Saffron is the most popular and expensive spice in the world. It is in demand
the world over because of its great aroma, coloring capacity and proven medicinal
properties and also because it involves heavily labour-intensive production
and processing. The history of saffron cultivation dates back to more than 3,000
years. Ancient persians cultivated persian saffron in Isfahan and Khorasan provinces
by the 10th century BC. Due to long experience of Iran in cultivation and the
transfer of methods of growing and harvesting from person to person and or generation
to generation, Iranian saffron has managed to keep its distinctive qualities
in comparison with that produced in other regions of the world with exceptional
recognition for its fragrance, flavor and color at the international markets
A typical saffron farm needs daily manual harvesting because every saffron
plant produces only three flowers in different heights and days. There are on
an average 2,170 flowers in each kilo of harvested fresh flowers and one kilo
of dried saffron requires processing 78 kilos of fresh flowers. The final product
is actually the stigma part of flower (Emadi, 2009).
Saffron cultivation requires scientific cultivation practices which include
improved corm varieties, skilled labour and irrigation during critical period
of the standing crop.
As saffron does not need great amount of water, its cultivated area and production have increased in recent years substantially so, that many farmers completely depend on saffron. As a large amount of this product is exported. It fetches considerable amount of foreign exchange. So, in view of the economic, historic and social importance and due to the special situation of Iranian saffron in the world it is important to pay attention to the economic aspects of production and exporting of saffron in order to enhance its place in the world market.
MATERIALS AND METHODS
For the purpose of analysis of marketing issues, 50 traders (10 local traders,
12 wholesalers, 10 retailers, 11 processors and 7 exporters) in the markets
of Mashhad, Torbat Heydarieh and Ghaen were selected randomly and also elected
representatives of cooperatives in the study areas spread all over the markets
chosen for the study, randomly. The secondary data regarding the trends in marketing,
price (domestic and international market) and export were collected from Iranian
Ministry of Agriculture, Department of Commerce, Trade Promotion Organization
of Iran, Website-Ministry of Agriculture in saffron producing countries, Website
related to saffron Price in international markets, United Nations Commodity
Trade, European Commission, Statistics Database and other published reports
from the Government as well as from the private agencies and FAO publications.
Analytical tools used
Marketing cost, marketing margins and efficiency models: To analyse
the market performance of saffron, different models and indicators were adopted
and they are as follows:
Marketing cost: The total marketing cost was determined by the following
|| Total cost of marketing
|| Producer cost of marketing
|| Marketing cost by the ith trader
Marketing margin: The absolute margin of the middlemen, wholesaler,
processor, trader and retailer was determined as follows:
|| Selling price
|| Buying price
|| Marketing cost
Producer share in the consumer price: The producer share in the consumer price was calculated by the following indicator:
||Producer share in the consumer price
|| Producer price
|| Retail price or final consumer price
Marketing efficiency: Shepherd Index was used to evaluate the marketing efficiency of different channels involved. In the marketing of saffron, this is given by:
Marketing channels and price spread for saffron in Iran: Saffron stigma
is supplied by farmers to buyers after getting it dried. Marketing of saffron
has been largely in the hands of private enterprises and there exist many channels
of distribution and also a long chain of middlemen between the producer and
the ultimate consumer (Ghorbani, 2008). The main agencies
involved in the marketing of saffron in the Khorasan provinces are local traders,
town wholesalers, wholesalers in Mashhad and Tehran, retailers, co-operative
societies and Packaging Companies and exporters. Bulk of the saffron output
moves to the Mashhad market from different parts of Torbat Heydarieh, Ghaen
and other counties (Khorasan provinces). Marketing channel is shown in Fig.
The marketing functionaries appropriate a substantial proportion of the profit
and as a result, the farmers as well as the consumers are exploited. The present
study revealed that the farmers sold their produce largely through the local
traders and middleman while cooperative societies and processing companies were
not involved in the marketing of even the small quantities of saffron. The disposal
of saffron through different agencies involved in the marketing of saffron in
the study area has been presented in Table 1 (Kheirandish,
Table 1 indicates the farmers transaction with different
types of marketing agencies. It is interesting to note that 56.57% of the farmers
preferred to sell their product through wholesale and local traders in their
respective counties. The percentage of farmers selling their produce through
middlemen and wholesalers in Mashhad has been estimated at 12.57 and 11.71%,
respectively while 8.86% of the farmers sold their products directly to saffron
processing and packaging company.
|| Marketing channels for saffron in Iran
|| Disposal of saffron produce through different market agencies
|Figures in parentheses indicate percentages to total
Only 4.29% of the farmers sold their produce through cooperative societies.
The wholesalers in the distribution market, popularly known as packaging companies,
purchase saffron from middlemen and very rarely directly from farmers and allow
brokers to thrive at the cost of farmers.
It is also inferred from the above table that the majority of the farmers (56.57%) disposed off the produce (70.04%) through wholesale and local traders who performed the task of wholesaling/retailing in the counties. The middlemen in the counties who performed the task of broker and money lender were responsible for 10.83% of the disposal of the produce. A total of 12.57% of the farmers preferred them as the source of marketing.
The major portion of dried saffron is sold by saffron farmers to the town wholesalers
and local buyers who in turn sell the product to Mashhad wholesalers based on
orders. These wholesalers supply saffron to the retailers in the area directly
and also to the Mashhad and Tehran companies, which in turn pack the produce
under a standard license and market it in domestic and international markets.
The companies buy saffron either directly from the farmers or from middlemen
or from Mashhad-Tehran wholesalers or from other towns in bulk form and then
pack in standard sizes in ready-to-sell form so that it can be sold locally
or exported either through export firms or by themselves directly.
The town of Mashhad, being the only main market of saffron, middlemen here tend to squeeze out the potential marketed surplus in the months of November to January. They stock saffron in their godowns and anticipate orders during certain festival periods. So, the small farmers having no marketing and financial facilities are exploited and the benefit goes to the brokers and middlemen who after storing saffron for some months reap substantial profits from the produce.
The intermediaries own and control all storage and packing facilities. They even lend credit facilities to farmers. In this way, they exploit the farmers who enter into agreements to sell their produce to their lenders at comparatively lower prices. These middlemen not only exploit the farmers by paying less and charging more from the consumers but also spoil the quality of the produce by adulteration which has badly affected the transaction of Iranian saffron in the world market. This happens because the producers are not aware of the marketing methods and practices; therefore more than 20% of the total producers are affected due to this system of marketing.
Many farmers do not have contacts with the saffron processing and packaging
company and exporters. Since, they do not have the marketing facilities, they
are forced to sell their product to the brokers or local traders to get immediate
money. The production of a large%age of saffron cultivating households is so
meager that they cannot operate in the market except of handing it over to the
brokers and local traders. The majority of the farmers are not sound economically
as well as educationally to understand the market mechanism and contact the
right market at right time. The worse situation has been compounded due to negligence
and lack of interference by the government in the marketing of saffron and inefficient
functioning of the co-operative societies or the voluntary organizations (Saraf,
As observed by studies, no NGO supports the producers or the consumers or stabilize the market fluctuations. In general, under the present market system, if the saffron producers enjoy enough motivation, they are able to produce superior saffron. However, because the product is moving through too many channels, the producers share in the consumers price is very low while the domestic consumers have to buy the product higher prices.
The foreign buyers purchase the Iranian product at about half of the global market price. Because the saffron farmers operate individually and their product quantity is very small. The cost of grading, packaging and advertisement tends to increase while the returns are poor. Unless the saffron farmers make collective effort and form systematic organization for buying and selling, the coordination can not be achieved. When the saffron farmers have little knowledge of the market situation and price fluctuations, their labor becomes futile while the market intermediaries would enjoy higher incomes at the farmers cost.
In the marketing chain, there are some intermediaries who illegally export saffron to other countries (e.g., to Saudi Arabia and UAE) or, based on some orders, sell it to the wholesalers in Mashhad, Tehran and other towns through whom it is dispatched illegally out of the country.
Marketing channels: There are six major channels in the marketing saffron
in Iran. They are domestic market and five major export markets. According to
the exporters, the major destinations for Iranian saffron were European Union,
Persian Gulf Countries, South East Asian Countries and other countries including
India and China in the crop year 2008-09. The main agents active in marketing
were wholesalers in Mashhad and Tehran/Processing and Packaging Companies and
exporters. The following channels were identified as the main marketing channels
||(Direct Marketing) Producer→domestic consumers
||Producer→wholesaler in Mashhad→retailer→domestic consumer
||Producer saffron producers cooperative→wholesalers in Mashhad→retailer→domestic
||Producer→wholesaler and local trader→wholesaler in Mashhad-retailer→domestic
||Producer→wholesaler and local trader→wholesalers in Mashhad
and Tehran→ processing and packaging company→retailer→domestic
||Producer→processing and packaging company→foreign consumer
||Producer→wholesaler and local trader→wholesalers in Mashhad→Processing
and packaging company→foreign consumer
||Producer→ middlemen→processing and packaging company→domestic
consumer and foreign consumer
||Producer→wholesaler and local trader→wholesalers in Mashhad→foreign
traders→ foreign consumer
||Producer→middlemen→foreign traders→foreign consumer
It is observed from Table 2 and 3 that the maximum marketing margins were usurped by the middlemen followed by wholesalers in Mashhad for bulk export to Spain, UAE and Italy traders. The packaging and processing companies which usually performed the task of grading, incurred the maximum marketing costs. The gross price spread was highest in channel-X and IX because of the foreign traders mostly from Spain, UAE and Italy, buying saffron in bulk from middlemen and wholesaler in Mashhad and re-exporting to foreign consumer after repacking and using their own brand name.
The producers share in the consumers price, as depicted in Table 4, was higher in the direct channel (channel-I) followed by channels II, IV, V and VI in the domestic market followed by other channels in the international market. The producers share was low in the channel X and XI because of the huge margin appropriated by the middlemen and wholesalers in Mashhad with bulk export to the foreign traders who repack and sell in the market using their own brand name. The results thus indicated that the existence of the middlemen was the main factor responsible for the low share of producer in the consumers price and lack of international marketing by domestic firms in Iran for using direct export opportunity.
It is also observed that as the number of intermediaries declined, the marketing efficiency increased. This also confirmed the findings that the price received by the producer declined with the increase in the number of intermediaries in marketing channels. As the produce moved from the local wholesaler to distant markets, the marketing costs increased and the marketing efficiency decreased.
|| Price spread in different marketing channels of saffron (Amount
|NB: Figures in parentheses indicate%age to the totals
|| Price spread in different marketing channels of saffron (Amount
|NB: Figures in parentheses indicate% age to the totals
|| Producers share in consumers price and marketing
efficiency in different marketing channels of saffron in Iran
The study revealed that there is considerable scope to increase the producers share in the consumers price if the number of intermediaries is reduced and the government intervenes pro-actively in order to organize and streamline the marketing cooperatives unions so that the farmers use these unions as a profitable channel to sell their product. There is no effective control on intermediaries in the saffron market, at%. The problem of irregular supply can be solved by forward contracts to be signed between producers and marketing bodies. The prices of saffron witness frequent fluctuations-and even day to day fluctuations-causing concern to the farmers.