Chemical Leasing in Agriculture

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1 Chemical Leasing in Agriculture Presentation developed by Lakmini Edirisinghe, Vojislavka Satric, Reinhard Joas, Aleksander Startzev, Aleksander Uzunov, Maria Grineva

2 Table of content 1. Background to Chemical Leasing for agro-chemicals 2. Experiences in Sri Lanka and Serbia 3. Other experiences 4. Conclusion

3 1. Background to Chemical Leasing for agro-chemicals OECD Definition:- Agro-chemicals are commercially produced, usually synthetic, chemical compounds used in farming such as a fertilizer, pesticide or soil conditioner. Differentiation between fertilizer and pesticides: Fertilizers are organic or inorganic substances containing chemical elements that improve the growth of plants and the fertility of the soil. The percentage content of nutrients in organic fertilizers (manure s) is relatively low. A pesticide is any substance or mixture of substances that is used to prevent, destroy or control pests including vectors of human or animal disease, and unwanted species of plants or animals.

4 Global consumption of PPP and fertilizers Worldwide consumption of pesticides: >1,000,000 tonnes per year Worldwide consumption of fertilizers: >50,000,000 tonnes per year Huge reduction potential exists

5 Chemical Leasing Use of pesticides Intention: Get the same result with less chemicals Background: Overconsumption does not provide any advantages pesticides Classical business model: payment per kg or liter pesticides Chemical Leasing: payment per ha agriculture area free of pest, payment per kg of achieved yield

6 Improvements by intensified collaboration along the supply chain Supplier of pesticides User of pesticides Selection of appropriate pesticides Timing and frequency of pesticides application Suitable indicators for pesticides applications Maintenance of sprayers Suitability of sprayers Equipment supplier Efficiency increase Cost reduction Better products Improved competitiveness

7 Chemical Leasing for fertilizers Yield Analysis of soil Analysis of plant needs Efficiency increase due to knowledge exchange Special additives to standard fertilizers Best practice applications Amount of fertilizer Intention: use fertilizers more efficiently Background: In most cases more fertilizers bring more yield. So simple reduction of fertilizers amount are only a solution beyond its critical point

8 2. Experiences In Sri-Lanka

9 Survey Results (2012) : Current Agro-chemicals usage in Sri Lanka (S A Bandera University of Peradeniya, Sri Lanka) Dosage Status Method of Selection Status Recommended 20% More than recommended 60% Less than recommended 10% Not known 10% Measuring Devices Stat us Specific Container 25% Lid of pesticide bottle 55% Consult village level extension officers 10% Consult dealers 25% Consult neighboring farmers 15% Own experience 50% Time of Application Status Before appearance of pests 70% After appearance of pests 15% Arbitrary measurement or no measurement 20% Before or After appearance of pests 15%

10 Distribution Network of Agro-chemicals in Sri Lanka ROP Importers Local Formulators Main Dealer Key Activities In Sri Lanka Formulation & Packaging Sub Dealer Retailer Agriculture Officers Farmer

11

12 Major observations in existing model /current practices (Potato & Paddy) 1. Spend approximately 35% of cost from total production cost for agrochemicals 2. Use a huge amount of weedicide & pesticides throughout the cultivation period according to their knowledge not knowing the harmful impact 3. Farmers apply more than recommended level of agrochemicals during rainy season assuming a small quantity of agrochemicals might not fulfill the requirement 4. Farmers are in the habit of using a huge amount of Inorganic fertilizer to the soil without testing 5. All these happens due to farmer not having any consultancy with expertise

13 Agrochemicals Consumption Pilot Projects 10% Other Home / small scale Gardening 35% Paddy cultivation * Completed Case Study 25% Tea,Rubber and Coconut plantations * One pipeline project (Tea Plantation) 30% Vegetable farming * Completed Case study * Two ongoing pilot projects

14 Introduced Model for Pilot projects Supplier A Monitoring UNIDO/NCPCSL Monitoring Supplier B Service Provider ChL Farmer/ User Supplier C R&D Supplier D ChL Technical Consultant Chemical Leasing

15 Tasks Major tasks of the farmer in ChL Model Fulfill all the agronomic practices (except the control of pests and diseases) timely and appropriately with respect to the recommendations make by agriculture department. Major task of Service Provider/supplier Control all the Pests and Diseases occurre in the cultivated land from the period of crop establishment to harvesting (based on the recommendations made by Agriculture department)

16 Project Completed Pilot Project Project Partners Status Saving /Added Value Potato Cultivation Project 1 ha Service Provider: Kandurata Agro Advisory services User : Mr Asela Jayasinghe Completed 180 USD/ha 40% of reduction in agrochemicals costs and Yield increased by 10%,compare to the conventional model Paddy Cultivation Project 1 ha Service Provider : Liyanage Agro Advisory services User: Mr S A Kithsiri, Medium Size Farm Holder Completed 120 USD/ha 50% of reduction in agrochemicals cost

17

18 Project Ongoing Pilot Project Project Partners Status Saving / Added Value Potato Cultivation project (Scale Up to 10ha) Service Provider: Kandurata Agro Advisory services User : Mr Asanka Jayasinghe Ongoing (Complete December) Already signed by all participants Vegetable Cultivation Project Service Provider: Kandurata Agro Advisory services User : Medium size farm holder Ongoing (Complete December) Already signed by all participants

19 Unit of Payment Identified total saving in the chemical leasing project compare to the conventional model Added Value of the project Identify the yield equivalent for this saving / added value Share the Yield according to the agreed percentage in the ChL contract X% Y% Service Provider Farmer

20 Potato Project Paddy Project Potato Extension project Carrot Project Five Projects in Vegetable Five projects in Plantation (Tea,Rubber and Coconut) 1 project 3 projects 10 projects

21 Serbia

22 ChL Agro Project in Serbia (Technology instead Fertilizers) Project Partners Agrochemical distributor, farmer and NCPC Current situation Soya bean is growing at the field It will be harvested in September

23 Base line Field (selected cultivated area) will be divided in two parts One part will be treated as it was used to and will be baseline The other part will be used for ChL pilot project All other condition remain uniformly

24 Project focus - Advanced technology of growing wheat - Soil testing before use of fertilizer - Choice of fertilizer according to results - Reduced tillage - Choice of seed - Seeding to leave, so called, permanent lines - Additional fertilizing during the winter according to additional soil testing - Use of pesticide for disease prevention

25 ChL project versus traditional one All costs (for each part of the property) will be recorded separately Yield on the both part (t/ha) will be measured separately

26 Payment All chemicals will be paid according to the market prices After the yield, calculations will be done, and final payment will be related to a yield Chemical Leasing Model Traditional Model ChL profit (din/ha) = Yield (t/ha) on ChL field x price of wheat (din/t) costs (din/ha) A Traditional profit (din/ha) = Yield (t/ha) on the traditional field x price of wheat (din/t) costs (din/ha) B

27 Payment Benefit ChL Benefit (din/ha) = ChL profit (din/ha) - Traditional profit (din/ha) A - B Sharing of benefit Agreed percentage x (A-B) x No of ha

28 Difference in the profit (A-B) (positive or negative) is going to be shared after the harvest between farmer and agro chemicals distributor in agreed proportion (will be agreed at the project beginning) and defined in the Contract

29 Future project idea in Serbia Optimization is use of pesticides in fruit production (planned for March 2014)

30 4. No success it is also an experience: Projects on agriculture in Ukraine and Mexico Focus: cultivation of wheat, corn, sugar cane, cucumber Substitution (partly and full) of chemical fertilizers by microbiological fertilizers

31 Some reasons why projects did not succeed: 1. Partners often continue thinking in a traditional way, even after signing a letter of intent (e.g. lack of trust and transparency, supplier is interested in increasing sales, no commitment to share risks and benefits ). 2. In order to have baseline, the field has to be divided in 2 parts (one part has to be treated with traditional fertilizers, another part with application of new ones) - farmers are not always ready to do that. 3. Producers are not interested to offer services for relatively small fields (product quantities). 4. It is very important to select and agree on a proper unit of payment for microbiological fertilizers. There are lessons learned in ChL community that will facilitate successful realization of projects in the future.

32 Obstacles in Application of ChL for Fertilizing Process Obstacle Possible solution There are many influences in agriculture that cannot be put under control (weather conditions, type of pests and disease that can occur during the cultivation period) There must be a control field to be fertilized in a traditional way base line Other treatments would be the same (pests control, irrigation) Unit of payment It could be related to - yield - soil quality improvement or - hectare of arable land were less (certain %) classical fertilizers are applied Control of application of proper quantity of fertilizer / there is not a reliable way of control Trust

33 5. Conclusion Fertilizers and pesticides need to be treated differently for ChL Huge reduction potential for chemicals exist with significant benefits for health and environment Key role for service providers/ distributers Absence of manufacturer despite intensive know-how on their side Different units of payment and models for sharing Various obstacles exist missing trust, different parameters influence for yields but successful pilots show that they can be overcome

34 Thank you! Any questions?

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