INSTITUTE OF ACCOUNTACNCY ARUSHA

INDIVIDUAL ASSIGNMENT
MODULE :INTRODUCTION TO MARKETING
REG NO. :ODA/0195/2019
MODULE CODE : AFU 06113
FACILITATOR : Mlay(Mr felex)
SEMISTER : ONE
ACADEMIC YEAR : 2020/2021
COURSE : ODA II

QUESTION
As an expert on the areas of supply chain, marketing and pricing give out your
argument as to why the price of agricultural product keep on fluctuating in the
local market as well as in international market.
 Agriculture is the dominant user of the environment and natural
resource2and Agricultural products means goods produced by an agricultural,
forestry or fisheries undertaking in each Member State as a result of the activity.
The following are the example of agricultural products Coffee and tea are
agricultural products,and the following are the reasons why the price of
agricultural product fluctuating in local market and international market.
Weather conditions. For example, an early frost can harm supply
(causing a rise in prices). This is a problem for agricultural products like coffee and
bananas – plants susceptible to frost.Good weather can lead to an unexpectedly
large increase in supply (which can lead to glut on the market and falling
prices.Also, disease and pests can affect the supply. If potatoes are affected by
blight, it can cause potato prices to rise.
Demographic pressures: growing population numbers in developing
countries stretch the food and water supply more thinly. The developing-country
population is projected to increase by some clearly indicating that there will be
more mouths to feed, which is reflected in land-use changesAs people strive to
get the most out of land alreadyexploit virgin territory to develop more
agricultural land to grow food, the damage inflicted on the environment grows.
Arable lands are lost to erosion, salinity, desertification and urban spread; forests
disappear and biodive
Inelastic demand.inelastic-demand-volatile-prices Demand for coffee and
tea are relatively price inelastic. If the price of coffee falls, there will be a smaller
percentage rise in demand. This is because there are few close substitutes to
coffee/tea. Also, coffee/tea accounts for a small percentage of income and
therefore a change in price doesn’t make much difference to overall
demand.With inelastic demand, a change in price causes relatively large change in
the price.
Inelastic supply. In the short term, the supply of coffee and tea is
inelastic. If price rises, farmers can’t respond by increasing supply overnight. You
have to clear the ground and plant more coffee plants. It will take 3-5 years
before new coffee plants start to produce beans. Therefore, there is a big delay in
responding to changing prices.

Global market. In recent years, the number of countries producing coffee has
increased. Traditional producers like Colombia have faced increased competition
from new countries seeking to enter the market. More countries make it harder
for coffee producers to influence prices through the use of minimum prices and
buffer stock schemes.
Transportation costs.There are many factors which influence market
values and farmer incomes. Aside from the big picture of world supply and
demand economics, transportation costs are the most significant factor. But
transportation costs involve much more than the railroad tariff or contract rate to
move a commodity from one point to another. The availability of equipment,
power, crews, along with prevailing transportation logistics, will greatly impact
total transportation costs on a producer’s bottom line.
Water scarcity exacerbates food insecurity: compounding food insecurity
is water scarcity in the locations that need it most. Note that water supply does
not coincide with regional distribution of the world’s population. Water-stressed
and water-scarce countries are defined as those with less , respectively, of
available water per capita. Some 30 countries already face water shortage
Generally above are the reasons why the price of agricultural product
fluctuating in local market and international market.Price fluctuation is a
multifaceted problem attributed to various factors which, when combined,
culminate in dangerous consequences for the most vulnerable3
 REFERENCE
FAO. 2001. Global forest resources assessment 2000. Forestry Paper No. 140.
Rome.
FAO. 2003. World agriculture: towards 2015/1030. A FAO Perspective. Bruinsma,
J. (ed). Rome and London, Food and Agricultural Organization of the United
Nations and Earthscan. 432 pp
FAO. 2006b. Global forest resources assessment 2005. Forestry Paper No. 147.
Food and Agriculture Organization of United Nations, Rome.