UNIT I.

AGRICULTURAL MARKETING
Overview:

Agriculture has historically been one of the most vital sectors of the economy. The rising
trends in agricultural production have created new challenges in terms of finding a market for
surplus produce. Additionally, there is a requirement to respond to the challenges and opportunities
that global markets present in liberalized trade. The learners will be reoriented in this unit to respond
to market needs and consumer preferences in terms of the country's agricultural sector.

Learning Objectives:

At the end of the unit, I am able to:

1. Define agricultural marketing;
2. Familiarized with the functions and importance of agricultural marketing;
3. Solved agricultural marketing problems of developing countries.

Setting Up

Name: ____________________________________ ____ Date:________________

Course/Year/Section: _____________________

Directions: The following grid contains terms associated with agricultural marketing. Find
and encircle them. Look for them in all directions including backwards and diagonally.

A L P W Z R T S E C N E I D U F A R M O
Z Q E P E R S U A S I O B S G H J I K R
A G R I C U L T U R E P G D R T Y D I O
C A B N L O V E P G H O M E S D C E C M
D F G W V A D A L P O U R D T S C N B O
A B X V B N M U A S S T C E V P B T Y T
U T I L I T Y Y C U I D P M A E S I W I
S O V B N M R T E T A O Z A B R E F F O
Y A C M T J F H R A W M A T E R I A L S
R D P A P R O D U C S R U D B U A I A B
T C O R U P R I C I N G G S T A S N C B
N A R K M A R C O V E R T K E S T G I N
E S M E A R K E D R I A N M A I C B A S
T T O T G M A R K E T I N G S D E F G U
N E R O I N F O R M A T I O N N D A J E
O N H A I L E Y F R A N C I S C O N A I
C D A P U B L I C S E R V I C A G R O S
Lesson Proper

Marketing functions and functionaries

Agricultural marketing is, at its most basic level, the act of purchasing and selling agricultural
products. Marketing agricultural products was easy in the past, when the village economy was more
or less self-sufficient, as the farmer sold his produce directly to the consumer, either for cash or
barter. This includes all functions and services involved in moving commodities from producer to
consumer. It includes not only the physical movement to the desired location, but also the
preparation of the product in the desired form and quantity, and the availability of the product at the
desired time.

Marketing functions: In contemporary marketing, agricultural produce must pass through a series of
transfers or exchanges before it reaches the consumer. This is accomplished through the
performance of three critical marketing functions, namely

A. Assembling (Concentration) – Concentration refers to the operations involved in the

assembly and transportation of produce from the field to a central assembly area or market.
B. Preparation for consumption (processing) – Before the produce is taken to market, it may
be cleaned, graded, processed, and packaged by the farmer or village merchant. Some
processing is necessary to maintain the product's quality.
C. Distribution (Dispersion) – It entails the wholesale and retailing of goods at various points.
The distribution system's job is to match available supplies to existing demand through a
series of necessary adjustments and equalizing functions.
The following are the primary functions of agricultural marketing:

1. Assembling: Assembling is the process of gathering produce for sale in mandis or larger
markets. Assembling is classified into two types:
Combining smaller quantities of produce for ease of purchase, transportation, and
processing.

Assembling takes place during the distribution of finished goods. Wholesalers purchase from
a variety of processors in order to keep the commodities required by retailers on hand to
supply consumers.

2. Grading and Standardization : Grading is the process of classifying commodities according

to their size, variety, taste, quality, and color. Separation may or may not be in accordance
with established standards. Whereas standardization establishes the grades and prevents
them from varying seasonally and year to year. Grading and standardization are terms that
are frequently used interchangeably.
Grading and standardization have a number of advantages.

• The uniformity of markets is ensured.

• Bulk storage of similar-grade products is possible.
 • Market values are more readily discernible.
• Without prior examination, commodities can be purchased and sold.
Standardization establishes a foundation for market reporting and advertising.

3. Processing : The term "processing" refers to the process of transforming farm produce into
a more consumable state. For example, converting wheat into floors, making butter and ghee
from milk, and hulling paddy to make rice. Processing confers utility on the form.
Advantages:

• Excess produce can be preserved.

• Reduces the amount of work done at home

4. Transportation: Transportation is the physical movement of goods from the point of

production to the final consumer. Transportation contributes to the utility of a location.
Transportation occurs via a variety of modes, including road, rail, air, and water.

5. Storage : Storage is the process of keeping produce from the time of production until it is
consumed. Storage enables the creation of time utility. Storage aids in the distribution of
market supply. Certain products can be stored for a short period of time, while fresh fruits
and vegetables require refrigeration.

6. Packaging: Packaging is the process of packing or covering a product in such a way that it is
most marketable in terms of size and pattern. Packaging's objectives are as follows:
• to facilitate product handling,
• to reduce storage and marketing costs,
• to avoid product loss due to deterioration and rob, and
• to make products more appealing.

7. Distributing: It is concerned with the distribution, retailing, and marketing of produce.

Distribution connects wholesalers and a large number of consumers.

Marketing functionaries

The exchange of produce or goods occurs via a network of middlemen or functionaries (agencies).

In a primary market, the main functionaries are the producer, the village, or itinerary merchant, pre
harvest contractors, commission agents, transport agents etc.

All primary market functionaries are involved in the secondary market, as well as processing and
manufacturing agents. Agents of financing, such as shroffs, banks, and co-operatives, also participate.

The commercial analyst and shipping agent are also involved in the transfer of goods at the terminal
or export market.
Each functionary has their own configuration. They may be individuals, partnerships, or co-
operatives who buy and sell on an immediate and future basis at a price determined by market forces.
Each functionary provides a service to the marketing process while also earning a varying profit
margin and taking on risk in the process.

Agricultural Marketing: Concept and Definitions

Agriculture satisfies humanity's most basic need by producing food. Around a century ago, farmers
produced food commodities primarily for self-consumption or exchange (cash or kind) with others
in the same village or nearby areas. They were largely self-sufficient. However, the production
environment has shifted significantly from self-sufficiency to commercialization. Technological
advancements such as high yielding varieties, the use of fertilizers, insecticides, and pesticides, and
farm mechanization have resulted in a significant increase in farm production and, as a result, a larger
marketable and marketed surplus. Increased production is accompanied by increased urbanization,
income, changing consumer lifestyles and food habits, and increased ties to the international market.
Consumers are no longer restricted to rural areas where food is grown. Additionally, the growing
demand for processed or semi-processed food products necessitates the addition of value to raw
agricultural products. These developments necessitate the movement of food commodities in the
form of value-added products from producer to consumer. Agricultural marketing connects
producers and consumers via a series of activities, and as such becomes a critical component of the
economy. Agricultural marketing is not limited to the sale of finished agricultural products.
Additionally, it concentrates the supply of agricultural inputs (factors) to farmers.

Definitions of Agricultural Marketing

• Agricultural marketing is a term that combines the words agriculture and marketing.
• Agriculture, in general, refers to the cultivation and/or raising of crops and livestock, whereas
marketing refers to the sequence of activities involved in transporting goods from the point
of production to the point of consumption. Numerous scholars have defined agricultural
marketing and incorporated critical factors such as time, place, form, and utility of passion.
The following are some definitions of agricultural marketing;
• Human activity aimed at satiating needs and desires through exchange (Phillip Kotler).
• Execution of commercial activities that regulate the flow of goods and services from
producers to consumers (American Marketing Association).
• Agricultural marketing is the study of all operations and agencies involved in the movement
of farm-produced foods, raw materials, and their derivatives, such as textiles, from farms to
final consumers, as well as the impact of such operations on farmers, middlemen, and
consumers (Thomsen). This definition excludes agriculture's input component.
• Agricultural marketing is a process that begins with the decision to produce a marketable
farm commodity, encompasses all aspects of the market structure or system, both financial
and institutional, and is guided by technical and economic considerations. It encompasses
pre- and post-harvest operations, as well as assembly, grading, storage, transportation, and
distribution (National Commission on Agriculture, 1976).
Importance of Agricultural Marketing

Agriculture marketing is critical not only for stimulating production and consumption, but also for
accelerating economic growth. It is the primary factor in agricultural development. Marketing
emerges as the most significant challenge during the transition from traditional to modern
agriculture, owing to the production surpluses generated by the transition. The following illustrates
the critical nature of agricultural marketing:

1. Resource optimization and output management

A successful agricultural marketing system optimizes resource utilization and output management.
A more efficient marketing system can also help increase marketable surplus by reducing losses
associated with inefficient processing, storage, and transportation. A well-designed marketing
system can effectively distribute the available stock of modern inputs, enabling the agricultural
sector to grow at a faster rate.

2. Farm Income Increase

An efficient marketing system ensures higher income levels for farmers by reducing the number of
middlemen or by limiting the cost of marketing services and malpractices associated with farm
product marketing. A well-functioning system ensures farmers receive fair prices for farm products
and encourages them to invest their surpluses in modern inputs that increase productivity and
production. This results in an increase in the farmers' marketed surplus and income. If the producer
lacks an easily accessible market outlet for his surplus produce, he has little incentive to increase
production.

3. Market Expansion

A well-organized and efficient marketing system expands the market for products by bringing them
to remote areas both within and outside the country, i.e., areas remote from the manufacturing
locations. The expansion of the market contributes to continuous demand growth, ensuring a higher
income for the producer.

4. The expansion of agro-based industries

A more efficient and effective agricultural marketing system contributes to the growth of agro-based
industries and stimulates the economy's overall development process. Numerous industries,
including cotton, sugar, edible oils, food processing, and jute, rely on agriculture for raw material
supply.

5. Price Signals

An efficient marketing system enables farmers to plan their production in response to economic
conditions. This work is accomplished through the transmission of price signals.
6. Technology Adoption and Spread

Farmers benefit from the marketing system when it comes to adopting new scientific and technical
knowledge. Farmers will invest in new technology only if they are assured of market clearance at a
remunerative price.

7. Job Creation

Millions of people are employed by the marketing system in a variety of activities such as packaging,
transportation, storage, and processing. Directly employed in the marketing system are commission
agents, brokers, traders, retailers, weighmen, hamals, packagers, and regulating staff. Apart from this,
several others find work supplying goods and services that are required by the marketing system.

8. Increase in National Income

Marketing activities add value to the product, thereby increasing the gross domestic product and net
domestic product of the nation.

9. Improved Quality of Life

The marketing system is critical to the success of development programs aimed at uplifting the entire
population. Any economic development strategy aimed at alleviating agricultural poverty, lowering
consumer food prices, increasing foreign exchange earnings, or eliminating economic waste must
therefore prioritize the development of an efficient food and agricultural product marketing system.

10. Utility creation

Marketing is a productive endeavor that is equally as necessary as farm production. It is, in fact, a
component of production, as production is not complete until the product reaches the location and
time specified by the consumers. Marketing increases the cost of the product, but it also increases its
utility. Marketing generates the following four types of utility for the product:

a. Utility Form: The processing function enhances the product's form utility by transforming
the raw material into a finished form. The product becomes more useful as a result of this
modification than it is in the state in which it is produced by the farmer. For instance, oilseeds
are converted into oil, sugarcane into sugar, cotton into cloth, and wheat into flour and bread
through processing. The processed forms are more useful than the raw materials in their
natural state.

b. Place Utility: The transportation function enhances the place utility of products by
relocating them from a location of abundance to a location of need. Due to the increased utility
of the product, products command a higher price at the point of need than at the point of
production.

c. Time Utility: The storage function enhances the products' time utility by making them
available when they are required.
 d. Possession Utility: The purchasing and selling functions of marketing assist in the transfer
of ownership from one person to another. Through marketing, products are transferred from
persons with a low utility to those with a higher utility.

References

Course instructor: S.K. Srivastava, Scientist (Agril. Economics), NCAP, New Delhi-110 012
http://jnkvv.org/PDF/10042020083748concept%20of%20ag%20markeing_EgEcon530.pdf

IndiaAgronet.com. Marketing functions and functionaries.

https://www.indiaagronet.com/indiaagronet/Agri_marketing/contents/functions.htm

Assessing Learning

Name: ____________________________________ ____ Date:________________

Course/Year/Section: _____________________ Score: ______________

Activity 1
Directions: On the space provided, answer the following questions with honesty and integrity.
Rubrics for Essay: *50% Content *30% Organization of Ideas *20% Grammar and Use of Words = 100%

1. How do you see the agricultural sector of the Philippines 10 years from now? Is there any
silver lining for the farmers to have a better future?
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2. As a marketing major student, what do you think is the essence of including agricultural
marketing subject in your curriculum? How will you help the agricultural sector?
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