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Essay

Market Data, Far From the Market

Uriel Sinai/Getty Images

Reuters is testing a service in the Indian state of Maharashtra that reports crop prices to farmers on cellphones, helping them earn more at market.

Published: June 29, 2008

WHETHER it’s for an Armani-suited Wall Street trader or a farmer in rural India, the right information at the right time is a baseline for success.

For 157 years, since signing a contract in 1851 to supply stock prices from exchanges in Continental Europe to the London Stock Exchange, Reuters has served up numbers to the finance set.

Now, Reuters is trying to provide analogous services to farmers in the developing world, where price information is stubbornly hard to compare. If successful, the program could become a model for economists and international agencies that have long proselytized for the use of technology — in particular, the mobile phone — to burnish economic growth in places like India and sub-Saharan Africa. (Reuters is now part of Thomson Reuters.)

To that end, the company has been testing a program called Reuters Market Light for several months in Maharashtra, India’s third-largest state, about the size of Italy. The state is one of India’s prominent agricultural centers, with farmers growing onions, oranges, corn, soybeans, wheat and bananas. But the farmers’ business suffers from the difficulty of comparing prices from one market to another.

“We kind of saw that there was a clear market inefficiency,” said Mans Olof-Ors, a Reuters employee who had the idea for Market Light three years ago. “The farmer would decide which market to travel to, then would just sell to that market. So there was no competition between markets.”

Reuters has dispatched about 60 market reporters to the region to report on the going price for, say, oranges or onions, and to package the data into a text message that is sent to subscribers.

The service is signing up about 220 subscribers a day at a price of 175 rupees, or about $4.10, for three months at post offices throughout Maharashtra. (The average monthly income of a farm household is about $50, according to the Indian government.) The service has about 40,000 customers so far — a tiny portion of India’s farm population, which is in the hundreds of millions, but it proves that many farmers are hungry for more information.

Reuters has collected anecdotal evidence from farmers about how the service has influenced their decisions about crop sales. One farmer, according to Reuters, held back the sale of 30 quintals of soybeans (1 quintal equals 100 kilograms, or 220 pounds) for 15 days after noticing that prices had been rising for several days. He was able to get 400 extra rupees per quintal.

Amit Mehra, managing director of Market Light, says early data show that most subscribers are making more money from their crops. “We’ve seen that about 70 percent have benefited and changed their behavior about when to sell and when to harvest and where to sell,” he said.

David Edelstein of the Grameen Foundation, who studies ways to use technology to fight poverty, says the Reuters program “is a great example of how information can be used to improve economic inefficiencies and help alleviate poverty in general.” The foundation uses microfinance to promote economic growth in the developing world.

Some academic research has shown that mobile phones can have a stark effect on economic growth in rural areas. Robert Jensen, an economist at the Watson Institute for International Studies at Brown University, has studied the impact of putting mobile phones in the hands of fishermen in Kerala, a southern region of India. His study found that both fishermen and consumers benefited: profits rose 8 percent while prices of fish fell 4 percent.

“We find that the addition of mobile phones reduced price dispersion and waste and increased fishermen’s profits and consumer welfare,” Mr. Jensen wrote last year in The Quarterly Journal of Economics. He added that “the results represent persistent rather than one-time gains since market functioning would be permanently enhanced by the availability of mobile phones.”

Incidentally, Reuters’s service started during a global climb in commodity prices, coupled with what some experts say is an increased risk of natural disasters — two factors that have given more urgency to Market Light. “More people are sitting on higher-valued assets with greater risk,” Mr. Olof-Ors said. “When there’s more money at risk, there’s more demand for neutral information.”

In 2005, Mr. Olof-Ors earned a fellowship at Stanford through the Reuters Foundation and took his idea with him to California.

“I went with a crude idea,” he said. “My project there was coming up with a business plan. It was clear that the extensive growth of mobile phones was the enabler and would make this possible.”

After Stanford, he pitched the plan to Reuters Innovation, an internal venture fund, and secured financing.

According to the International Telecommunication Union, a United Nations agency, India has a long way to go before cellphone use catches up with that of the developed world. Last year, the agency says, there were almost 20 mobile phone subscriptions per 100 citizens. In some European countries, by contrast, there are more cellphones in use than there are people, and in the United States there are about 84 cellphones per 100 citizens.

Among farmers in rural India, the rate is even lower than the overall rate for India.

“About 80 percent to 90 percent of farmers don’t have mobile phones,” Mr. Mehra said. He wants to bring the service to other emerging markets, and says it has the potential to be “transformational” over the long term.

“The market is not there yet because mobile phone penetration is just taking off,” he said. “We need about 18 to 24 months to prove some of the biggest assumptions behind the business model.”

One of the biggest challenges is high illiteracy rates in the region. In some cases, farmers rely on their children to read the text messages.

The brass at Reuters has approved money to operate Market Light for three years.

After three years, “it will be either a very healthy business, or it won’t exist,” said Amanda West, head of Reuters Innovation.

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