Modi looks to Bihar for future of farming

By Mayank Bhardwaj

PURNIA, India (Reuters) - From his sleepy village in Bihar, Ram Narain arrives at Gulab Bagh market to sell a truckload of corn that will fetch him enough money to buy a motorbike for his son, school uniforms for his daughter and a gift for his wife.

Narain and legions of farmers in the dirt-poor state have more than doubled corn output in just five years by adopting hybrid seeds and good farm practices, a rare success story Prime Minister Narendra Modi wants to replicate in other states. He came to power six months ago by promising faster farm and economic growth.

Traders such as Cargill Inc, Glencore International AG and Louis Dreyfus Commodities BV have set up operations in Purnia, an administrative outpost that now buzzes with trading activity.

"Corn has come as a boon ... helping our children attend good schools and improving our living standards," Narain, 42, said, lending a hand to labourers unloading sacks at the mandi, or wholesale market.

Bihar had an initial advantage as corn is grown year-round to meet local food demand, making it a natural place for traders to seek supplies when demand began to rise. Other states were largely growing corn for animal feed.

The arrival of global traders and the establishment of a market for the crop gave small farmers the confidence to invest in higher-yielding hybrids.

Rising output encouraged banks, a commodity exchange and commodity collateral management companies to move in, opening up Bihar to regional and international trade.

"We acted as a catalyst by establishing a linkage between the market and farmers," B.K. Anand, chief of the grains and oilseeds division of Cargill India, told Reuters.

Local farmers say they now produce 7-8 tonnes a hectare, a figure confirmed by Cargill's own research which shows Bihar's yields catching up with the 10 tonnes achieved in the United States, the world's top producer.

India's average corn yield is just 2 tonnes.

HIGHER YIELDS

Urbanisation and industrialisation are limiting available agricultural land. Increasing yields addresses the issue and cuts the relative cost of inputs like fertilisers.

India produces 23-24 million tonnes of corn, with Bihar accounting for nearly 3 million tonnes, according to trade and industry estimates. If other big producing states fail to match Bihar's gains, rising consumption would cut into Indian exports that now average 3.4-4.5 million tonnes a year.

With the advent of top-name traders competing for stocks, farmers are now making 12 rupees ($0.19) per kg against 2-3 rupees a few years ago, said Narain, who now grows corn on 2 hectares, up from less than a hectare 5 years ago.

Traders look to buy from local farmers living in the Gulab Bagh area because they can export to neighbouring Nepal and Bangladesh by road. The region is also close to six major ports on the east coast, including Kolkata.

"The daily corn arrival in the Gulab Bagh mandi is around 5,000 tonnes a day against 2,000 tonnes five years ago," reckons Chandan Daga, owner of wholesale trader Arihant Agri.

An assured market encouraged farmers to embrace hybrid seeds by companies such as DuPont Pioneer and they have kept pace with the latest varieties. GMO, or genetically modified, food crops are banned in India.

"Being sturdy and taller, the plants are not prone to rat infestation and damage after hailstorms," farmer Vinod Yadav said of his P3522 variety of seeds, looking at mounds of corn cobs in his back yard.

The government says it hopes to extend Bihar's success in boosting yields and to other leading corn growing states such as Karnataka, Andhra Pradesh and Maharashtra.

"We are consulting concerned ministries like agriculture and government research bodies to see how this model can be replicated in other corn growing parts of the country," Food Minister Ram Vilas Paswan told Reuters.

Buoyed by the sharp rise in physical trade, India's leading commodity exchange NCDEX last year launched a new contract setting Bihar's Gulab Bagh as a delivery centre. The new futures contract gives farmers an idea about the outlook for prices.

"Bihar reveals that by providing a market for farm goods and by allowing trade to determine its own course, we can write a success story even without any active government help," said Amit Sachdev, India representative of the U.S. Grains Council.

(1 US dollar = 61.87 rupees)

(Editing by Douglas Busvine and Richard Pullin)