Chapter - 3

Agricultural Marketing
Meaning
The term agricultural marketing is composed of two words- agriculture and marketing.
Agriculture, generally means growing and/or raising of crops and livestock while, marketing
encompasses a series of activities involved in moving the goods from the point of production
to point of consumption.

Definition
 Human activity directed at satisfying the needs and wants through exchange process
(Phillip Kotler).

 Agricultural marketing is a process which starts with a decision to produce a saleable farm
commodity, involves all the aspects of market structure or system, both financial and
institutional, based on technical and economic considerations, and includes pre- and post-
harvest operations, assembling, grading, storage, transportation and distribution (National
Commission on Agriculture, 1976).

Organization and functions of agricultural marketing

Organization of agricultural markets
In order to know more about agricultural marketing, let us discuss how agricultural marketing
activities are organized. This calls for a clear understanding of types, structure and
functionaries of agricultural markets.

Classification of Markets
The various basis on which agricultural markets may be classified are:
1. Frequency
On the basis of the frequency at which the markets are held, they can be classified as daily,
weekly, fortnightly, etc.
2. Types of products traded
Different markets deal with different products. While some might deal with all products, a few
markets might specialize in some products. On the basis of the type of product traded, they
can be named as Grain markets, Cotton markets, Fruit & Vegetable markets, etc. It is relevant
to quote ‘gur mandi, noon mandi etc.’ in Ludhiana and Amritsar. They specialize in one single
commodity only, although now-a-days they are dealing with other products also.
3. Types of transaction
On the basis of their transactions, the agricultural markets can be classified as spot and forward
markets. The spot markets undertake those transactions only in which the exchange is affected
at the current prices; while in the forward markets, the commodities are traded for future
delivery. The future markets resemble with the future trading system of stock market.
4. Area Served
Depending upon the type of area served, the agricultural markets can be classified as Local,
Central, etc. The local markets cater to the needs of only the local population, while the central
markets are located in the city center and cater to the needs of the entire city or the region. The
latter are much bigger in size and area of operation.

Other bases of classification

It may, however, be noted that there is no rigidity in these classifications and one classification
overlaps the other. However, for our discussion, let us classify agricultural markets into
primary, secondary and terminal markets.
(1) Primary Markets
These are periodical markets locally known as ‘Haats’. They are generally held once or twice
a week. The days on which these markets meet are fixed so that traders can visit the area. They
are generally held in the open and along roadsides in important or centrally situated localities.
These markets are situated in the producing areas and commodities produced in the
surrounding tracts are mainly sold in them. A part of the produce is purchased by the small
retailers who, further, sell it to the non-farm rural population. During the lean season, a part of
the produce might be sold back to the cultivators themselves. The rest of the produce is
purchased by intermediaries and finds its way to the wholesale market. Besides agricultural
produce, a number of other articles required by rural folk such as salt, tobacco, oils, gur, fruits
and vegetables, spices, cloth, hosiery products and ornaments of cheap metals are also sold in
these markets.
(2) Secondary markets
These markets, also known as ‘Mandis’, are regular wholesale markets and provide a
permanent place for daily transactions. The work starts in them early morning and continues
till all transactions are over. These markets are generally situated in the towns, districts, and
important trade centres. Usually they are situated near railway stations. Shops or ‘Arhats’ are
built in these markets. Postal, Banking and telephone facilities are available at such places.
(3) Terminal Markets
A terminal market is the place where the produce is either finally disposed of to the consumer
or to the processor or assembled for exports. Such markets are usually situated in metropolitan
cities like Delhi, Bombay, Madras and Calcutta etc. In these markets, merchants are well
organized and use modern marketing methods.

Market functionaries
Beginning from the agriculturists, down to the final consumer, one can find a long chain of
different functionaries. Let us discuss these functionaries under two heads viz.
i) Functionaries at village level
ii) Functionaries at Mandi level

(1) Functionaries at village level

Some important functionaries operating at village level are:
a) Big Cultivators;
b) Village Merchants; and
c) Itinerant Traders.
(a) Big Cultivators
Big cultivators with large holdings and substantial marketable surplus constitute the first type
of market functionaries operating at village level. They also own tractor, carts and other means
of transportation.
(b) Village Merchants
They are known by different names in different parts of India such as ‘Beopari’, ‘Baniya’,
‘Sahukar’, ‘Paikars’, ‘Farias’, etc.
(c) Itinerant Traders
They are petty merchants who move between villages and purchase the produce for cultivator.
They either own some animal such as pony or possess carts to transport the produce to the
nearby market.

(2) Functionaries at mandi level

Important functionaries at Mandi level are:
a) Arthatias;

b) Brokers; and

c) Co-operative Marketing Societies.

a) Arhatias
The most important functionary to be found in bid mandis are ‘Arhatias’ who include both
buyers on commission and outright buyers.
b) Dalal (Brokers)
Their main function is to bring buyers and sellers together. They differ from the Arhatias in
the sense that they have no fixed business of their own. They charge commission from the
buyers and the sellers.
c) Co-operative Marketing Societies
These have been established under the integrated Rural Credit and Marketing Scheme initiated
under the Second Five-year Plan. The main function of these societies is to sell the product of
their members. They also undertake outright purchases, provide storage facilities for storage
and grading, and thus save cultivators from exploitation by traders, and help the farmers in
securing a fair price for their produce.

Agricultural Marketing Functions

Agricultural marketing functions are many and varied. The part played by each function varies
widely as regards to the specific goods and services. It may further be noted that these
functions are indispensable regardless of the institution or agency which performs them or the
commodity in connection with which they are performed. These functions are closely related
to each other and cannot be isolated from one another. Accordingly, the functions of
agricultural marketing can be classified into three broad categories:
1. Exchange functions;
2. Physical functions; and
3. Facilitative functions.

1. Exchange Functions
Exchange functions are considered to be the most important of all the functions of agricultural
marketing. These mainly include functions related to buying and selling. Buying and selling
are complementary to each other and one cannot take place without the other. Buying function
is largely one of seeking the sources of supply, assembling of products and activities which
are associated with the purchase of goods, raw materials-etc. Selling is the process which
stimulates demand or desire, finds the buyer, advises the buyer, and negotiates with him to
bring about a transfer of title.

2. Physical Functions
These functions relate to the physical handling of agriculture produce either in moving it from
one place to another or in storing it over a period of time. Agriculture produce has to be moved
from threshing floors to the consuming areas, because it is not consumed at the place of its
production.

3. Facilitative functions
As the very name of these functions implies, they involve neither transfer of title to goods nor
handling of the product but help in the smooth discharge of the above functions. The function
of classification and grading helps in classification and sorting out of commodities according
to size, quality colour, weight, etc. This makes the determination of prices easy and thereby
assumes a fair return to the producer, on the one hand, and good quality produce to the
consumer, on the other, without any trouble to either. Then, there is always a time lag between
the assembling of commodities and their sale in the consuming markets. During this period,
somebody’s money remains tied up in the stocks. This creates the problem of finance. Further,
the growing vastness between the place of production and place of consumption has made the
function of market information invaluable. This function involves activities of collecting,
interpreting and disseminating market news to various agencies including producers residing
in the interiors of the country. This helps the government in formulating policies and plans of
production and marketing of good. Lastly, no business can be done without undertaking the
inherent risk which may be caused either due to a decline in price, bad debts or deterioration
of the produce itself by fire, flood etc. These risks have to be borne by someone in the channel.
Physical risks may be covered under insurance while risks stemming from price fluctuations
are handled through the hedging operation.

Classification of agricultural products

Agricultural products can be classified into various categories on the following basis:

(1) On the basis of season

Agricultural products can be classified into two categories on the basis or seasons; Rabi and
Kharif.
(i) Rabi: Sowing is done from October to December and harvesting season is from March to
May. The various Rabi crops include wheat, gram, peas, potatoes and barley.
(ii) Kharif: Sowing for the crops is done from April to July and harvesting is done from
September to December. The various crops of Kharif season include rice, sugarcane,
jowar, jute, bajra, maize, cotton and groundnut.

(2) On the basis of encashability

Agricultural products can be divided into two categories-food crops and cash crops. The food
crops refer to rice, wheat, barley, maize etc. while cash crops or commercial crops include tea,
coffee, rubber, oil seeds, tobacco etc.

(3) On the basis of perishability

Agricultural products can be classified into two categories perishable and nonperishable
products. Generally, all the vegetables fall in the category of perishable agricultural products
as they survive only for a few days while cereals and pulses can survive for years and hence
can be classified in the category of non-perishable agricultural products.

(4) On the basis of processing

Some products require processing before they are finally consumed while others need no
processing at all. Sugarcane, cotton, jute, wheat, rice etc. require processing but these can not
be concerned vegetables, milk fishes etc. do not require any processing.

Market Structure and Performance

Marketing Structure
The term structure refers to something that has organization and dimension-shape, size and
design; and which is evolved for the purpose of performing a function. The term market
structure refers to the size and design of the market. It also includes the manner of the
operation of the market. Some of the expressions describing the market structure are:
 1. Market structure refers to those organization characteristics of a market which influence
the nature of competition and pricing, and affect the conduct of business firms.
2. Market structure refers to those characteristics of the market which affects the traders’
behaviour and their performances.
3. Market structure is the formal organization of the functional activity of a marketing
institute.

An understanding and knowledge of the market structure is essential to identify the

imperfections in the performance of a market

Components of market structure

The components of the market structure, which together determine the conduct and
performance of the market are;

1. Concentration of market power

The concentration of market power is an important element determining the nature of

competition and thus market conduct and performance. This is measures by the number and
size of the firms existing in the market. The extent of concentration represents the control of
an individual firm or a group of firms over the buying and selling of the produce. A high degree
of market concentration restricts the movement of goods between buyers and sellers at fair and
competitive prices, and creates an oligopoly or oligopsony situation in the market.

2. Degree of product differentiation

Whether or not products are homogeneous affects the market structure. If the products are
homogenous, the price variations in the market will not be wide. When products are
heterogeneous, the firms have the tendency to charge different prices for their products.

3. Conditions for entry of firms in the market

Another dimension of the market structure is the restriction, if any, on the entry of firms in
the market. Sometimes, a few big firms do not allow new firms to enter the market or make
their entry difficult by their dominance in the market.There may also be some government
restrictions on the entry of firms.

4. Flow of market information

A well-organized market intelligence information system helps all the buyers and sellers to
freely interact with one another in arriving at prices and striking deals.

5. Degree of integration
The behaviour of an integrated market will be different from that of a market where there is
no or less integration either among the firms or of their activities. Firms plan their strategies
in respect of the methods to be employed in determining prices, increasing sales, co-ordinating
with competing firms and adopting predatory practices against the rivals or potential entrants.

Market performance
The term market conduct refers to the patterns of behaviour of firms, specially in relation to
the pricing and their practices in adopting and adjusting to the market in which they function.

Specifically, market conduct includes;

• Market sharing and pricing setting policies

• Policies aimed at coercing rivals, and
• Policies towards specification of the quality of products.

The term market performance refers to the economic results that flow from the industry as
each firm pursues its particular line of conduct.

Critaria for measuring market performance

Society has to decide critaria for the satisfactory market performance. Some of the critaria for
measuring market performance and of the efficiency of the market structure are as follows;

1. Efficiency in the use of resources, including real cost of performing various marketing
functions
2. The existence of monopoly or monopoly profits, including the relationship of margins with
the average cost of performing various functions
3. Dynamic progressiveness of the system in adjusting the size and number of the firm in
relation to the volume of business, in adopting technological innovations and in finding
and/or inventing the new form of product to maximize the social welfare.
4. Whether or not a system aggravates the problem of inequalities in inter-personal,
interregional or inter-group incomes. For example, inequalities increase under the
following situations:

A. A market intermediary may pocket a return greater than its real contribution to the
national product.
B. Small farmers are discriminated and are offered a lower return because of the low
quantum of surplus.

The market structure has always to keep on adjusting to changing environment if it has to
satisfy social goals. For a satisfactory market performance, the market structure should keep
pace with changes in 1) Production pattern, 2) Demand pattern, 3) costs and patterns of
marketing functions, and 4) technological changes in the industry.
Agricultural product processing
Description
Processing is defined as any activity that maintains or raises the quality or alters the physical
or chemical characteristics of a material or object, or adds value to it in any way whatsoever.
Processing can be as simple and quick as washing vegetables or it can be as involved and
complicated as making cheese or wine. Cooking, canning, smoking and drying are among the
various methods used in the processing industry.
Many farm products must be processed before they can be used by the general public or by
farmers. For example, most fruits and vegetables are cleaned, graded and stored or processed
before they enter the retail market. Similarly, many rations are cleaned, dried, ground and
mixed before they are fed to livestock.

Many agricultural products are perishable and are only suitable for consumption over a short
period of time. Processing extends the season during which they are available. For example,
the conversion of berries and fruit into jam, jelly and juice means consumers can enjoy these
products year-round.

On-farm processing is done to prepare products for sale, to make value-added products to sell,
and to prepare feed for livestock. On-farm processing also includes the preparation of growing
media for greenhouse and mushroom production and for composting of farm wastes.
Processing operations may be carried out continuously or intermittently.

Wastes generated during processing operations are not considered to be agricultural wastes
but industrial wastes, and their discharge must therefore be governed and regulated under the
Environmental Management Act.

Activities and Operations

Equipment Operation

On-farm processing equipment may be operated 24 hours a day. All on-farm processing
equipment, machinery or other devices should be kept in good working condition and operated
according to manufacturers' recommendations.

On-Farm Processing and Product Preparation

On-farm processing and product preparation should be permitted for situations in which the
property on which the processing and preparation occurs includes a commodity or
commodities produced on the associated farm unit.

Materials Handling
Materials handling operations often include the following activities:

Cleaning. Cleaning of agricultural products can be accomplished by soaking or water

spraying or by using rotary drums, brush washers, shaker washers, or any combination thereof.
Washing. The Fresh Fruit and Vegetable Regulations under the Canada Agricultural
Products Act requires that products be prepared in a sanitary manner. They stipulate that
flumes and wash water used for processing are not stagnant or polluted, that only potable water
is used in the final rinsing of produce to remove any surface contamination before packing,
that the final rinse water if reused is used only in the initial washing or fluming of the produce,
and that the produce is handled with equipment that is cleaned regularly.

Sorting. Fruits and vegetables are sorted by colour, size and quality using screens, diverging
belts, roller sorters and weight sorters. Grains, nuts and seeds are cleaned and sorted by size,
shape, specific gravity and surface characteristics using screens, blowers, specific gravity
separators, centrifuges, cyclones and other similar equipment.

Separating. The most common types of equipment used for separating a variety of
agricultural products include cream separators, gravity separators and cyclones.

Grading. Farm products may be graded by colour, quality, shape and size.

Packaging. Farm products may be packaged individually, in groupings, or in bulk.

Conveying and transporting. Conveyors, elevators, augers, lift trucks and other types of
equipment are used to move materials and goods.

Size Reduction
A variety of size reduction operations are used to process agricultural products.

Cutting. Fruit and vegetables are cut in preparation for processing operations such as freezing
or canning.

Chopping or shearing. Forages such as corn and silage are typically chopped to optimize
the ensiling process.

Shredding. Some products are shredded to assist in mixing and drying operations.

Crushing. Some agricultural products are crushed for juice or oil extraction and to expedite
drying.

Grinding. Grinding and hammering of grains is a common practice in the preparation of

livestock feed.

Milling. Milling operations are used to produce flour or to separate fibres in crops such as
flax.
Mixing
The following agricultural materials and products are mixed in processing operations.

Livestock feed is mixed in batches or continuously with augers or paddles.

Fruits and vegetables are typically mixed in kettles or drums with paddles. Equipment using
variations of egg beaters is used for a variety of purposes as well.

Fertilizers and soils are mixed in batches or in continuous operations using augers, drums or
paddles.

Composting materials are mixed using front-end loaders, side-mounted or self-propelled

windrow turners, and in-vessel compost turners.

Drying

The following agricultural materials and products are often dried as part of broader processing
operations:

Grain is dried using batch, bin and continuous gravity flow dryers.

Hay can be dried using natural air for convection for smaller quantities or heated air if drying
must be completed before spoilage occurs.

Fruits, vegetables and associated wastes may be dried using vacuum ovens, rotary dryers, tray
or tunnel dryers, and freeze dryers.

Powders typically have excess moisture removed with spray dryers.

Heat Treatment

Heat is used to pasteurize milk and juice, to boil fruits and vegetables for vacuum or freeze
packaging, to steam or thermally sterilize canning equipment, and to fry or bake products for
retail use. Conduction, convection and radiation methods are widely used in processing
industries.

Cold Treatment

Many products are cooled to prolong shelf life. Various types of mechanical refrigeration
equipment and structures include dairy coolers, cold storages, freezers and controlled
atmosphere storages.

Chemical Treatment

Seed may be treated with fungicides and insecticides to improve resistance to decay during
storage or during early growth. Various chemical treatment products may be added to
processed fruit, vegetable, meat and dairy products to improve shelf life and appeal.
Biological Treatment

Biological treatments to enhance product shelf life or appeal may include aeration or
oxygenation. Fermentation may be used to produce specific products prior to marketing.

Retail Activities

The Agricultural Land Commission’s farm retail sales order specifies which retail activities
may be carried out on a farm within the Agriculture Land Reserve. Restrictions on sales of
products grown off the farm ‒ including the size of the retail area that can be used for off-farm
products ‒ are also specified.

Related Farm Practices

Other farm practices that pertain to product processing practices include, but are not limited
to, the following:

Farmstead Refuse

Refuse should be managed to keep farm premises neat and tidy and should be disposed of in
compliance with associated waste management legislation.

Storage of Farm Supplies and Products

Storage of containers and products is often required at product processing sites.

Transportation

Most processing operations require the transportation of inputs and finished products to and
from facilities.

Why We Process our Food Crops

 Processing helps to make food available even during the off-season.
 When food is processed it taste and look very attractive
 Processing helps in the durability of food crop products- when food crop is been
processed like in dehydration of a food crop, micro-organisms becomes absent
thereby preventing spoilage.
 Processing adds value to the agric produce.
 Processing helps in producing income to individual and foreign exchange to a
country
 It creates room for commercial agriculture, thereby promoting agricultural
activities.
 If we stand to process our food crop regularly, then more food will be in our food
reserve which is an aid in adaptation and mitigation of climate change.
 Processing provides raw materials for further studies and for industrial uses.
 Through processing some materials are produced (by-products) which can be used
for formulation of animal feed.
 The science of processing can aids in drugs and medicinal purposes
 Agric produce processing gives Income to a farmer and improve his standard of
living
 When a country process her food crops then exportation will be high, thereby
improving her foreign exchange earning
 Processing provides employment for individual and the masses
 Through agric processing of crops like sugarcane bio-fuel and power is produce
which is use for generation of farm or industrial power.
 If a processing factory is sited in a rural area, it creates development of that rural
areas.