Understanding Floor Price
Floor price, is one of the most common term used in economics and finance sector, especially in the agricultural sector. The term holds a significant importance in various contexts when it comes to the agricultural sector, may it be from deciding the prices of the commodities and trading and also for deciding the government policies when it comes to the development of the farmers and agricultural sector. The term floor price in common language represents the minimum price in which has been set by the authorities for a particular commodity or any particular asset. It is used in order to establish a baseline for the profit and stability for the farmers and the producers of the commodity. In many of the companies, especially in the farming organisations, the concept of floor price is used largely in order to develop the living standards of the farmers who are working with the organisations.
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Floor Price in Organic Farming
 Establishing a Floor Price: establishment of the minimum price for the organic produce that is being done by the farmers in order to receive and get a fair compensation for all the efforts that are made by the farmers to provide the organic produce to the world, and also playing a major role in sustainable development of the environment and bettermentof the ecosystem.
 Economic Stability: setting up of the floor prices in areas of organic farming by the company and the organizations who are working with the farmers for providing the farmers a reliable standard income and reducing the inequalities that are usually done to the farmers in case of fluctuating markets and various external problems which take place
in the agricultural sectors.
 Incentivizing Sustainable Practices: When farmers are provided with a guaranteed floor price which will be offered to them in any case, at the time of fluctuations in the market, the farmers and the agriculturalists will be motivated in order to work more in the sector of organic farming and contributing more to the environmental conservation.
Ensuring Fair Trade: setting of floor price with the farmers and the organisations, also play a major role in promotion of the fairness and equality in the farming sector and amongst the famers. With floor price being set the farmers and the producers of the organic crops are protected from being exploited in lieu of the market fluctuations and also floor price ensure a fair exchange of the value in between the farmers and the buyers and companies.
 Market Confidence: when the farmers know and have a confidence that the company or the government has already set a floor price for the commodities which are being produced by the farmers. The floor price instils a confidence in farmers for practicing organic farming as a sustainable economic activity. Setting up of the floor prices for enhancing the living standards of the farmers also adds to the economic value of the produce and attract high investments and fostering growth in the organic farming sector.
Setting up of floor price at Pavitramenthe
Management at Pavitramenthe, have a open discussion with the farmers at the very starting of the cultivating season of every crop, where the management sits with all the farmers and decide on the actual price which the farmers have spend in the production of the organic crops in the agricultural season and with setting up of these floor prices along with the farmers, many problems are solved which help in the enhancement of the farmers living standards as well as encouraging the farmers to practice more organic and sustainable practices in order to enhance environmental situation and also enhance the living standards of the farmer families. Some of the steps which are taken at Pavitramenthe for deciding the floor price are as follows-
1– Market Analysis – First of all market analysis is done as for what is the actual price which is being seen and set up in the market for the particular commodities and crops which are currently being harvested by the farmers who are connected with the organisation and playing a major role in developing the sustainable practices for the environment.
2- Cost of Production Evaluation- after the market research a open discussion is held between the upper management of the of the organisation and the farmers groups along with the farmers who are directly working in the farms for the production of the organic crops. The farmers here discuss with the upper management that what amount is being used in the production of the organic crops. The time, money and efforts which are being taken by the farmers are all seen while the decision on the final floor price is being seen in the process of determining the floor prices for the farmers.
3– Regulatory framework- a regulatory framework is set for the prices and the regulations which have been duly discussed with the upper management. Here it is decided that if the market price of the commodities and crops which are produced by the organisation goes above the floor price which has been decided by the company, the farmer will get the upper price which is already prevailing in the market, whereas of the prices of the commodities goes below the market price due to any external reasons and the prices drop down, the farmers will surely get the floor price which has been set by the organisation in order to maintain the living standards of the farmers.
4– Evaluation and adaptation– evaluation and adaptation of the floor price is done with a very fair and just basis in order to maintain transparency and fairness with all the stakeholders of the company, the farmers who are fully dedicated in order to produce the organic crops for the company as well as the environment which will benefited with the practice of the sustainable agricultural practices which play an important role in the enhancement of the environment quality and the planet.
Conclusion: As a conclusion, one can say that Pavitramenthe is one only company in the world that decides on the floor price, in an open discussion with the farmers and all the stakeholders of the company, in order to maintain transparency and justness in the farmers and company management. With floor prices being set the aim of fair for life approach of the organisation is also fulfilled and in such a condition all the stakeholders of the company especially the farmers are benefited and given a chance to enhance the well being and maintain the living standard of their families.