LECTURE 20

MARKET AND AGRICULTURAL MARKETING

1.1 Market: Meaning and definition

The word market comes from the latin word, marcatus w h i c h means merchandise or
trade or a place where business is conducted. Word market has been widely and variedly
used to mean (a) a place or a building where commodities are bought and sold, e.g., super
market; (b) potential buyers and sellers of a product, e.g., wheat market and cotton market; Some
of the definitions of market are given as follows:
1. A market is the sphere within which price determining forces operate.
2. A market is area within which the forces of demand and supply converge to establish a
single price.
3. The term market means not a particular market place in which things are bought and
sold but the whole of any region in which buyers and sellers are in such a free intercourse
with one another that the prices of the same goods tend to equality, easily and quickly.
4. Market means a social institution which performs activities and provides facilities for
exchanging commodities between buyers and sellers.
5. Economically interpreted, the term market refers, not to a place but to a commodity or
commodities and buyers and sellers who are in free intercourse with one another.

1.2 Components of a Market

For a market to exist, certain conditions must be satisfied. These conditions should be
both necessary and sufficient. They may also be termed as the components of a market.
1. The existence of a good or commodity for transactions(physical existence is, however, not
necessary)
2. The existence of buyers and sellers;
3. Business relationship or intercourse between buyers and sellers; and
4. Demarcation of area such as place, region, country or the whole world. The existence of
perfect competition or a uniform price is not necessary.

1.3 Dimensions of a Market

There are various dimensions of any specified market. These dimensions are:
1. Location
2. Area or coverage
3. Time span
4. Volume of transactions
5. Nature of transactions
6. Number of commodities
7. Degree of competition
8. Nature of commodities
9. Stage of marketing
10. Extent of public intervention
11. Type of population served
12. Accrual of marketing margins

1.4 Marketing and Agricultural Marketing Definition

The Marketing is defined as the study of entire gamut of activities that direct the flow of
goods and services from the primary producer ultimate consumer.
Agricultural marketing is the study of all the activities, agencies and policies involved in
the procurement of farm inputs by the farmer and the movement of agricultural products
from the farmer to the consumers. It includes organization of agricultural raw materials supply to
processing industries, the assessment of demand for farm inputs and raw materials.

The term agricultural marketing is composed of two words-agriculture and

marketing. Agriculture, in the broadest sense, means activities aimed at the use of natural
resources for human welfare, i.e., it includes all the primary activities of production. But,
generally, it is used to mean growing and/or raising crops and livestock. Marketing
connotes a series of activities involved in moving the goods from the point of production to the
point of consumption. It includes all the activities involved in the creation of time, place, form and
possession utility. According to Thomsen, the study of agricultural marketing, comprises all
the operations, and the agencies conducting them, involved in the movement of farm-
produced foods, raw materials and their derivatives.

1.5 Scope and Subject Matter of Agricultural Marketing

Agricultural marketing in a broader sense is concerned with:
• The marketing of farm products produced by farmers
• The marketing of farm inputs required by farmers in the production of farm products

Subject of agricultural marketing

 This includes product marketing as well as input marketing. The subject of output
marketing is as old as civilization itself. The importance of output marketing has become more
conspicuous in the recent past with the increased marketable surplus of the crops following the
technological breakthrough. The farmers produce their products for the markets. Input
marketing is a comparatively new subject. Farmers in the past used such farm sector inputs as
local seeds and farmyard manure. These inputs were available with them; the purchase of inputs
for production of crops from the market by the farmers was almost negligible. The new agricultural
technology is input-responsive. Thus, the scope of agricultural marketing must include both
product marketing and input marketing. Specially, the subject of agricultural marketing
includes marketing functions, agencies, channels, efficiency and costs, price spread and market
integration, producer s surplus, government policy and research, training and statistics on
agricultural marketing

1.6. Classification of markets

Markets may be classified on the basis of dimensions like area, time, commodities, volume,
competition, on basis of location, on basis of nature of location, on basis of stage of marketing and
basis of extent of public intervention

i. On the basis of area

On the basis of area from which buyers and sellers usually come for transactions, markets are
classified into
a. Local or village markets: A market in which the buying and selling activities are confined
among the buyers and sellers drawn from the same village or nearby village. The village market
exists mostly for perishable commodities.
b. Regional markets: A market in which buyers and sellers for a commodity are drawn from a
longer area than the local markets. Regional markets in India usually exist for food grains.
c. National Markets: A market in which buyers and sellers are at the national level. Eg. Jute and
tea.
d. World Market: A market in which the buyers and sellers are drawn from the whole world.
These are the biggest markets from the area point of view. These markets exist in the
commodities, which have a worldwide demand and or supply such as coffee and machinery.
The storage facility, transportation preservation and processing techniques used can enhance the

area dimension of market for a commodity. e.g. Mushroom local enhances to wider area by
dehydration; milk – pasteurization enhances the area dimension from local to regional.
ii. On the basis of time span
a) Short period Markets: The markets, which are held only for a few hours called as short period
markets. The products dealt with in these markets are of a highly perishable nature such as fish,
vegetables, milk and flowers. In these markets, the prices of commodities are fluctuating.
b) Long–period markets: Their markets are held for a longer period than the short period markets.
The commodities traded in markets are less perishable and can be stored for some time e.g. food
grains and oil seeds. The prices are governed both by the supply and demand forces.
c) Secular-Markets: These are markets of a permanent nature. The commodities traded in these
markets are durable in nature and can be stored for many years. Example is markets for
machinery and manufactured goods.

iii. Classification of markets based on commodities

It includes two aspects a) Number of commodities in which transactions take place and b)
Nature of commodities.
a. Number of Commodities: A market may be general or specialized on the basis of the number of
commodities in which transactions are completed.
General Markets: A market in which all types of commodities, such as food grains, oil seeds, fiber
Crops, gur etc. are bought and sold is known as general markets. These markets deal in a large
number of commodities. e.g. Simmakkal market in Madurai.
Specialized Markets: A market in which transactions take place only in one or two commodities are
known as specialized market. For every group of commodities, separate markets exist. The examples
are food grain markets, vegetable market, wool market and cotton market.
b. Nature of commodities
On the basis of the type of goods traded, markets may be classified into the following
categories.
Commodity Markets: A market which deals in goods and raw materials such as wheat, barley,
cotton, fertilizers and seed are formed as commodity markets.
Capital Markets: The market in which bonds ,shares and securities are bought and sold are called
capital markets, for example, money market and share market.

iv. On the basis of volume of transactions

There are two types of markets on the basis of volume of transactions at a time
Wholesale markets: A wholesale market is one in which commodities are bought and sold in large
lots or in bulk. Transaction in these markets takes place mainly between traders.
Retail Markets: A retail markets is one in which commodities are bought and sold to the consumers
as per their requirements. Transactions in these markets take place between retailers and consumers.
The retailers purchase in wholesale markets and sell in small lots to the consumers. These markets
are very near to the consumers.

v. On the basis of degree of competition

On the basis of competition, markets may be classified into the following categories.
a. Perfect Markets
A perfect market is one in which the following conditions hold good.
1. There are a large number of buyers and sellers.
2. All the buyers and sellers in the market have perfect knowledge of demand, supply and prices.
3. Prices at a time are uniform over a geographical area, plus or minus the cost of getting supplies
from surplus to deficit areas.
4. The prices are uniform at anyone place, over period of time, plus or minus the cost of storage
from one period to another.
5. The prices of different forms of a product are uniform plus or minus the cost of converting the
product from one form to another.
b. Imperfect Markets
The markets in which the conditions of perfect competition are lacking are characterized as
imperfect markets. The following situations, each based on the degree of imperfect, may be
identified.
I Monopoly Market: Monopoly is a market situation in which there is only one seller of a
commodity. He exercises sole control over the quantity or price of the commodity. and charges
higher price e.g. Railways electricity for irrigation .
Duopoly Market: A duopoly market is one, which has only two sellers of a commodity, e.g. two
retailers in a village.
Oligopoly Market: A market in which there are more than two but still a few sellers of a commodity
is termed as an oligopoly market e.g. different air lines operating in out country.
Monopolistic Market: When a large number of sellers deal in heterogeneous and differentiated
form of a commodity, the situation is called monopolistic competition. e.g. Tea and Coffee by
different companies, pump sets, fertilizers or generally input market .Difference in price is due to
different trade marks of product and hence different prices prevail for same basic product.
Monopsony market: Single buyer in the market
Duopsony market: Two buyers in the market
Oligopsony market: Few buyers in the market
vi. On the basis of location
Village market -Market located in a village and transactions take place among buyers and sellers of
a village.
Primary wholesale market-located in big farms near centres of production of agricultural
commodities. Major part of produce brought for sale by producer farmer them selves. Transactions
takes place between farmers and traders.
Secondary wholesale market-located generally in district headquarters on important trade centres
or near railway junctions. Transaction takes place traders and wholesalers. The bulk of arrivals is
from other markets. The produce in the market handled in large quantities. Specialized marketing
agencies perform different marketing functions like those of commission agent, brokers and
weighmen.
Terminal market – Market in which produce is either finally disposed off to consumers or
producers assembled for export. Merchants use modern methods of marketing .Commodity
exchanges exist in these markets which provide facilities for foreword trading in specific
commodities. Located in metropolitan cities or in sea ports of Bombay, Madras, Calcutta and Delhi.
Seaboard Market- Markets located near seashore and meant for import and export of goods e.g.
Bombay, Madras and Calcutta.

vii. On basis of nature of transaction

Spot or cash markets -goods exchanged for money immediately after sale
Forward market- purchase and sale of a commodity takes place in time ‘t’ but exchange of
commodity takes place on some specified date in future ‘t+1’. If exchange does not take place,
difference in purchase and sale price paid or taken.

viii. On basis of stage of marketing

Producing market – markets mainly assemble commodity for further distribution to other markets.
Located in producing areas.
Consuming market- markets which collect the produce for final disposal to consuming population.
Located in areas where production inadequate or in thickly populated urban centers

ix. On basis of extent of public intervention

Regulated market-Business done in accordance with rules and regulations framed by statutory
market organization. Marketing costs standardized and practices regulated.
Unregulated market-Business is conducted without any sets of rules and regulations. Traders form
own rules for conduct of business. This market suffers from ills of unstandardised charges for
marketing functions to imperfections in price determination.

x. On the Basis of Type of Population Served:

On the basis of population served by a market, it can be classified as either urban or
rural market:
a) Urban Market: A market which serves mainly the population residing in an urban area is
called an urban market. The nature and quantum of demand for agricultural products arising from
the urban population is characterized as urban market for farm products.
b) Rural Market: The word rural market usually refers to the demand originating from the rural
population. There is considerable difference in the nature of embedded services required
with a farm product between urban and rural demands.

xi. On the Basis of Accrual of Marketing Margins:

Markets can also be classified on the basis of as to whom the marketing margins
accrue.
 Chart: 1 Dimensional Classification of Markets

VILLAGE MARKETS
PRIMARY MARKETS
SECONDARY WHOLESALE
MARKETS
ON THE BASIS OF LOCATION
TERMINAL MARKETS
SEA-BOARD MARKETS

LOCAL/VILLAGE MARKETS
REGIONAL MARKETS
ON THE BASIS OF AREA OR
NATIONAL MARKETS
COVERAGE
WORLD/INTERNATIONAL
MARKETS

SHORT PERIOD MARKETS

PERIODIC MARKETS
ON THE BASIS OF TIME SPAN
LONG PERIOD MARKETS
SECULAR MARKETS

ON THE BASIS OF VOLUME WHOLESALE MARKETS

OF TRANSACTIONS
RETAIL MARKETS

ON THE BASIS OF NATURE SPOT/CASH MARKETS

OF TRANSACTIONS
FORWARD MARKETS

GENERAL MARKETS
ON THE BASIS OF NUMBER SPECIAL MARKETS
OF COMMODITIES
TRANSACTED
PERFECT MARKETS
MONOPOLY MARKETS
DUOPOLY MARKETS
ON THE BASIS OF DEGREE OLIGOPOLY MARKETS
OF COMPETITION MONOPOLISTIC
ON THE BASIS OF NATURE COMMODITY MARKETS
OFCOMMODITIES
CAPITAL MARKETS

ON THE BASIS OF STAGE PRODUCING MARKETS

OF MARKETING
CONSUMING MARKETS

ON THE BASIS OF EXTENT REGULATED MARKETS

OF PUBLIC INTERVENTION
UN-REGULATED
MARKETS

ON THE BASIS OF TYPE URBAN MARKETS

OF POPULATION SERVED
RURAL MARKETS

ON THE BASIS OF MARKET FARMERS MARKETS

FUNCTIONARIES AND CO-OPERATIVE
ACCRUAL OF MARKETS GENERAL
MARKETING MARGINS MARKETS
1.7.Approaches to the study of marketing
Marketing is a subject which has varied and wide problems. In includes the services
and functions of different specialized institutions and middlemen. Different commodities
have special marketing problems and. also, the same commodity will have different problems
in different regions. Various approaches have been suggested and used to study marketing
problems. These are functional, institutional, commodity and behavioral approaches.

i. Functional Approach
A marketing function is an act, operation or service by which the original
producer and the final consumer are linked together. Marketing consists of many
operations and an operation may be performed several times in the marketing process. The
functional approach splits down the field of marketing into a few functions. This method
analyses in details the specific functions of marketing such as buying selling, transportation,
storage, standardization, grading, financing, risk taking and marketing research.
The advantages of the functional approach in the study of agricultural marketing
problems are:
1. We can make inter functional comparison of the marketing costs.
2. Inter agency comparison of the cost of performing a marketing function can be made
3. Inter commodity comparison of cost of performing the various functions can also be
made.
The defects of this approach are
1. An undue emphasis on functions of marketing does not permit one to know how these
functions are applied to specific business operations.
2. The marketing functions are so numerous that it is difficult to eliminate the unnecessary
from the necessary functions.
 Marketing functions

__________________________________________________________________

Functions of Exchange Functions of Physical supply Facilitating Functions

__________________ ________________________

Selling Assembling Transportation Storage and Ware

(demand (buying) housing
creation)

Financing Risk taking Standardization Market information

(Collection and
interpretation)
ii. Institutional Approach
The institutional approach to study of marketing problems implies a study of agencies
and institutions, which perform various functions in the marketing process. The nature and
character of various middlemen and other related agencies involved in the movement of the
product are studied. The human element receives the primary emphasis. The agencies and
institution, which perform various marketing functions, are individuals, partnership,
corporation, cooperatives, or government organizations.
Agencies and Institution

__________________________________________________________

Individual Partnership Corporations Cooperatives Government

Commission Agent FCI, TNCSC Taluk Co-operative organization
Broker CCI Marketing Coffee Board
Itinerant Merchant Societies NAFED
Wholesaler TANFED
Retailer APEDA
Processors MPEDA

These agencies vary widely in size and ownership. They get their reward in the form
of marketing margins. This approach helps us to find answers to the problems of ‘who does
what’ in the marketing process, whether the margin of the agency is commensurate with the
services rendered, which government regulations are necessary so that their unlawful
activities may be curbed and how to simplify the procedural system. The serious limitations
of this method are that if leaves one with an inadequate understanding of marketing. Since the
material presented is often largely descriptive and does not show effectively the inter-
relations of the institutions studied.

iii. Commodity Approach

Under this approach, the commodity is the pivot around which all institutional and
functional details are studied. The problems of marketing differ from commodity to
commodity mainly because of the seasonally of production, the variations in its handling,
storage, processing and the number of middlemen involved in them. For example potatoes are
stored in cold storage, while wheat is stored in godowns. Paddy, pulses and oil seeds are
processed at miller’s level. The main advantage of this approach is that it is concrete since all
work relates to a specific product but it is a time consuming process and often results in
excessive repetitions.
iv. Behavioral System Approach
This approach refers to the study of behaviour of firms, institutions and
organizations, which exist in the marketing system for different commodities. The
marketing process is continually changing in its organization and functional combinations.
An understanding of the behaviour of the individuals is essential if changes in the behaviour
and functioning of the system are to be predicted.