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Challenges in Agribusiness




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    The development of agribusinessgenerates employment among rural masses and reduces poverty. The growth of agribusiness– manufacturing industries like textile, leather, furniture, food, paper, beverage, etc. — depend upon the progress of agriculture sector. At present about 7,20,343 agribusiness firms are working in different sectors in the country. The number and value of other agribusiness industries are given in the following table.

    Number & Value of Agro-Based Industries (Million Rs.)

    Industry
    Number
    Value of Production
    Dairy Products
    10
    10877
    Vegetable Ghee
    56
    43962
    Refined Sugar
    62
    55585
    Canning of fruits & vegetables
    10
    1516
    Wheat & grain milling
    300
    27475
    Textile manufacturing
    1063
    320932
    Leather manufacturing
    82
    18655
    Fertilizer
    9
    25925
    Pesticides
    15
    4102
    Total
    2861
    720343
    The trends in global agribusiness are changing at a rapid pace and the traditional practices in agriculture seem obsolete today. Now this sector is more concerned with delivering customer value and diversification rather than increasing quantity of production only. The consumer is more conscious of a number of product attributes before making a decision about the product like low nutritive value, good taste, convenient packaging, easy availability and Green products.
    Strategic alliances and big joint-ventures have given birth to the concept of supply chain management. Electronic commerce, increasing global competition and relationship management have brought operations and supply chain management to the forefront of manager?s attention. Free flow of information, related product attributes, increasing sources of raw materials, competitors and customer characteristics are enigma of a developed agribusiness sector. As a result, an information intensive food production system has emerged at global level.
    The regulations in agribusiness have also approached to its ever highest standards. The environmental protection, food health and safety standards and child labour issues are at the core of consumer welfare theory. Agribusiness firms are exploring other ways to maximise profit i.e. exploitation of niche markets, product innovation, market segmentation, targeting specific customers, product positioning, product differentiation etc.

    Sustainability of agribusiness to ensure consumer and producer?s welfare is the need of the time. Recent food crisis in the country (wheat flour, sugar, pulses, rice, milk etc.) demand prime focus of the policy makers. The major pro-active motivators for the globalisation of agribusiness are the price differentials between national and international markets while the market distortions (shortage, hoarding, black marketing etc.) at local level are the reactive motivators. The more is the difference between national and international market prices, the more will be the market distortions.

    The global arena is very dynamic with continuous quality improvements and cost competitiveness. The local infrastructure regarding implementation of food safety standards and quality control is not satisfactory. Another major problem is ever increasing prices for agricultural inputs i.e. fertilisers, high yielding seed, fuel, agricultural credit, plant protection measures and farm machinery which put this sector in less productive profile.
    Hence the increased cost of production put the exporters in a no-win situation in the international market. At national level, these price hikes have crushed the purchasing power of the consumers.
    Diversification of agro-based industries has brought competition in the form of product innovation at the global level to which Pakistan is no exception as evident from a large number of varieties of food items available on display of the superstores. Variety in canned fruits and vegetables, milk and milk products, fried chicken, frozen meat and bakery products etc. are common. Allied industries like foot wear, wood and furniture products, paper and paper products, packaging etc. have also been advanced to a level where quality difference is visible.
    Comparing all these with our local situation, we can observe a low level of value addition. Just a nominal percentage of total produce is being converted into value added products.
    Pakistan’s agribusiness sector is characterised by many functional and institutional inefficiencies. All the marketing functions being performed in transferring the agricultural products from producer to consumer exhibit inefficiency. The functioning of wholesale markets is not satisfactory due to many reasons like lack of storage facilities, unhygienic display sites, exploiting behaviour and illegal deductions by the market intermediaries, lack of availability of accurate and transparent market information, nonprice setting mechanism, lack of market research and development efforts, lack of production and price forecasts etc. The modern marketing concepts like future markets and crop insurance do not exist altogether.
    One of the major reasons resulting in these functional and institutional inefficiencies is lack of skilled management. In the absence of management agricultural graduates, it becomes a little difficult job to yield quality results from this sector. In addition to these problems, there is almost total absence of promotion for Pakistani brands in the international market.

    We need to re-organise the regulatory and administrative frameworks to improve institutional efficiency. The entrepreneurship skills enhancement programmes should be launched to deal with the problem of skilled management deficiency i.e. MBA agribusiness degree. Business incubators may also serve as secondary source of learning and training the entrepreneurs.

    Productivity of the farmers may be enhanced meaningfully by connecting agricultural research more closely to the needs of farmers and the food industry. An integrated approach, collaborating the efforts of research institutions, universities and industry should be adopted. International compliance to emerging and changing trends is the need of the time. This target may be achieved by adopting a more proactive approach.
    In a nutshell, the country’s future lies in agribusiness and we should not only try to add value but create value as well. We should move towards a more integrated approach to remove deficiencies and inefficiencies in this sector. Improving quality, economising on cost of production, well-articulated marketing efforts, effective regulatory framework and compliance to increasing international standards are some of the core policy issues confronting agribusiness sector. Policy reforms in changing preferences and attitudes can serve the purpose by adopting a well integrated approach involving all the stakeholders.

     

    By : Muhammad Moazzam

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