Advance in Agriculture and Biology Adv. Agric. Biol.

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E-ISSN: 2310-9343 / P-ISSN: 2311-0163 © PSCI Publications
DOI: 10.15192/PSCP.AAB.2015.4.2.7174

A Review of Book Theory on Agricultural Marketing and Food

Prices: Nigeria in Perspective
O.W. Olowa
Department of Agricultural Education Federal College of Education (Technical) Akoka, Lagos
Corresponding author: O.W. Olowa

Paper Information ABSTRACT

This paper discusses food/agricultural marketing in theory. Identifies
Received: 18 June, 2015 various approaches to marketing as variously described. Arguments against
the continuous existence of the middlemen viz-a viz their exploitative
Accepted: 127 August, 2015 tendencies as its affect food prices was highlighted. As food is known to
be essential, its prices could stand between it and poor consumers. Several
Published: 20 October, 2015 course of fluctuating food prices were elaborated which also includes
activities of the middlemen. The conclusion of this discourse embodied a
Citation recommendation towards preventing wastages and improper pricing as it is
being experienced in the Nigeria food sector of today.
Olowa OW. 2015. A Review of Book Theory on
Agricultural Marketing and Food Prices: Nigeria in
Perspective. Advance in Agriculture and Biology, 4 (2), 71-
74. Retrieved from www.pscipub.com (DOI:
10.15192/PSCP.AAB.2015.4.2.7174)
© 2015 PSCI Publisher All rights reserved.
Key words: Food Price, Middlemen, Marketing functions, Nigeria

Introduction
Food market and marketing
Koli (1967) defined food marketing as the performance of all business activities involved in the flow of food products
and services from the point of initial agricultural production until they are in the hands of the ultimate consumers. This
definition shows that the marketing process in not restricted only to non-farm activities. It is not implied that there is
interdependence between the producer’s and the middlemen who complete the producers’ process by adding values to
agricultural products. Terpstra (1972) offered a very interesting approach to marketing, which can be applied with certain
qualifications to food, the identified four tasks which must be successfully completed if a firm is to market its products
properly. The first task is for the firm to study it potential customers, and factors which influence their purchases or non-
purchases of produce; firm to develop products or services that satisfy customers’ needs and wants. In this regard, the firm
must set prices and terms, which appear reasonable to buyer, which at the same time return what the firm considers to be fair
profit. The third task of the firm concerns the distribution functions ensuring that products are available when and where
buyers can conveniently get them. The fourth and final task of the firm is to inform the market about its producer, and this will
probably include some methods of persuading them to buy. Adegeye and Dittoh (1985) termed the terpstra’s “four task”
marketing functions which describes as assembling the products from various production centre; processing the commodity in
the form that will be suitable for consumption and then making every arrangement to get them distributed to consumers. To
accomplish these functions, they listed seven services called “Marketing Services “ which include Transportation, storage,
Grading and standardization, packaging, connecting Buyers to sellers, financing and risk bearing. All these stage, have their
cost implications, and it has been argued that the cost implication of all the stages (services) involved in the flow of food
products or agricultural products from producer to consumer is responsible for high prices charged on food products. For
instance, Adeyemi (1983) studied beef marketing and observed that high transportation cost of slaughtered cattle, together with
Government levies levied on abattoirs were responsible for the high prices charged on beef.
In any developing economy with multiple urban centre like Nigeria middlemen plays major role (marketing
functions) in the continuum between producers and final consumer of products. Their middlemen are perceived to be the cause
of high prices of food in the market. This have led to the agitation that middlemen should be eliminated from the marketing
continuum. But as earlier stated, marketing functions performed by middlemen have cost implication and are compensated for
with marketing margins.
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The rest of the paper is structured as follows: apart from section one which is introductory, section two, elucidates
marketing margin and the middlemen. In section three, food price and whether middlemen should be eliminated are discussed
while the broad objectives of price decision and market structure are articulated in section four. The paper closes with
concluding remarks.
Marketing Margins and Middlemen
Gittinger (1972) defines marketing margin as the difference between the price a buyer pays for a good or service and
the price at which he sells that good or service. Generally, this will equal the cost of providing the marketing services needed
in a relatively competitive market. Marketing margin is the earning of the middlemen for services provided. When marketing
entity can influence prices, marketing margin may exceed the cost of the marketing services.
It is indeed good to distinguish among middlemen which are known to constitute the marketing channels. In Nigeria,
and as enumerated by Adegeye and Ditto (1985) and Olowa (2015), the classes of middlemen include farm-gate middlemen,
the commissioned agent, cooperative marketing agency, the wholesaler and retailer. Marketing channels for a particular
commodity vary from one part of the country to another, so it is always difficult to talk of a typical marketing channel for a
particular commodity.
Marketing margins are thought to be exploitatively adjusted in other to meet the middlemen’s financial target but, it is
not always true. Agricultural produce, due to their unique characteristics (perishability, bulkiness etc,) does not give room or
allowance for hoarding and other sharp practices which could lead to hike in prices, second, relatively inelastic nature of
demand and supply for agricultural produce and, third, the fact that where marketing entity influence prices, marketing margin
may exceed the cost of the marketing services or on the other hand completely fizzled out.
However, it important to state that the existence of excessive margin in a particular place and at a time depict an absence of
regulation and in efficiency in the structure and organization of marketing channels in Nigeria.

Food Prices And Whether Middlemen Should Be Eliminated

All Arguments about whether or not the middlemen should be eliminated or eradicated in the marketing of food
emanated from the growing concern about escalating food prices. In the real life, it is very difficult to eliminate the
middlemen in the marketing of food or agricultural produce. Peasant farmers would find it difficult to combine the marketing
function with their rigorous farm work. Thus eliminating the middleman will mean transferring the marketing function and
cost to someone else. Hence, the knowledge of food prices is significant and cannot be linked with the Arguement for the
elimination of middlemen. As long as marketing services exists, they carry along with them their cost implication, regardless
of who perform or render the service.
Both consumer and producer have a goal. The ultimate goal of a producer is to maximize profit while the consumer,
to maximize consumption utility. Price is the instrument for rationing these goals. Various authors have proposed different
factors as influencer of food prices. Olaiyide (1975) revealed that instability of staple food prices is due to stochastic
fluctuation of stable food price, which does not occur with any degree of consistency because it is governed by unpredictable
conditions. The study revealed that seasonal variation in prices might be as high as 100%. Olayide (1972) noted high food
prices as one of the manifestation of famine. Adejumobi (1970), in his analyses of price movement found a substantial amount
of cyclic price movement to exist in major urban centre in Nigeria. Barret (1996) found out there is seasonal and spatial
differences in food price distribution which emerges naturally from the geography of private agricultural marketing in low
income, infrastructure, poor economics. Agricultural market is the chief means of transmitting consumers demand or response
to producers hence, the price system should be able to reflect the demand system. The situation as it were, in Nigeria is an
affirmation of this statement.

The Price Decision And Market Structure

The pricing decision is in other words complex, yet it is one over which a business has much less control than over
product, promotion and distribution. This is true of all business, but even truer of farm business. The pricing function also
varies significantly between raw product and consumer product markets. Here the pricing objective in competitive market is
outlined and discussed. The over-all pricing objective is to ensure that sufficient sales are made to allow the business to
achieve its business objective. The pricing functions therefore depend on business objective. In the long run prices are
determined by the market, but in the short term a price – making producer may be able to set prices to satisfy its objectives,
and even price-takers will know the prices they need. Four broad pricing objectives are distinguished: business survival, sales
maximization, current profit maximization and product quality leadership.

Business Survival
Survival of a business over the long depends on the difference between the revenue and the cost of production. At
least, revenue should exceed cost sufficiently to provide a surplus for reinvestment. In the short run most business experience
periods in which reduced demand or overcapacity in the industry may cause revenue to fall and prevent total recovery of costs,

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for business subject to seasonal supply or demand such as agricultural business, this is almost inevitable and highly likely for
businesses exposed to the fluctuations. Provided these period of deficit trading are short, and revenue gained exceeds the
variable cost associated with production, production may continue since any surplus will make some contribution to fixed costs
(which-would be totally lost if production ceased). A business may in other words survive a period of unprofitable trading
provided it succeeds in the long run in covering its fixed costs, but the ability to do this may depend on past performance and
the attitude of capital providers.

Sales Maximisation
This is a common strategy, supported by strongly competitive pricing. Large volumes permit lower production costs
by achieving economies of scale; they also improve the efficiency of other marketing costs (Principally promotion) since the
costs are spread over a much larger volume. As a long-run strategy sales maximization leading to a dominate market share
may allow a business to raise prices and gain extra profits in the absence of little or no competition. High profit will invariably
attract competition.

Current Profit Maximisation

Economic theory states that profit is maximized at the point where the cost of the last increment of production
(marginal cost) equals revenue derived from the sale of this last increment (marginal revenue). In a competitive market this
marginal revenue is the price. For the farmer whose product is not differentiated, commodity sold in a highly competitive
market, prices do tend to approximate marginal cost, and the farmer has little control over the price received. Profit
maximization must therefore be sought via cost reduction rather than a price change.

Product Quality Leadership

Since many consumers associate higher prices with higher quality, a business may deliberately choose to charge a
high price to establish a quality image. The pricing objectives notwithstanding, the price level of a product will be the result of
a number of interacting factors such as supply competition, Government intervention, cost of production, Demand competition,
Required rate of return, and Demand competition, all of which will not be elaborated upon in this write-up. Once, the price
level for a product has been determined, the exact price to be charged under different circumstances must also be determined:
at different times and places, and different quantities, product forms and sizes within a range.

Conclusion
Increasingly commercialized economy which culminated in urban growth and increased urban earners necessitates
increased supply of food and other agricultural products to this area. Excess production from the farm must also be disposed in
order to earn some income with which the farmers can purchase others goods and services not produced by the farm.
Much have been asserted by various authors ranging from the definition of Agricultural marketing, reasons for
incessant/fluctuating price of food and agricultural products, and excess profit in form of ‘margins’ that accrue to the
middlemen and argument in favour of eliminating the middlemen as seen in this write-up. Even though the price
decision/determination process is a function of the structure, producers and buyers in the market, the situation as it were, in
Nigeria is a grave exploitation engendered by lack of organisation and regulation. Efficient regulatory system should not
interfere or disrupt the smooth interaction of market forces but create a good platform for all players in agricultural marketing.
Argument in favour of eliminating middlemen is uncalled for since it will mean transferring the functions of this middlemen to
the farmers with attending financial burdens, which many Nigeria farmers cannot bear alongside their normal farming
activities. Again removal of middlemen in the continuum of marketing agricultural products from the farm to the consumer
will also lead to massive unemployment and multiplier effect on the economy.
In Nigeria to day, marketing of food and other agricultural products is not enjoying the required advancement
technology-wise. Many farmer still sell their products below the equilibrium prices due to poor transportation and feeder roads
from the farm to the urban centres, poor storage facilities and retardation in rural development.
The government and private sector are advised to explore this long abandoned subsector in order to reduce wastage
the nation is experiencing on our farms.

References
Adejumobi EO.1970.“An analysis in the movement of urban food prices in Nigeria (1954-1965). The Nigeria journal of Agricultural Economic and Social
Studies Ibadan
Adeyemi O. 1983. Analysis of beef marketing in Nigeria. A Case study of Lagos State unpublished project B.sc. Department of Agriculture Economic
university of Ibadan.
Barret CB. 1996. Urban bias in Price risk: the geography of food price distribution in low-income economics. Journal of Development studies 32 13. 830-849
Kohi Pl.1967. “Marketing of Agricultural product”. Macmillan Company 6th adition.
Olayide SO, et al.1972. A quantitative analysis of food requirements supply and demand in Nigeria 1968-1983. Federal department of Agriculture, Lagos. Pg
84

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Olayide SO, et al.1975. “The food problem, Tractable or the mere chasing of the marriage” (Inaugural lecture) University of Ibadan press, Ibadan.
Olowa OW.2015. Principles of Agricultural Marketing in Olowa (Ed) Marketing, Cooperative and Policies in Agriculture: Nigeria in Perspective. India:
Photon e-Books. UBN: 015-A94510112014
Terpstra V. 1972. International marketing Dyden, Hinsdale II.

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