saffron value chain
31/08/2022

Iranian Saffron Value Chain Fully Explained

Iran being the main saffron producer, with more than 90 percent of total world saffron production, yet has a little share of the global trade. This highlights the effect of the saffron value chain procedure, more than before. What is saffron value chain, what are the challenges, how Iranian companies and related-organizations are committed to improving the saffron value chain, and what are the plans for the future of saffron industry are some of the questions that needs to be addressed. However, we only focus on the definition of saffron value chain, major players, introduction of challenges, and potential solutions, in this blog.

What is value chain?

Value chain is any value-added activities that are done to change the raw materials into a final sellable product. This includes the full range of required activities to sell a product or service in the market. Different enterprises in different places are involved to process the design, production, and marketing of the final product.

saffron value chain

Why is Value Chain analysis important?

Studying the value chain analysis is important for several reasons. The reasons include:

  • Normally, suppliers only pay attention to the manufacturing step. Studying value chain analysis makes the suppliers pay more attention to the other stages of activities in the process of supplying goods and services. This moves their focus to other before or after intangible phases.
  • The existence of explicit value chain analysis shows that the goods need to go through a standard flow of information and stages of activity. This shows what firms are linked and what kind of arm power, skills, and knowledge are required to finish the product. Showing the links and flow of activities and information justifies the scarcity and the command for large financial rewards. 
  • The last but not least, the global appropriation of the returns to production is best achieved by the ability to identify high return activities in the value chain.

Now that we know why it is important to study the saffron value chain, we need to know who/ what major or minor players are involved in this chain:

Major players in the saffron value chain

  1. Supplier of agriculture inputs (Saffron bulbs, fertilizer, pesticide and etc.)
  2. Farmers
  3. Dealers (saffron flower buyers, dried saffron buyers)
  4. Saffron flower processing stations
  5. Suppliers of dried saffron for packaging companies
  6. Packaging and processing companies (for Domestic market or international markets or both of them)
  7. Saffron commodity exchanges
  8. Foreign importer companies and industries
  9. Foreign distributors and retail stores
  10. Foreign personal consumers
saffron major players

It is worth noting that buyers of newly picked saffron flowers, known as dealers, in this industry play an important role. They meditate activities between farmers and saffron processing stations. The dealers are known to be the saffron suppliers of large-scale producers. Also, dealers meditate the relationship between small-scale farmers with the whole chain. As small-scale farmers have no ability to participate efficiently in this process, because of the reasons will be discussed in following lines, the dealers collect the flowers or threads of them and delivers to large-scale processing stations.

saffron dealers and farmers

Packagers and processers have different roles in the chain. Most of the packagers, only package the saffron in a passive manner, while processers mix the saffron with other materials to produce new products, like saffron tea or essential oils and etc.

The flow of information through top levels of the chain is so limited, meaning that nearly no information leaks to the inferior levels, for commercial purposes. That is, nobody would like to share statistical information from buyer to supplier side. Therefore, lack of top to bottom relationship among players, make no force for the saffron farmers to increase their production or information to make better products, unless there are some price initiatives or guaranteed purchase of the products.

UNIDO has prepared the below value chain map in 2011-2013 when saffron has not found its way to commodity exchanges. Therefore, the below-flowchart lacks the main category of saffron commodity exchanges, which currently plays an important role in setting and fluctuations of local market saffron price.

saffron value chain map

Planning for sustainable development of agriculture sector, especially in saffron, requires to identify the saffron value chain challenges, in the first place. We try to offer solutions to improve the value-chain productivity, based on the identified challenges and gaps.

Challenges of the Iranian saffron value chain 

The main challenges of the Iranian saffron value chain include:

1- The organizations and regulatory boards have no exact information on saffron production and, statistical information regarding active farmers in each region or hectarage of the area under cultivation, or the exact saffron trade volume on national or international scales. 

2- The lack of strategic development documents and plans in production and trade of saffron.

3- The lack of a centralized system to improve the general knowledge and training of the farmers, according to the global standards and market needs

4- The diffusion of Agricultural Engineering services among saffron producers.

5- Shifting roles in the saffron value chain: Saffron flower processing stations have found more outstanding role, comparing to saffron farmers, in production of dried saffron in recent years. In other words, Saffron stripping and drying is rarely done by saffron farmer recently. The immigration of rural residents to the suburbs led into decline of working forces in the villages, and the increase of labor cost required for harvest and stripping saffron. As a result, land owners cannot afford to process the saffron flowers in huge amounts, making them sell the saffron to middlemen who have access to saffron flower processing stations. Otherwise, the newly picked saffron flowers will be wasted if they are exposed to environment or warm temperature more than 10 hours.

6- The fact that tracing saffron production process is hard and complicated effort. Shifting roles in this value chain makes it harder to trace saffron through early stage of saffron production.

saffron traceability

7- The local price difference between free market and exchange warehouses: As there is high price gap between the saffron price in the exchange warehouses and the products in the hands of farmers and dealers, an unpleasant duality has occurred in the saffron supply channels. As a result, the suppliers have faced several troubles to consider competitive price in their sales contracts.

8- Trade barriers for Iranian saffron producers and exporters companies.

9- Iranian saffron is deprived of the general benefits of geographical indication (GI): The geographical indication of saffron products in each region helps a lot to the branding and sales of high-value-added products in the global markets. However, Private and public legislators have not taken any effective action in this area.

10- The changes in the genetics and texture of saffron: By pressing saffron in the drier machines in order to produce Super Negin saffron for some limited markets.

11- Lack of long-term plans to maintain the quality of saffron corms and farms.

12- A little share of Iranian companies from the value-added processing of saffron: As for a limited relationship with international technology companies due to sanctions.

In our opinion, the above list only includes the most critical challenges in the value chain, which require greater attention. Minor challenges are crossed out of this list for briefing purposes.

Beyond the present challenges, Iranian exporter companies have shown a great performance in recent years, despite trade limitations, local and international sanctions, demanding national regulations, and Coronavirus pandemic challenges. This is why Iranian exporter companies need to receive full governmental support to facilitate trading with international customers.

What are our suggested plans for the future of saffron industry?

use of blockchain in saffron value chain

SunLand is actively present in most of the influential levels of the supply and value chain, including cultivation, processing, quality check, packaging, and export of saffron. SunLand also has established a strong relationship with a large network of farmers, international customers, and even local market dealers. As a result, SunLand is familiar with the challenges of each level of players in this chain and has been looking for solutions to improve the chain and add value to the saffron industry, as a whole.    

 Consequently, we are trying to identify challenges and develop a smart program for the saffron value chain, in the field of production and trade of saffron, through research and innovative processes.

The planning phase of this program has ended and is currently starting the implementation phase.

Implementation of this program will resolve many of the challenges in the saffron supply and value chain as mentioned above. However, those challenges that require international agreements and negotiation cannot be resolved without the cooperation and interaction of government and top-level organizations.

Using artificial intelligence and blockchain technology, this platform integrates comprehensive information about farmers and saffron-producing conditions aiming to achieve value-added products and services for international markets.

This platform helps saffron international end users, in the top levels of the saffron value chain, to receive ID-based saffron products. Therefore, it can be claimed that Iranian saffron will be highly traceable by exploiting the functions of this platform. The traceability of saffron production makes it possible to make sure about the purity and real origin of the product.

What’s more, with the help of highly accurate mechanisms within the procedures of this platform and providing ID-based products, this platform resolves the challenge of saffron quality manipulation.

This program has a long way to go and is considered to be only the starting point for Iranian saffron and other agricultural products. Therefore, we invite all experts to share their ideas to improve our plan.

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