Bangalore, June 7: With multinationals suddenly finding the food sector to be a prime focus area and local majors losing their breath to catch up, questions are being raised about the status and prospects of local farmers. The controversy surrounding Cargill operations in India and also Pepsi's efforts in Punjab was based on the fear that the local farmer will suffer the most.

Traditionally placed at the lowest end of the food chain, the local farmer fail completely at forward integration exercise. His exposure, finances and organisation completely limit any marketing initiatives. However, the farmer's strength by virtue of his crucial position in the food link is not only proving to be the major weakness of MNCs but is also making the latter dependent on them.

Analysing the strength and weaknesses of each of the players it is clear that multinationals win with their strong forward linkages. Most of them have sound and established marketing networks, distribution setup, even their own transport fleet and a cash rich status to pump millions of dollars into research work worldwide.

It is the backward integration exercise which has prevented them from reaching a scale of operations they are used to in their global operations. For instance looking backwards these MNCs are not only dependent on the local farmers but also the farm size, yield per hectare, quality of produce, horticulture development among other factors.

Realising their dependence on this segment companies like Cargill have adopted the co-operative farming route by successfully working with around 7000 farmers. Nestle has also achieved the same scale for its tomato requirements. Apart from coming to terms with local farming conditions, the co-operative farming also offers MNCs economies of scale.

"Even a farm size of 80-100 acres is chicken feed when you compare with global practices," says K R Narsimhan, country manager, W R Grace (Hong Kong) India Limited.

Economies of scale raises further questions about technology induction which has been held as the main block in making of a national success story especially in the value added industry of food processing.

The modus operandi adopted by old players like Cargill, Nestle and now Hindustan Lever has thrown some light on the shape of things to come. Till the time Indian farmers can get their act together on the marketing front, they are likely to play an important role on a local basis and continue to grow under a co-operative farming pattern.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.