Lecture No.

AGRICULTURAL MARKETING:

Concept and Definition:

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, such as textiles, from the farms to the final consumers, and the effects of such operations on
farmers, middlemen and consumers. This definition does not include the input side of agriculture.

Agricultural marketing is the study of all the activities, agencies and policies involved in the procurement
of farm inputs by the farmers and the movement of agricultural products from the farms to the
consumers. The agricultural marketing system is a link between the farm and the non-farm sectors. It
includes the organization of agricultural raw materials supply to processing industries, the assessment of
demand for farm inputs and raw materials, and the policy relating to the marketing of farm products
and inputs.

According to the National Commission on Agriculture (XII Report), agricultural marketing is a process
which starts with a decision to produce a saleable farm commodity, and it involves all the aspects of
market structure or system, both functional.

and institutional, based on technical and economic considerations, and includes pre-and post-harvest
operations, assembling, grading, storage, transportation and distribution.

Objectives of the Study:

A study of the agricultural marketing system is necessary to an understanding of the complexities
involved and the identification of bottlenecks with a view to providing efficient services in the transfer of
farm products and inputs from producers to consumers. An efficient marketing system minimizes costs,
and benefits all the sections of the society.

The expectations from the system vary from group to group; and, generally, the objectives are in
conflict. The efficiency and success of the system depends on how best these conflicting objectives are
reconciled.

Producers:

Producer-farmers want the marketing system to purchase their produce without loss of time and
provide the maximum share in the consumer's rupee. They want the maximum possible price for their
surplus produce from the system. Similarly, they want the system to syupply them the inputs at the
lowest possible price.

Consumers:

The consumers of agricultural products are interested in a marketing system that can provide food and
other items in the quantity and of the quality required by them at the lowest possible price. However,
this objective of marketing for consumers is contrary to

the objective of marketing for the farmer - producers.

Market Middlemen and Traders:

Market middlemen and traders are interested in a marketing system that provides them a steady and
increasing income from the purchase and sale of agricultural commodities. This objective of market
middlemen may be achieved by purchasing the agricultural products from the farmers at low prices and
selling them to consumers at high prices.
Government:

The objectives and expectations of all the three groups of society-producers, consumers and market
middlemen conflict with one another. All three groups are indispensable to society. The government has
to act as a watchdog to safeguard the interests of all the groups associated in marketing. It tries to
provide the maximum share to the producer in the consumer's rupee; food of the required quality to
consumers at the lowest possible price; and enough margin to market middlemen so that they may
remain in the trade and not think of going out of trade and jeopardize the whole marketing mechanism.
Thus, the government wants the marketing system should be such as may bring about the overall
welfare to all the segments of society.

Scope and Subject Matter of Agricultural Marketing:

Agricultural marketing in a broader sense is concerned with the marketing of farm products produced by
farmers and of farm inputs required by them in the production of these farm products. Thus, the subject
of agricultural marketing 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. Farming
becomes market-oriented. 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
importance of farm inputs-improved seeds, fertilizers, insecticides and pesticides, farm machinery,
implements and credit-in the production of farm products has increased in recent years. The new
agricultural technology is input-responsive. Thus, the scope of agricultural marketing must include both
product marketing and input marketing. In this book, the subject matter of agricultural marketing has
been dealt with; both from the theoretical and practical points of view. It covers what the system is,
how it functions, and how the given method or techniques may be modified to get the maximum
benefits.

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.

Difference in Marketing of Agricultural and Manufactured Goods:

The marketing of agricultural commodities is different from the marketing of manufactured
commodities because of the special characteristics of the agricultural sector (demand and supply) which
have a bearing on marketing. Because of these characteristics, the subject of agricultural marketing has
been treated as a separate discipline and this fact makes the subject somewhat complicated. These
special characteristics of the agricultural sector affect the supply and demand of agricultural products in
a manner different from that governing the supply and demand of manufactured commodities. The
special characteristics which the agricultural sector possesses, and which are different from those of the
manufactured sector, are:

1. Perishability of the Product:

Most farm products are perishable in nature; but the period of their perishability varies from a few
hours to a few months. To a large extent, the marketing of farm products is virtually a race with death
and decay. Their perishability makes it almost impossible for producers to fix the reserve price for their
farm-grown products. The extent of perishability of farm products may be reduced by the processing
function; but they cannot be made non-perishable like manufactured products. Nor can their supply be
made regular.

2. Seasonality of Production:

Farm products are produced in a particular season; they cannot be produced throughout the year. In the
harvest season, prices fall. But the supply of manufactured products can be adjusted or made uniform
throughout the year. Their prices therefore remain almost the same throughout the year.

3. Bulkiness of Products:

The characteristic of bulkiness of most farm products makes their transportation and storage difficult
and expensive. This fact also restricts the location of production to somewhere near the place of
consumption or processing. The price spread in bulky products is higher because of the higher costs of
transportation and storage.

4. Variation in Quality of Products:

There is a large variation in the quality of agricultural products, which makes their grading and
standardization somewhat difficult. There is no such problem in manufactured goods, for they are
products of uniform quality.

5. Irregular Supply of Agricultural Products:

The supply of agricultural products is uncertain and irregular because of the dependence of agricultural
production on natural conditions. With the varying supply, the demand remaining almost constant, the
prices of agricultural products fluctuate substantially.

6. Small Size of Holdings and Scattered Production:

Farm products are produced throughout the length and breadth of the country and most of the
producers are of small size. This makes the estimation of supply difficult and creates problems in
marketing.

7. Processing:

Most of the farm products have to be processed before their consumption by the ultimate consumers.
This processing function increases the price spread of agricultural commodities. Processing firms enjoy
the advantage of monopsony, oligopsony or duopsony in the market. This situation creates disincentives
for the producers and may have an adverse effect on production in the next year.

IMPORTANCE OF AGRICULTURAL MARKETING

Agricultural marketing plays an important role not only in stimulating production and consumption, but
in accelerating the pace of economic development. Its dynamic functions are of primary importance in
promoting economic development. For this reason, it has been described as the most important
multiplier of agricultural development.
The importance of agricultural marketing in economic development has been indicated in the
paragraphs that follow.

Optimization of Resource use and Output Management:

An efficient agricultural marketing system leads to the optimization of resource use and output
management. An efficient marketing system can also contribute to an increase in the marketable surplus
by scaling down the losses arising out of nefficient processing. storage and transportation. A well-
designed system of marketing can effectively distribute the available stock of modern inputs, and
thereby sustain a faster rate of growth in the agricultural sector.

Increase in Farm Income

An efficient marketing system ensures higher levels of income for the farmers by reducing the number
of middlemen or by restricting the commission on marketing services and the malpractices adopted by
them in the marketing of farm products. An efficient system guarantees the farmers better prices for
farm products and induces them to invest their surpluses in the purchase of modern inputs so that
productivity and production may increase. This again results in an increase in the marketed surplus and
income of the farmers. If the producer does not have an easily accessible market-outlet where he can
sell his surplus produce, he has little incentive to produce more. The need for providing adequate
incentives for increased production is, therefore, very important, and this can be made possible only by
streamlining the marketing system.

Widening of Markets:

A well-knit marketing system widens the market for the products by taking them to remote corners both
within and outside the country, i.e., to areas far away from the production points. The widening of the
market helps in increasing the demand on a continuous basis, and thereby guarantees a higher income
to the producer.

Growth of Agro-based Industries:

An improved and efficient system of agricultural marketing helps in the growth of agro- based industries
and stimulates the overall development process of the economy. Many industries depend on agriculture
for the supply of raw materials.

Price Signals:

An efficient marketing system helps the farmers in planning their production in accordance with the
needs of the economy. This work is carried out through price signals.

Adoption and Spread of New Technology

The marketing system helps the farmers in the adoption of new scientific and technical knowledge. New
technology requires higher investment and farmers would invest only if they are assured of market
clearance.

Employment

The marketing system provides employment to millions of persons engaged in various activities, such as
packaging, transportation, storage and processing. Persons like commission agents, brokers, traders,
retailers, weighmen, hamals, packagers and regulating staff are directly employed in the marketing
system. This apart, several others find employment in supplying goods and services required by the
marketing system.

Addition to National Income:

Marketing activities add value to the product thereby increasing the nation's gross national product and
net national product.

Better Living:
The marketing system is essential for the success of the development programmes which are designed
to uplift the population as a whole. Any plan of economic development that aims at diminishing the
poverty of the agricultural population, reducing consumer food prices, earning more foreign exchange
or eliminating economic waste has, therefore, to pay special attention to the development of an
efficient marketing for food and agricultural products.

Creation of Utility:

Marketing is productive, and is as necessary as the farm production. It is, in fact, a part of production
itself, for production is complete only when the product reaches a place in the form and at the time
required by the consumers. Marketing adds cost to the product;

but, at the same time, it adds utilities to the product. The following four types of utilities of the product
are created by marketing: 20-23

(a) Form Utility: The processing function adds form utility to the product by changing the raw material
into a finished form. With this change, the product becomes more useful than it is in the form in which it
is produced by the farmer. For example, through processing, oilseeds are converted into oil, sugarcane
into sugar, cotton into cloth and wheat into flour and bread. The processed forms are more useful than
the original raw materials.

(b) Place Utility: The transportation function adds place utility to products by shifting them to a place of
need from the place of plenty. Products command higher prices at the place of need than at the place of
production because of the increased utility of the product.

(c) Time Utility: The storage function adds time utility to the products by making them available at the
time when they are needed.

(d) Possession Utility: The marketing function of buying and selling helps in the transfer of ownership
from one person to another. Products are transferred through marketing to persons having a higher
utility from persons having a low utility.