Crop Forecasting - 2

A few posts back I had written about how value is eroded at all levels in the agriculture industry for the simple reason that nobody's aware how much crop production's gonna happen in the country in any given season. The value chain of ITC e-choupal occurs after the crop is harvested and sold in the market. But the point still remains who will tell how much production has actually happened in the country? Be it for a particular crop or for all the crops taken together, no one has the faintest idea about this. An interesting thing that CII does is that it holds national level conferences and calls all big traders in the agricultural business and asks their expert opinion about the crop production. Though it might seem cocky but it works to an extent.

HLL however, goes through a completely different channel. It does its own crop forecasting. Basically, HLL's many FMCG products especially soap are also dependent upon agriculture. For the simple reason that soap manufacturing requires oil, and oil comes from oil seeds. About 40% of the revenue of soaps is spent in buying oil and oil seeds. So when HLL spends 40% of its revenue on a single line of agricultural produce, one can imagine that it's no small deal. Also, crop forecasting gives HLL better insights into what should be its purchasing pattern, when should it buy, when would the stock arrive, how much would it be necessary to stock, will there be a shortage or excess supply of oil seeds etc etc.

So during harvest time, a team of HLL's investigators go around the country in a car, talking to the farmers who's got farms along the roadside, and take first hand info about the crops in that vicinity. They stop by every 5-10 miles and ask the farmer which crop is he growing and what his expected output per hectare is.

In fact the entire crop forecasting by HLL happens in 3 phases. Phase one occurs in July, during the start of the sowing season. The main objective is to gain an idea about the type of crops being grown in the region. Phase two happens in September during the middle of the crop season to ascertain how the crop is growing and also to know about the adequacy of rainfall and the effects of insects/pests if any. And finally when the harvesting has just started, the Phase three of investigation happens and that's when HLL can forecast with enough clarity the total crop production in the country.

The entire process takes about 65 man days to complete one round of investigation, and usually 4-5 investigators are given a route to survey which makes it possible to complete one entire round within a fortnight.

This is how India's largest FMCG manufacturer is ahead of the game, from the very start!