13 / January

A Billion Dollar Question - If Farming Really Profitable???

Is farming really profitable? If yes, why the heck there are so many suicides. If no, how the heck still there are farmers

As a company that deals with agriculture and asking people to invest in agriculture, the first and foremost question that I encounter with when meeting any person is "Is farming really profitable? We see lot of news about farmer suicides and farmer interviews, debates etc."

The immediate response I give them is "If it was a loss-making work every time, how can anyone continue to do it and we are getting food grains year on year"

Then comes the silence.....

I thought to break this silence in this article. To really dissect and analyze agriculture as a business.

For this exercise, let us take our main food crop Rice. To cultivate an acre of paddy, it takes approx. 18-20K in today's scenario. If you need an insight to the cost details, please click here.

Assuming a per bag (78 Kgs in Cuddalore district) cost of paddy is INR 1000. In this Samba season, the price is INR 1750 for Ponni but let us take the lower range considering not everyone cultivates the same variety. At 1000 RS per bag, 20 bags is a break even and on an average, farmers easily get 25 bags minimum. So their expected return is 25K, which is a profit of 5K when you have invested 20K. This is a whopping profit percentage of 25% in 4-5 months. In this scenario, from an economics perspective, the returns are good. 

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Let us look the same numbers from a different perspective. Looking at the scenario of Indian farmers, more than 70% of them are small and their land ownership is less than 2 acres. Going by this stat, the total amount a farmer gets out of his 4-month work is 10K in 2 acres. Yes 10K in 4 months, which is INR 2500 per month.

Though the percentage wise the returns seems to be higher, value wise the numbers are very low and there lies the main problem in agriculture. Will a farmer be able to sustain his life with 2500 Rs a month?

All these calculations are cropping under a favorable condition. If there is a crop failure in a single season, the farmer who gets all his capital as a loan gets into a debt situation and to overcome that debt is a serious challenge for him.

Well! I can hear you asking, Are there any ways how this could be overcome? Don't they have insurance? etc. Well that deserves a new article at length. With these thoughts, I leave you here and will be back with another article of possible ways the farmer challenges could be mitigated.

Your thoughts on the same???