like Ruchi Soya, the country’s largest soy food maker, which are helping the small Indian farmer cash in on the growing demand for sustainable soy. Last November, the company bought 10,000 Responsible Soy credits from over 10,000 certified farmers who are members of its sustainability programme.
 
The Round Table On Responsible Soy’s (RTRS) Certificate Trading Platform allows farmers to earn credits for soy produced in keeping with sustainability norms. The credits can then be ‘sold’ to companies committed to Responsible Soy, much like carbon credits are bought and sold. To demonstrate that the system actually works, Suresh Motwani, Solidaridad’s soy programme manager in India, displays an order he has received by email from Park Cakes, a leading private bakery label in the UK, for the purchase of Responsible Soy credits. 
 
Physical sourcing of certified beans is the next step in the Responsible Soy ecosystem and there are already some early movers. Three companies confirmed that they are ascertaining demand and discussing pricing with European buyers such as feed millers to firm up sourcing plans. Ruchi, the only company to go on record, says it is following up on its purchase of credits by buying 12,000 tonnes of certified beans, supporting another 20,000 farmers.
 
Growing Demand
That’s small change given that India produces 12 million tonnes of soy a year, and is poised to overtake China’s production of about 12.2 million tonnes. Ideally, Ruchi would like its entire procurement to be of the sustainable kind. Its 12 crushing plants need over 4 million tonnes of soybean, but get only half that. The company is talking to various producers but certified soy is still not available in large quantities in India. Until that happens, it will have to be content with 100,000-200,000 tonnes of certified soy over the next two years, says Ashok Garg, assistant general manager, International Business, Ruchi Soya. Other agro companies, including one based in the soy bowl of Madhya Pradesh and the Indian arms of two transnationals, are also working on sustainability programmes with farmers starting this season, helping them realise the full potential of soy as a cash crop. Their programmes involve at least 100,000 farmers.
 
A large part of the demand for certified soy in India is from foreign shores, says the agri extension head of a company. Companies normally initiate collaborations with farmers who have complied with traceability norms. A lot more needs to be done, especially in terms of streamlining processes and ensuring traceability along the entire chain of custody, for more such collaborations. Again, much hinges on how lucrative the certified soy market proves to be.
 
“India’s experience with soy certification offers great learning to countries — that it’s possible to be sustainable even with small and marginal farmers,” says Augustin Mascotena, executive director, RTRS. Speaking from Uruguay, he explains that RTRS certification is first and foremost aimed at improving the livelihood of farmers in India. In addition to a price premium, certification helps farmers get access to discounts on agricultural inputs and finance. More significantly, it is proving to be the access key for unlocking overseas markets for certified soy.
 
RTRS works with over 150 members from more than 20 countries to build a market for responsibly sourced soy. Among its stakeholders are producers and retailers from the soy industry, environmental and social NGOs and commodity traders.
 
In India, RTRS runs one of the largest sustainability programmes in soybean certification for Indian farmers, in partnership with Solidaridad, which has been working on sustainable practices in India for over five years now. Rolled out as part of the Farmer Support Programme funded by the Dutch ministry of foreign affairs across five geographies, the Soy Producer Initiative in India was launched in 2009 to introduce 30,000 small farmers, across 14 districts of Madhya Pradesh, to good agricultural practices. The state accounts for two-thirds of the India’s soy production. 
 
Taking Root
After four years of following RTRS production principles, an evaluation conducted by rural consultancy MART on the initiative’s impact found that the productivity of farmers  — with an average land holding of 2.2 hectares —had increased by 54 per cent and their average income had gone from around Rs 42,000 to Rs 1,00,000 a year. There’s more. There was a 23 per cent decrease in the use of chemical fertilisers and an over 60 per cent reduction in the use of child labour. “These were all outcomes beyond our expectations,” says Gert van der Bijl, international soy programme coordinator, Solidaridad. To maximise reach, the programme  roped in NGO partners on the ground — Action for Social Advancement (ASA), IGS, Samarth, Vrutti, Access, SRIJAN and BAIF—with considerable presence in the fields of watershed development, livelihood promotion, micro-credit and self-help groups. 
 
Alongside, existing producer groups were strengthened and tapped for more effective outreach, even as new ones like Balram Kisan Samruddhi and Jimmedar Samruddhi Utpadak Samuh were formed. A few like Samarth Kisan, supported by the state administration and having a large member base of over 6,550 farmers across 137 villages, were also approached. 
 
An intensive engagement initiative was then launched through the network of producer companies to train farmers in best practices related to agronomy and sustainability, explains Motwani. To help build capacity for RTRS certification, an internal control system coordinator tracks its adoption under five broad parameters across 96 sub-heads. These parameters include ensuring that proper wages are paid, no banned chemicals are used and no minors are employed. 
 
Big Benefits
So far, it has all been about phase I of the programme. In phase II that began last year, the reach is being expanded to 75,000 farmers in Maharashtra and Rajasthan. Consider the economics of the initiative: 80,000 hectares currently producing an average of about 104,000 tonnes of soybean. By adhering to the sustainability standards, the certified crop is expected be fetch an extra Rs 8,08,00,000 (calculated at a premium of Rs 777 per tonne). Add to that a significant increase in yield and the impact of the programme looks formidable.
 
Right now RTRS and Solidaridad bear the cost of training the farmers. Other costs involved in certification are being met by the credits buyback guarantee provided by two Dutch buyers — dairy company Friesland Campina and premium cheese company CONO Kassmakers. With more global companies, especially food retailers, turning to India for fulfilling their targets for certified soy, the cost burden is likely to ease.
 
The Local Picture
According to Van der Bijl, what is needed is a country-specific interpretation of RTRS standards. “What is being done right now in India, China, Argentina, Paraguay and Canada is that general principles are being applied to fit local legal realities,” he says. Another lacuna is that, to bring down certification costs, farmers are being audited in batches — 2,000 on average. 
 
When RTRS began by certifying the first 420,000 tonnes of soy as sustainable in 2011, India was one of four producer countries to take the lead. However, as with most other crops, low productivity has been the bane of Indian farmers. An estimated 6-8 million soy farmers in the country produce just 12 million tonnes of soy a year. Growing on 12 million hectares across the three states of Madhya Pradesh, Rajasthan and Maharashtra, the average soy yield works out to just about 1 tonne per hectare. 
 
When crushed, soybeans produce meal and oil in the ratio of 80:20. An estimated 2.4 million tonnes is used to produce soy oil in the country and the remaining 10 million tonnes goes towards soy meal production. Half of this is consumed in India and the balance exported, mostly to markets such as Iran, Vietnam, Korea, Thailand and Bangladesh. Van der Bijl says as the growing middle class in these low-income countries consumes more meat, the demand for soy will rise as it is an excellent animal feed. 
 
Advantage India
India has an edge with regard to the European market because it produces only non-genetically modified soy, which is what Europe consumes. Again, though Brazil is the world’s largest producer of GM-free soy, it faces issues with regard to segregated storage, logistics and transportation, which has pushed up the cost of non-GM soy. As a result, European companies are now increasingly looking to India for GM-free soy. 
 
Last year, India exported 0.5-0.6 million tonnes of soy to Europe, notably to countries such as France, the UK, Italy and Switzerland. This is twice the quantity that it exported two years earlier. 
 
The Indian farmer has understood the value that sustainability fetches, says Ashis Mondal, director, ASA. It’s only a matter of time before other small farmers follow the Responsible Soy example.  
 
The author is a freelance business writer
 
(This story was published in BW | Businessworld Issue Dated 29-12-2014)