AGRICULTURAL MARKETING

What is Marketing ?
 A series of services involved in moving a product from the point of production to the point of
consumption

Point of Production
 The point of usual first sale by the farmer
 Maybe done at the farm, farm’s house, along the road, mountain trail or assembly market
 Transaction occurs between the farmer and the buyer
 A price is established

Point of Consumption
 The point of last purchase or sale
 Transaction occurs between the buyer and the seller
 A priced is established

Services
 A function performed on or for a product that alter its form, time, place, possession
characteristics
 Add value to a product and thus entails cost
 May or may not involved physical handling
 Generally performed to meet existing or anticipated consumer’s demand

Exchange function
 Activities involved in the transfer of title of goods
 The point at which price determination enters the study of agricultural marketing
 Buying – seeking out sources of supply
 Selling – merchandising activities; proper unit of sale, proper packaging, best market channel

Physical function
 Those activities that involved handling, movement and physical change of the actual
commodity itself
 Answer the When? What? And Where of marketing
 Storage
 Transportation
 Processing – done to either change the form of the product or to aid in the preservation of the
product to make it available to consumers for longer periods of time (carrying, freezing,
drying)

Facilitating function
 Acts as the grease of the agricultural marketing machinery
 Enables the smooth performance of both the exchange and physical functions
 Standardization - the establishment and maintenance of uniform measurements
 Financing - the advancing of money to carry on the various aspect of marketing
 Risk-bearing – the acceptance of the possibility of loss in the marketing of the product
 Packaging – to preserve the product and to protect it from contamination to make it easier to
handle, and to make the product more attractive to the buyer. Packaging is especially more
 important to protect the product from damage during transport, particularly if transport occurs
over poor roads.
 Market intelligence – the job of collecting, interpreting and disseminating the large variety of
data which are necessary to the smooth operation of the marketing process.
 Market research – alternative marketing channels, routes, marketing functions, market
potential of new products, etc.
 Demand creation – effective advertising and use of promotional devices

What is Market ?
 A group of buyers and sellers with facilities for trading with each other
 A place where buyers and sellers ,meet to exchange goods and services
 A large geographic wherein a given set of supply and demand forces operate to set prices
 May be formal or informal markets

Marketing system
 Also known as agricultural marketing machinery
 An inter-organizational system made up of set of interdependent activities aimed at expanding
agricultural production
 Has objective or goal to achieve
 Has components or participants
 Has institutional arrangements
 Needs planning and management decision structure
 Has spatial and temporal

Components of the agricultural marketing system

1. Producer subsystem – initiators of production
2. Channel subsystem – the actors often branded as necessary evil
3. Flow subsystem – product, financial and information flows
4. Functional subsystem
 Marketing processes and marketing functions
5. Environmental subsystem
6. Consumer subsystem

Approaches to the study Agricultural Marketing

 Commodity Approach
 Institutional Approach
 Functional Approach
 Industrial organization or market structure, conduct, performance approach
 Market efficiency or analytical approach

 Commodity Approach
 Studying the commodity concerned
 Product oriented than marketing function oriented
 Study may cover the characteristics of the product, market demand and supply situation,
prices, consumer preferences, market potential of new products, etc.
 Institutional Approach
 Studying the various agencies and business structures involved in the marketing processes
 Attempts to answer the question “who”
  Considers the nature and character of the various middleman and related agencies, also the
arrangement and organization of the marketing machinery

Types of Middlemen
 Merchant middlemen – take the title to and therefore own products they handle; buy and sell
for their own gain
 Agent middlemen – act as representative of their clients; do not take title to and therefore do
not own the products they handle; income is in the form of fees and commission
 Processors and manufacturers
 Facilitative organization – e.g. auction markets
 Market association

Merchant Middlemen
 Contract buyers
 Grain millers
 Wholesalers
o Assembler wholesale or viajeros
o Financer wholesaler or bodegeros/cuartajera
o Shippers
o Wholesaler
o Wholesaler-retailer
o Retailer
Agent Middlemen
 Commission agent
o Normally takes over the physical handling of the product, arranges for the terms of
sale, collects, deducts his fees and remits the balance to the principal
 Broker
o Usually does not have physical control of the product, ordinarily follows the instruction
of his principal closely and has less discretionary power in the price negotiations that
the commission agent
 Functional Approach
 Attempt to answer “what” in the question ”who does what”
 Marketing function – a major specialized activity performed in accomplishing the marketing
process
 Types of marketing function
1. Exchange function
2. Physical function
3. Facilitating function
Uses of the Functional Approach
 Considers the jobs that must be done
 Helpful in evaluating marketing costs of various middlemen
 Useful in understanding the difference in marketing machinery by breaking down a complex
marketing task into its component function
Demand
 The various quantities of a product which consumers will buy all probable prices
 Effective demand
o Consist of both the desire for the product and the ability to pay for it
 Market demand
 o Summation of all individual demands

Types of Demand
 Consumer demand – demand for the final finished product
 Producer demand – demand for the intermediate products used in producing the final or
finished product
 Demand for social services – a special type of consumer demand where the government’s
ability to provide for the services and not the consumer’s income determines demand
The Law of Demand
 Inverse relationship between price and quantity demanded
 Explained by;
o Substitution effect – consumer shift their purchases towards the relatively cheaper
product as price changes
o Income effect – a change in the price of one commodity, all other factors affecting
demand held constant, changes ion the consumer’s real income