CBU 5205

Agribusiness Marketing
Topic 1
Introduction

Daisy Odunze
Introduction
 Agribusiness includes not only those that farm
the land, but also:
 the people and firms that provide the inputs (e.g.
seeds, chemicals, and credit);
 process the output (e.g. milk, grain, and meat);
manufacture the food products (e.g. ice cream,
bread, and breakfast cereals); and
 transport and sell the food products (e.g.
restaurants and supermarkets) to consumers.
Introduction
 Agriculture has undergone a rapid
transformation as new industries evolved and
traditional farming operations grew larger and
more specialized. The transformation did not
happen overnight, but came slowly as a
response to a variety of forces.
 Evolution of Agribusiness
The Agribusiness
System
To capture the full
meaning of the term
“agribusiness” it is
important to visualize
Processing-
these three sectors as Agricultural
input sector
Production
sector
manufacturing
sector
interrelated.

The success of each part

depends heavily on the
proper functioning of the
other two.
The Agribusiness System
 Input sector
 This sector is a large part of agribusiness.
 It provides producers with the feed, seed, credit,
machinery, fuel, chemicals, they need to operate.
 This sector provides 75% of the input used in
production agriculture.
 Improvements in the quality of purchased inputs
have been a large source of efficiency gains for the
entire system.
 The trend towards the use of more purchased input
will continue
The Agribusiness System
 Production sector
 The middle part of agribusiness is the production
sector.
 In the recent years, producers have specialized into one
or a few crops or types of livestock in order to be able
to increase the efficiency of their operations and
become production experts.
 The agricultural production sector has been the cause
of much of the change in agribusiness. They, in turn,
have been changed by development in other areas of
agribusiness, particularly in technology.
The Agribusiness System
 Processing/manufacturing sector
 Employs millions of people in a variety of
businesses ranging from grain elevators to fruit
and vegetable- processing plants to
supermarkets to fast food restaurants.
 The businesses in this sector acquire raw
agricultural commodities from producers and
then process them into food products that are
sold at times, at places, and in forms that are
desired by consumers. The cost of these
activities is called the marketing bill.
 Definition of Agribusiness
 John Davis and Ray Goldberg (1957), defined
agribusiness as all operations involved in the
manufacture and distribution of farm suppliers;
processing, and distribution of the resulting
commodities and items.

 Ewell Roy (1980) defined agribusiness as the

“coordinating science of supplying agricultural
production inputs and subsequently producing,
processing and distributing food and fibre.
Definition of Agribusiness
 An inclusive definition of agribusiness was
provided by the Australian Department of
Agriculture, Fisheries and forestry. The ADAFF
called the agribusiness sector a “chain” of
industries directly or indirectly involved in the
production, transformation, or provision of food,
fibre, chemical and pharmaceutical substrates.
Definition of Agribusiness
 Agribusiness is the coordination of all activities
that contribute to the production, processing,
marketing, distribution, financing and
development of agricultural commodities and
resources. This includes food, fibre, wood
products, natural resources, horticulture, and other
plant and animal products and services.
Definition of Agribusiness
 Scope of agribusiness.
Definition of Agribusiness
Marketing
 Agribusiness marketing can best be defined as
series of services involved in moving a product
from the point of production to the point of
consumption. It is a series of inter-connected
activities involving: planning production, growing
and harvesting, grading, packing, transport,
storage, agro-and food processing, distribution
and sale.
Conflicting Needs of Producers and
Consumers

 Conflicting needs of producers and consumers that agrimarketing seeks

to reconcile.

 Producers try to consumers try to

 Maximize profit Maximize the
over the long term satisfaction they receive from
the products they buy With
their limited incomes

 Sell large quantities Buy small quantities

of fewer products of many products

 Obtain the highest Obtain the lowest

prices prices
Conflicting Needs of Producers and Consumers

 Marketing plays a key role in the success of any

economy by bridging the gap between the differing
needs of producers and consumers.
 Marketing helps producers to decide what products
to produce and when to produce them. Marketing
also helps consumers by letting them know what
products are available at what price.
 When done well, it leads to greater satisfaction for
consumers and higher profits for producers.
Conflicting Needs of Producers and
Consumers

 Agribusiness is the largest industry in most

developed nations, and marketing is its largest
segment. More than 80 % of those involved in
agribusiness are employed in marketing
Role of Marketing in the
Agribusiness System
 In any economic system there are always barriers
between producers and consumers that prevent
producers from efficiently meeting consumer
needs.
 These include separations of space, time,
information and ownership. The role of
marketing system is to overcome these
separations by building a bridge between
producers and consumers
Role of Marketing in the
Agribusiness System
 The most familiar marketing
function.
 Must occur in the marketing
system if any product
exchanges are going to
occur.
 Overcomes separations of
ownership by exchanging
legal title of the product for
money between the buyer
and seller.
Role of Marketing in the Agribusiness
System
 Physical functions: Storage:
 Agricultural supply is seasonal while demand is
continuous. This gives rise to the need for storage.
 The storage function is one of balancing supply and
demand.
 It overcomes the separation of time by keeping the product
in good condition between production and the final sale.
 A farmer, merchant, co-operative, marketing board or
retailer who stores a product provides a service. And
should earn a profit from that service.
 Both growers and consumers gain from a marketing system
that can make produce available when it is needed.
Role of Marketing in the
Agribusiness System
 Physical functions: Transportation:
 The transport function is chiefly one of
making the product available where it is
needed, without adding unreasonably to the
overall cost of the produce.
 It overcomes the separation of space by
moving the product from where it is
produced to where the consumer is willing to
purchase it
Role of Marketing in the
Agribusiness System
 Physical functions: Processing:
 This function is responsible for changing the
form of a commodity to a form that has
greater value to the consumer.
 The form changing activity is one that adds
value to the product.
 Does not overcome any gap but it increases
the utility of the product.
Role of Marketing in the
Agribusiness System
 Role of Marketing in the Agribusiness
System
 Facilitating functions: Standardisation:
 Establishment and maintenance of uniform
measurements of produce quality and/or quantity.
 Simplifies buying and selling as well as reducing
marketing costs by enabling buyers to specify
precisely what they want and suppliers to
communicate what they are able and willing to
supply with respect to both quantity and quality of
product.
 Overcomes the information gap

 Impossible to trade without this function

Role of Marketing in the
Agribusiness System
 Facilitating functions: Financing:
 An inevitable lag between investing and sale and
someone must finance the lag.
 The question of where the funding of the
investment is to come from, at all points between
production and consumption, is one that
marketing must address.
 Overcomes time separation.
Role of Marketing in the
Agribusiness System
 Facilitating functions : Risk bearing:
 Involves assuming the risk of loss between the
time of purchase and sale. In both the production
(physical risk)and marketing of produce the
possibility of incurring losses is always present
(marketing risk).
 Overcomes the separation of time
Role of Marketing in the
Agribusiness System
 Facilitating functions : Market intelligence:
 As far as is possible marketing decisions should
be based on sound information.
 The role of market intelligence is to reduce the
level of risk in decision making.
 It establishes what products are right for the
market, which channels of distribution are most
appropriate, how best to promote products and
what prices are acceptable to the market.
 Overcomes the gap of information
Utilities of Marketing
 A useful way to think about the utility process
is to think of them as adding value to the
product.
 Form utility: this means to process the product into a
form desired or needed by the consumer.
 Place utility: this means transporting the product to a
location desired by the consumer.
 Time utility: this means storing the product until the
time it is needed by the consumer.
 Possession utility: this allows consumers to gain
ownership of the product legally.
Utilities of Marketing

 Each of these utilities is added to the product by

performing one or more of the nine marketing
functions.
 Form utility is created by processing.
 Place utility is created through the transportation
function.
 Time utility comes from the storage function.
 Possession utility is created by the buying and selling
functions.
 In this way the barriers of space, time,
information, value and ownership are overcome
for the producer and consumers.
The end
 Energiser:
 Consider one of the best-selling fast- food items,
the cheeseburger. To get an idea of how
agribusiness affects our daily lives,
 imagine what is involved in assembling a cheeseburger
with all the trimmings.
 List at least 10 businesses or services that are needed to
get a cheeseburger ready for consumption.