Get daily agriculture business leads on WhatsApp. Join our WhatsApp Channel

Article Mr. Laxmi Prakash Semwal on "Need for fair pricing in apple supply chain"

ForumGuardian

Active Member
Staff member
Laxmi Prakash Semwal, Director, Annamrit Farmers as Owners Foundation Garhwal, Uttarakhand, explains how price fluctuations in the apple market can create challenges for both producers and consumers and insists on fair pricing systems to improve stability and quality production.

FFT Himalayan Fresh Produce Private Limited operates an integrated cold chain network for apples produced by small growers’ collectives across Himachal Pradesh and Uttarakhand, with a complete system covering procurement, storage, transportation, and distribution of apples to major Indian markets. The company established a controlled atmosphere storage facility at Naugaon in Uttarkashi, Uttarakhand, along with eight pre-cooling structures located in different apple-growing regions equipped with sorting equipment, collection centres, and handling systems designed to maintain the freshness and quality of apples from farm gate to market.

The organisation also operates a fleet of 12 refrigerated trucks for transporting apples from production areas to the controlled atmosphere storage facility and then onwards to wholesale markets and retailers across India.

1784541573610.png


Fair prices, better livelihoods

Every year, apples are procured from members of farmer collectives located across eight different regions and supplied to buyers in major markets, including Delhi, Lucknow, Kanpur, Patna, Bhubaneswar, Kolkata, Jaipur, Indore, and Ahmedabad. The entire operation functions through cooperation between businesses, investors, bankers, and farmer groups for a fair pricing system. Investors finance infrastructure facilities, banks finance Apple stocks, and farmers contribute directly to production and supply.

The experience gained through operating this system has highlighted the importance of fair pricing in ensuring food security for consumers and securing sustainable livelihoods for farmers and all participants within the agricultural supply chain. The issue of fair pricing affects not only producers but also employees working in collection, storage, transportation, processing, and distribution systems throughout the agricultural economy.

The elusive fair price

In principle, creating fair prices appears simple. Conventional economic thinking suggests that prices can be calculated through a “cost plus profit” approach at each stage of the value chain. However, in agriculture, particularly in fresh produce, this process becomes highly complicated in practice. Agricultural commodities are influenced by several unpredictable factors, including weather conditions, seasonal production, pest attacks, government policies, transportation systems, imports, storage capacity, and consumer demand.

This difficulty is one of the major reasons behind continuing farmer agitations and protests worldwide. Despite support from cooperatives, supply chain companies, fair trade organisations, and producer groups, farmers often remain vulnerable to unstable markets and speculative pricing systems. Governments also attempt to regulate agricultural markets through subsidies, minimum support prices, import duties, export restrictions, storage facilities, and policy interventions. However, despite these efforts, no completely successful system currently exists for ensuring fair pricing for all stakeholders.

A chain under pressure

The present situation within the apple value chain reveals serious structural problems affecting farmers, storage companies, retailers, auctioneers, importers, investors, and consumers alike.

During the recent harvest season* from August to October, apple prices increased dramatically compared with previous years. Prices were nearly double those seen during the last five to ten years. This increase was primarily caused by lower production resulting from unseasonal rainfall and snowfall during the flowering period. Due to poor weather conditions, many storage companies were unable to fill even 50 per cent of their storage capacity. Some businesses purchased only 10 to 20 per cent of their usual inventory because procurement prices were already extremely high during harvest season.

From the farmers’ perspective, however, the situation initially appeared positive. Although production volumes were lower, higher market prices allowed farmers to achieve income levels similar to years of high production. Reduced supply pushed prices upwards, balancing the losses caused by lower yields.

The second layer of the value chain, including storage companies and auctioneers, assumed that rising prices would continue during the off-season. Historically, businesses operating controlled atmosphere storage systems generated profits by purchasing apples during harvest season and selling them later during the off-season when market supply declined. Because harvest prices were already exceptionally high this year, many industry players expected prices during the off-season to rise even further, potentially reaching three or four times the harvest season prices. However, these assumptions proved incorrect and created severe consequences across the entire supply chain.

Between harvest and decay

Controlled atmosphere storage companies possess advanced technical knowledge about preserving fresh fruit quality. These companies understand how rapidly apples must be cooled after harvest and how oxygen and carbon dioxide levels should be managed inside storage chambers. By carefully controlling temperature, humidity, oxygen, and carbon dioxide, controlled atmosphere storage systems can maintain apples in almost the same condition as during harvest season.

However, because prices during harvest season were already very high, many retailers and auctioneers believed they could earn greater profits by storing apples independently rather than purchasing from professional storage companies later. Large quantities of apples were therefore purchased directly from farmers and stored in ordinary cold storage facilities rather than specialised controlled atmosphere systems. Unfortunately, many of these apples had already been weakened by excessive moisture, heavy rainfall, and increased chemical usage during production.

As a result, apples stored under ordinary cooling conditions began losing quality much more rapidly. Retailers and auctioneers generally lacked the technical expertise required to manage long-term fruit storage properly. They did not possess the same monitoring systems, freshness testing methods, or storage technologies available to professionally controlled atmosphere operators.

Imports and oversupply

At the same time, government policy changes created additional pressure within the domestic apple market. The Government announced that imported apples priced below Rs 50 per kilogram would not face import duties. Previously, import duties on apples had remained around 50 per cent for more than a decade. This policy encouraged importers to bring large quantities of cheaper apples into India from foreign countries. Imported apples entered the market at prices approximately 25 to 30 per cent lower than domestic harvest season prices.

The combination of imported apples, poor-quality stored domestic apples, and excess market supply created a severe oversupply situation from November onwards. Instead of increasing during the off-season, prices began falling sharply. Market prices eventually dropped to nearly half the rates paid by storage companies during harvest season. This sudden decline created financial losses throughout the supply chain.

The consumer’s loss

Consumers became one of the biggest losers in the entire process. Although prices during the off-season became slightly lower than harvest season prices, consumers received significantly inferior-quality apples compared with previous years. Retailers and auctioneers lacked the technical expertise necessary to maintain freshness and fruit quality properly. As a result, consumers paid prices similar to previous years while receiving lower-quality produce. In many cases, prices remained nearly equal to the previous year, although the quality had declined substantially. This damaged consumer confidence. Many buyers began shifting away from apples towards alternative fruits because they no longer trusted the quality available in the market.

The cost of miscalculation

Retailers also suffered heavy financial losses during the season. They had purchased apples directly from farmers during harvest season at unusually high prices, believing off-season prices would continue rising. However, because of market oversupply and falling quality, retailers were forced to sell apples at a loss. Many apples deteriorated during storage, further reducing their market value.

Auctioneers traditionally operated as intermediaries between farmers and buyers. They used their relationships with producers and retailers to facilitate trade while managing payment risks and advances. This year, however, many auctioneers also began operating as storage businesses themselves. They stored apples independently in the expectation of earning larger profits during the off-season.

Although auctioneers generally understood storage technology better than retailers, they still lacked the sophisticated systems available within professionally controlled atmosphere facilities. Their storage systems were less efficient in maintaining freshness, measuring sugar levels, and monitoring fruit quality regularly.

Consequently, auctioneers also faced both financial losses and quality deterioration. Retailers first sold their own poor-quality apples before shifting to apples stored by auctioneers. Although auctioneers’ apples were somewhat better, they still failed to match the quality maintained by controlled atmosphere storage companies. Eventually, both retailers and auctioneers suffered significant losses while consumer trust declined further.

When supply outlasted demand

Professional storage companies also encountered unprecedented difficulties. Retailers, auctioneers, and importers had already flooded the market with apples before controlled atmosphere storage operators could release their produce gradually. Storage companies expected that reduced inventory levels would allow their stock to sell more quickly. However, several important realities were ignored.

First, consumers had already started shifting to other fruits because of poor-quality apples available earlier in the season. Second, retailers and auctioneers were attempting to recover their losses by demanding lower prices from storage companies. Third, imported apples continued entering the market regularly at lower prices. As a result, controlled atmosphere storage companies experienced some of the most difficult financial conditions seen during the last 10 to 15 years.

Even by May, many storage facilities still contained between 25 and 40 per cent unsold stock. There was growing concern that apples stored from the previous season would overlap with the arrival of the next harvest beginning in July. This situation created serious risks for businesses, investors, and future procurement operations.

A call for collaboration

The present crisis demonstrates the urgent need for discussion among policymakers, farmers’ unions, cooperatives, storage companies, retailers, investors, and consumers.

Agricultural value chains must focus on four major objectives:

  1. Ensuring food security for consumers.
  2. Providing sustainable livelihoods for farmers.
  3. Maintaining reasonable profits for businesses.
  4. Protecting investment and ensuring financial sustainability.
All stakeholders must work together to share risks and responsibilities during difficult periods rather than transferring losses onto weaker participants. Dependence on imports may appear beneficial in the short term because imported products often seem cheaper, but it creates serious risks for national food security.

If global production is disrupted by climate events, wars, disease outbreaks, or pandemics, imported supply chains may collapse or become extremely expensive. Countries that lose domestic production capacity become highly vulnerable under such conditions. Therefore, maintaining domestic agricultural production systems remains essential for long-term food security and economic stability.

Farmers as partners

The organisation promotes a model based on cross-sector collaboration and farmer ownership. These two principles form the foundation of its approach towards fair pricing. Under this model, farmers are not merely suppliers but also co-owners of the business. This creates a completely different relationship between producers and the supply chain.

Farmers understand that if temporary losses occur during one season, long-term ownership and dividend benefits will compensate for these difficulties over time. Similarly, investors recognise that delayed returns during difficult years may lead to stronger long-term sustainability and future profits. This shared-risk system allows the organisation to maintain stable operations even during difficult market conditions.

In contrast, many competitors rely heavily on aggressive pricing strategies aimed at short-term profits. During favourable years, such strategies may generate significant gains. However, during difficult seasons, these same businesses often suffer equally large losses. Over the last decade, competitors experienced strong profits during several years but lost similar amounts during challenging seasons such as the current one.

Meanwhile, farmer-members within the collaborative model continued receiving benefits not only through produce prices but also through dividends, ownership participation, and long-term business stability.

The limits of speculation

One of the biggest problems within agricultural markets is the absence of rational price build-up systems. Most market participants rely heavily on speculation rather than structured analysis of actual costs and long-term sustainability.

Prices are often determined according to expected production volumes, government policies, import scenarios, and anticipated demand rather than careful evaluation of production costs, infrastructure expenses, and quality maintenance.

Agricultural commodity trading increasingly resembles stock market speculation. However, fresh produce markets cannot function like financial markets because food prices depend on numerous interconnected factors, including weather, logistics, quality preservation, consumer behaviour, and perishability.

Fair prices cannot remain fixed every year. In some seasons, fair prices may be lower, while in others they may be significantly higher. What matters is that pricing systems remain fair to all participants and create sustainable outcomes rather than speculative gains for only a few players.

Where ethics take root

Ethical considerations are central to sustainable agricultural systems. Within the collaborative model, price structures are determined collectively by farmers, business managers, and investors. In many competing systems, however, pricing decisions are controlled primarily by business managers responding to short-term market volatility.

Although businesses cannot completely ignore market realities, stakeholders can cooperate to distribute risks more fairly. Shared responsibility helps reduce speculative pricing behaviour while improving long-term sustainability for producers, businesses, and investors. Collaborative approaches also help maintain product quality and consumer confidence more effectively than purely speculative market systems.

Bridging the cold chain

One of the major structural problems within India’s agricultural sector is the lack of an efficient cold chain system from the farm gate to the retailer. India continues to lose substantial quantities of fresh produce every year because of poor storage systems, transportation inefficiencies, and inadequate handling infrastructure. Various studies conducted by banks, businesses, and government institutions estimate annual losses between 10 and 25 per cent of total fresh produce production. If converted into monetary value or food supply potential, these losses represent an enormous economic and social burden.

Investment in complete cold chain systems, modern storage technologies, efficient transportation, proper handling practices, and coordinated supply chain management could significantly reduce wastage while simultaneously improving profitability for all participants. Strong cold chain systems also help maintain food quality, support fair pricing, and improve food security for consumers.

Growing through cooperation

Several strategies are necessary for improving the sustainability of agricultural value chains and reducing pricing instability.

First, stronger partnerships must develop between farmers, businesses, retailers, investors, and consumers. Stakeholders should support one another during difficult periods rather than focusing solely on short-term gains. Consumers and consumer associations should support producers who supply high-quality food rather than continuously demand cheaper but inferior-quality products. Similar to organic and fair-trade systems in European markets, additional support mechanisms could reward responsible producers and encourage quality production. Farmers should also reduce dependence on government subsidies alone and instead focus on building long-term partnerships with consumers and businesses that value sustainable production practices.

Businesses must invest more heavily in efficient cold chain systems, quality monitoring technologies, and professional supply chain management. Improved infrastructure can reduce wastage, improve quality, and create fairer market conditions for all participants.

Finally, governments and policymakers should encourage collaborative models that balance the interests of consumers, producers, investors, and businesses rather than supporting purely speculative market systems.

The path forward

The challenges currently affecting the apple supply chain reveal the complexity of agricultural pricing systems and the interconnected nature of modern food markets. Weather conditions, imports, infrastructure weaknesses, speculative pricing, poor storage systems, and changing consumer behaviour all contribute to instability across the agricultural economy.

However, the experience of collaborative models based on farmer ownership, shared risks, and fair pricing demonstrates that more sustainable alternatives are possible. Ensuring food security, protecting farmer livelihoods, maintaining food quality, and supporting sustainable business investment require cooperation between governments, businesses, investors, retailers, farmers, and consumers.

The future of agricultural value chains depends not on speculation alone but on collaboration, responsible pricing systems, technological investment, efficient infrastructure, and shared responsibility across the entire supply chain. Only through balanced cooperation between all stakeholders can agricultural systems become sustainable, profitable, and capable of providing quality food security for future generations.

Contact details
Laxmi Prakash Semwal
Director, Annamrit Farmers, Garhwal, Uttarakhand
M: 9411112319
E: shrijas19@gmail.com
 

Back
Top