AGRICULTURAL

MARKETING
 National Commission on Agriculture defines Agricultural
Marketing as a process that starts with a decision to
produce a saleable farm commodity

 It involves all aspects of the market structure of system,

both functional and institutional, based on technical and
economic considerations

 It includes pre- and post- harvest operations, assembling,

grading, storage, transportation and distribution
Definition of Indian Council of Agricultural
research on Agricultural Marketing

It is the involvement of three important functions

namely assembling (concentration), preparation for
consumption (processing) and Distribution
Marketable surplus
 Marketable surplus is a surplus that is available for
sale after meeting

 Family needs
 Seed requirement
 Gifts to relatives and friends
 In case of food grains, the surpluses are generally
low

 They vary from zero (for small and marginal

farmers) to 70-80 per cent (for large farmers)
Marginal farmers and Small Farmers

 “Marginal Farmer” means a farmer cultivating (as

owner or tenant) agricultural land up to 1 hectare
(2.5 acres)

 “Small Farmer” means a farmer cultivating (as

owner or tenant) agricultural land of more than 1
hectare and up to 2 hectares (5 acres)
Large farmers
 “Large Farmer” means farmers owning more than 5
acres of land under farming or agricultural land.
 In general Marketable surpluses in Food grains are in
the range of 45-50 per cent

 In case of cash crops and in those commodities that

are used as raw materials in Industries, surpluses are
to the tune of 80-100 per cent

 In fruits and vegetables that are grown on a

commercial scale, the surpluses are above 90 per cent
Types of Agricultural Markets
 Primary Markets

 Secondary Markets

 Terminal Markets
Primary Markets
 Primary markets are periodical markets locally
called shandies or haats

 They are generally held in an open place once a

week on a particular day

 Commodities produced in the surrounding villages

are sold in these markets
 Besides agricultural produce, a number of other
articles required by rural folks are sold in these
markets

 Eg. Locally made inputs such as threshers,

winnovers etc and consumables such as pulses, salt,
jaggery, oil, fruits and vegetables, spices, clothes
etc are sold
Salient features of this market
 Convenient place: As the producers and buyers are
from nearby places, the market is a convenient
place for them to transact in. Problems of
transportaion and costs are minimized

 Cash payment: Village producers receive

immediate payment after the sale of their produce
Secondary Markets
 They are regular wholesale markets and are known
as “mandis” or “gunjs”.

 They are situated at district headquarters and towns

 The quantum of commodities transacted is in bulk

 Large quantities of commodities arrive from other markets
into these markets

 Middlemen, market agents, weighing men and commission

agents are involved in the marketing system

 Facilities like grading, packing, warehousing, loading,

transportation, telephone and banking facilities are available

 There are about 2500 secondary markets in India

Terminal Markets
 In terminal markets, the produce is either finally
disposed of to the consumer or to the processor or
assembled for export

 The terminal markets are located in highly

populated cities such as Mumbai, Chennai, Delhi,
Kolkata, Banglore etc.
Functions of terminal market committee

 Assembling of goods
 Grading
 Warehousing
 Distribution for processing
 Financing and risk bearing
 Price maintenance
 Commodity exchange
Assembling of goods
 Products from different local and primary markets
are assembled here so that they can be transported
economically from one market to another
Grading
 The produce is graded based on the quality and
specifications of different types of consumer
groups
Warehousing
 Agricultural produce can be stored in state
warehousing, central warehousing and FCI
godowns

 In case, the capacity of godowns is insufficent,

private godowns are rented by the market
committee to store the available marketable surplus
Distribution for Processing
 The marketable surplus is distributed to mill
owners and processors who further process it and
sell it to retailers or consumers
Financing and Risk bearing
 The marketing committee undertakes the functions
of financing and risk bearing

 It buys the produce that is not covered under the

minimum support price on auction basis and may
sell it in future when the prices are fair in the
market
Price maintenance
 The terminal-market committee, being agents of
the Government, play an important role in
stabilizing prices in varying demand-supply
conditions
Commodity exchange
 Commodity exchange is at the heart of terminal
markets

 It is an independent organization of dealers in

certain commodities

 It does not make purchases and sales on its own, but

provides a place where the goods can be bought and
sold economically and without any discrepancies
 The activities are carried out under certain set rules
and regulations and under the supervision of the
authorities of the exchange
Other Important classification of Agricultural
Markets

 On the basis of frequency with which they are held

 On the basis of types of products traded
 On the basis of volume of transactions at a time
 On the basis of nature of transaction
 On the basis of the number of commodities
On the basis of frequency with which they are held

Markets can be classified into

 daily markets

 Weekly markets

 Bi-weekly markets

 Monthly markets
On the basis of types of products traded

 Grain Markets
 Cotton Markets
 Fish Markets
 Fruits and Vegetable Markets etc
On the basis of volume of transaction at a time

 Wholesale markets : The market where commodities are

bought and sold in large lots or in bulk

 Retail markets:
 The market in which commodities are bought by and sold
to the consumers as per their requirements.
 Transaction in these markets take place between retailers
and consumers.
 Retailers purchase the goods from wholesale markets and
sell them in small lots to the consumers in retail markets
On the basis of nature of transaction

 Spot or cash markets: Markets in which goods are

exchanged for money immediately after the sale

 Forward markets: These are markets in which the

purchase and sale of a commodity takes place at a
time, but the exchange of the commodity takes
place on some specified date in the future
On the basis of the number of commodities

 General Markets: Markets in which all types of

commodities, such as food grains, oil seeds, fibre
crops etc are bought and sold. These markets deal
in a large number of commodities.

 Specialized Markets : Markets in which

transactions take place only in one or two
commodities. Eg. Food grain markets, Vegetable
markets, Wool markets and cotton markets
Marketing system
 Agricultural Marketing system in India is
characterized by different markets, agencies and
channels

 The objectives of an efficient marketing system are

to address the concerns of farmers and consumers
Objectives of an efficient marketing system

 To enable farmers to sell products at reasonable

prices

 To make available all products of farm origin to

consumers at reasonable price without
compromising on the quality of the produce
Agricultural Markets and Agents
Classification of Markets

Primary Market
Secondary Market
Terminal or Export Market
Agents involved in Primary Market
 Producer, the village or itinerary merchant, pre-
harvest contractors, commission agents, transport
agents etc
Agents involved in Secondary Market

 Processing and manufacturing agents are the

additional functionaries

 Financing agents such as shroffs(money changer),

banks and co-operatives
Terminal or export market
 Commercial analyst and shipping agent
Middlemen involved in the marketing of
agricultural produce

 Landlords

 Village beoparis

 Mobile beoparis

 Commission agent
Landlords
 Landlords are big cultivators and buy surplus
produce from farmers and sell the same in mandis
Village beoparis
 They set up a shop in the village and sell
consumption goods

 They purchase produce from farmers and may act

as financiers to other poor farmers

 They visit neighbouring markets to know the

prevailing prices and they sell the produce in
nearby markets or in a village
Mobile beoparis
 They do not have shops in the village

 They move from village to village and purchase the

produce from farmers

 They transport the produce to the nearby markets

Commission agent
 Commission agent is a person who buys
agricultural produce and makes the payment on
behalf of his principal trader

 He keeps the goods in his custody and delivers it to

the principal trader in due course

 He charges commission as per the agreement

between him and the trader
Three types of commission agents operate at the
mandi level

 Kachcha arthatias

 Pucca arthatias

 Dalals
Kcha arhatias
 They are commission agents and they act for the sellers
including farmers.

 Sometimes they provide money to farmers on the condition

that the produce will be sold to them

 The Kachcha arhatia has limited financial resources and his

sphere of activity is purely local

 His commission is known as the arhat and is about 2 per cent

of the value of the procedure
Pucca arhatias
 They are wholesalers and big commission agents

 They act on behalf of traders as well as farmers

 They are processors of rice, oilseeds and dealers in

cotton/Jute etc.

 They advance money to the farmers and earn

commission on sales of produce as well as on the
advance given to farmers
Dalals
 They link buyers and sellers and earn commission
Marketing Channels
 Government Channel

 Co-operative Channel

 Private Channel
Government Channel
Producer

Government Department

Consumer
 Government channel is used mainly to protect farmers as
well as domestic consumers

 In case of food grains such as rice, wheat and sugar, the

Government purchases the produce from farmers and
supplies it to consumers through the Public Distribution
System

 When farmers cannot get proper price for their produce, the
Government announces support price and buys from them
Co-operative Channel
Producer

Co-operatives

Consumer
 The co-operative channel is used partially along
with the private channel in the case of important
fruit crops such as grapes, pomegranates, bananas
and oranges
Private Channel
Producer

Village merchant

Wholesaler

Commission agent (Dalal)

Retailer

Consumer
 In the private channel, too many intermediaries result
in high costs
 The commodities become expensive for the final
consumer and this reduces the producer’s share in
consumer’s prices
 Nearly 60-70 per cent of the agricultural produce is
sold through this channel
 In some fruit crops, in addition to the above, the pre-
harvest contractor takes ownership of fruit gardens
while fruits are still on the trees
Commercialization
 Commercialization is a multi-faceted phenomenon
with its orientation depending on the technology,
policies and the location specific objective
conditions

 It refers to Production with a market orientation

 The transformation in agriculture during the last six

decades suggests that our agriculture has acquired
commercial characteristics on a significant scale
 The commercialization process faced several
constraints in the past and many of these
constraints are relevant even today
1.Marketing constraints
 An inefficient agricultural marketing system has been a
major impediment in the growth of marketed surplus and in
the realization of remunerative prices by farmers

 In spite of best efforts by the state, weakness still persist

 Some of the maladies that affect agricultural marketing are

the presence of unduly large number of middlemen, long
marketing channels, malpractices by the intermediaries,
information gap due to the lack of free and effective flow of
information
2.Input-supply constraints
 The supply of inputs in adequate quantities and
within time is essential for the success of
commercial projects

 For example, to establish plantations successfully,

supply of quality seedlings is a pre-requisite
 Water is a major constraint for undertaking land-
based commercial ventures
3.Technology Constraints
 The lack of suitable technology and non adoption
of the available technology pose severe constraints

 Technology is capable of easing some of the

constraints

 Eg. Tissue culture can solve the problem of non-

availability of quality seedlings in adequate number
 Water saving technologies such as drip/Sprinkler
irrigation can ease the water shortage in rain- fed
areas to a large extent

 Recent advances in Information technology can

bridge the information gaps in the agricultural
marketing system
4.Infrastructure constraints
 Constraints on account of adequate infrastructure
 Lack of roads, cold storage facilities, transport
(including refrigerated transport) facilities, air
cargo, pre-cooling etc. are some of the problems
plaguing the system
 Inadequate post-harvest facilities relating to
processing, grading, packing and erratic supply of
electricity etc are the major impediments

 Delays in electrification are yet another important

constraint
5.Institutional Constraints
 The present level of the exploitation of agro-based hi-tech
potential in the country has been observed to be very low

 The supply of credit is inadequate to meet the demand

notwithstanding the significant role played by NABARD
and credit institutions

 The lack of awareness among entrprenuers, bank personnel

and other implementing authorities about the relevance of
hi-tech facilities and the absence of effective co-ordination
among different agencies involves are the major constraints
 The existing provisions of the Land Ceiling Act in
the country impede large scale cultivation

 Most hi-tech and commercial ventures require large

extent of area under cultivation to achieve the
break-even point
6.Socio-economic constraints
 The socio-economic profile of our agriculturists are
not always conducive for adoption of new
technology

 As the green revolution technology was scale

neutral, it could enlist the participation of most of
the farmers sooner or later irrespective of farm size
 However, the new commercial agricultural ventures
are capital intensive, require in-depth knowledge
and involve high degree of risk and hence are not
amenable for less educated individual farmers