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Agricultural Marketing,

Indias Economy has grown by more than 9% for three years running, and has seen a decade of 7%+ growth. This has reduced poverty by 10%, but with 60% of Indias 1.1 billion population living off agriculture and with droughts and floods increasing, poverty alleviation is still a major challenge.

72% of the population is still dependent on agriculture for their livelihood. Agricultural sector contributes 26% to India s GDP.



Global agreements on Agriculture (WTO) Subsidy rationalisation Government assistance Budget allocations Finance facilities

Negative Aspects


Declining levels of agricultural research Environmental Degradation Unorganised storage Inefficient PDS Presence of middlemen

Stages of growth of Indian Agriculture:


Distinct phases of growth in agriculture.

19501950-1965, food grain output increased at 2.4% annually : large scale extension of cropped area. 19651965-1975: Green Revolution food grain output increased by an average 3.3% annually crop area increased by only 0.6%. 19751975-2003: record production of 183.2 million tonnes.


India is the largest producer of milk, fruits, cashew nuts, coconuts and tea. India is the second largest producer of wheat , vegetables, sugar and fish. India is the third largest producer of tobacco and rice.

production of fruit and vegetables by India: 14% of world wide production [BBC Sep 04] India's export of fruit and vegetables: 1 % of world's fruit/veg exports [BBC Sep 04]

India's tea production in 2003: 856 million kg [BBC Sep 04] tea produced in Assam: 55 % of India's total tea production [BBC Sep 04]

daily tea production in Assam in high picking season: 2 million kg [BBC Sep 04]

people who are farmers: almost 550 million number of agricultural labourers: about 200 million (many with daily
wages below Rs. 10 per day)

government spending for the agricultural sector: 8 percent of the annual budget total of arable land which is not irrigated: nearly 63 percent

GDP from agriculture: 24 % of total gross domestic product [BBC Jul 04] bank credit allocated for agriculture: 12% of total bank credit in India money allocated for various irrigation policies by the government: Rs. 620
million in 2003-2004 2003-


Term coined by Dr. William Gaud of the US Department of Agriculture in 1968. It is associated with higher production through enhanced productivity but also with negative ecological and social consequences.

Agricultural Marketing is a process which starts with a decision to produce a saleable farm product and involves all aspects of market structure or system based on technical and economic consideration and include pre and post harvest operations. NC on Agri.

Central Government is aided and advised by two organizations Directorate of Marketing and Inspection (DMI) National Institute of Agricultural Marketing (NIAM)

Importance Of Agricultural Marketing


Optimum use of resources and output management Creation of employment Better living Adoption and spread of new technology Adds to national income Growth of Agro based industries Increase in income of the farm

Activities involved in Agricultural Marketing:


Making an assessment of the disposable surpluses of agricultural production. Finding the markets to dispose off these surpluses Collection of produce from farmers. Transportation to the nearest assembling centre.


Cleaning, grading and standardisation. processing if needed Packaging Warehousing and storage Transportation to the consumption centre. Negotiations Exchange of goods.

Special characteristics of A.M


Special processing, storage and disposal : perishable commodities. Seasonal production but perennial consumption. Large number of small scale producers. Timely collection of agri. produce from scattered villages.

Variation in demand characteristics. Constant support , guidance and extension activities for the farmers. Dependence on middlemen.




It refers to marketing of goods required for agricultural production

Seeds Fertilisers / pesticides Repair services Agricultural Implements Cattle feed, poultry feed

It includes the marketing of foodgrains, vegetables, milk etc. High degree of fragmentation of holdings makes the produce less remunerative  Minimum support price

Government support ..

Agricultural input marketing: subsidies Agricultural output marketing: Price Support



Classification of Markets

Location Area Of Coverage Time Span Volume Of Transaction Nature Of Transaction Number Of Commodities Degree Of Competition Nature Of Commodities Stage Of Marketing Extent Of Public Intervention

Village Markets  Located in small villages  Transaction between buyers and sellers of the village

Primary Whole Sale Market  Located in big towns near centers of production of agricultural commodities.  Transactions take place between the farmers and traders.

Secondary Whole Sale Markets


in the district headquarters or important trade centers.  Transactions take place between the village traders and the wholesalers.

Terminal Markets  Produce is finally disposed off directly to the consumer or the processor. Seaboard Markets  Located near the sea shore, meant for export or import of goods.

Area Of Coverage

Local Village Markets

E.g.: Vegetables, perishable commodities etc.

Regional Markets
E.g.: Food grains

National Market
E.g.: Jute and tea

World Market
E.g.: Coffee, cotton etc.

Time Span

Short Period Market Few hours fish, milk etc. Long Period Market Less perishable food grains Secular Markets Permanent manufacturing goods, timber etc.

Volume Of Transaction

Wholesale Markets Retail Markets

Nature Of Transaction

Spot Or Cash Market Forward Market

Number Of Commodities

General Market Specialized Market

Degree Of Competition

Perfect Market Imperfect Market

Monopoly Duopoly Oligopoly

Nature Of Commodities

Service Market Capital Market Commodity Market

Stage Of Marketing

Producing Market Consuming Markets

Extent Of Public Intervention

Regulated Market
o 7161 of 7310 Wholesale Markets

Covered Under Regulation. Regulation.

o Of

27,294 Rural Markets, 27, Markets, Under Regulation

15% 15%

Unregulated Market

Marketing Functions

Primary Marketing Functions

Assembling Processing Distribution

Secondary Marketing Functions

Standardization and Grading Packaging Transportation Storing Financing Risk Bearing Selling

Increasing Farmers Income


90% of effort is Production oriented Only 10% on Marketing/Post harvest phases Single intervention that can enhance income by 20-30% 20Private Sector Investment

Producer s Surplus

Marketable Surplus MS = P C P = Total production C = Total requirements (family consumption, farm needs, payment to labor, artisans, landlord and payment for social and religious work)

Marketed Surplus


100% 18 90% 80% 17 70% 60% 50% 40% 65 30% 42 20% 10% 0% 41 66 65 35 36 20 19 14 16 23 23

Marketing Margins Marketing Cost Farmer's Share






Relationship Between Prices and Marketable Surplus

Inverse Relationship Positive Relationship

Factors Affecting Marketable Surplus

Size Of Holding:
There is a positive relationship between the size of holding and marketable surplus.


Level Of Production:
Positive relationship

Price of Communication:
It has positive or negative relationship depending upon weather one considers long or short runs, or micro or macro levels.


Size Of Family:
The larger family, the smaller surplus from the farm.

Requirement Of Seeds And Farm:

Higher the requirement smaller the marketed surplus

Consumption Habits:
In south India, Andhra Pradesh ,Karnataka are predominantly rice consuming states, and wheat enters the market .

Cash Requirements:
If fixed, marketable surplus will vary inversely with price changes. If variable ,marketable surplus will increase in response to increase in price.

Nature Of Crops:
Farmers produce two types of crops; food crops and cash crops food crops are retained while cash crops are retained in the market

Mode Of Production:
If the Farm uses traditional methods there is less marketable surplus and if it uses new technologies, HYV seeds and chemical fertilizers etc, there is more marketable surplus.

Characteristics of Agricultural Production


Seasonal in nature Uncertainty in production Lack of uniform quality Perishability Inelasticity Bulky in nature

Some Facts

Investment Requirement (Rs. in

Items Physical (Nos) 10th Plan 11th Plan Total

Wholesale markets Modernization of markets Rural Periodic Markets Grading Centers Modernizing Labs Agribusiness Centres Warehousing

3213 7293 27294 5786 100 1500 518

2410 2260 1024 400 10 50 5965 12119

4016 3766 1706 750 10 100 6200 16548

6426 6026 2730 1150 20 150 12165 28667


Structure In Market for Different Groups

Primary markets
Serves people within the vicinity of around 16 kms. Location is as per the convenience of the people.

Secondary markets
Exists in small town and cities Wholesale as well as retail trade takes place Wholesaler performs the functions of marketing and distribution

Terminal markets
Generally located near ports for import or export of goods Sale takes place on small scale, but throughout the year Dominated by large number of middle men

Methods Of Sale

Undercover OF a Cloth (Hatha System) Private Negotiations Quotations on sample, taken by the commission agent Dara Sale Method Moghum Sale Method Open Auction method
Phar System of open auction Random bid system of open auction Rostev bid system of open auction


Closed Tender System Forward Sale Jalap Sale Sale by Sample

Standardization and Grading

Meaning of Standardization: Standardization: The determination of basic limits or grades in the form of specifications to which manufactured goods must conform and a class into which the products of agriculture and the extra active industries may be sorted is known as standardisation.

Advantages of Standardization

Uniformity in quality Sale by samples Differential pricing Increase in demand Convenience in selling Advantages for manufacturers/ producers Elimination of risk

International organizations for standardization

International Standards for Organisation (ISO)and The Codex Alimentarious Commission (CAC).

Grading can be defined as the process of dividing a quantity of the same Kind of goods into uniform groups according to the many standards of size, shape, colour, texture, acidity or other significant characteristics.

Types of Grading

Fixed grading Variable grading Centralised / Decentralised Grading

Inspection and quality Control


Involves the testing of graded goods in order o determine whether they conform to the prescribed standards. Samples are tested and inspected in the laboratory. At present there are:
111 sate owned grading laboratories 549 laboratories of licensees (Private Packers) 9 laboratories in cooperative sector 49 private and commercial laboratories

Advantages / Importance Of Grading


Production of large scale Pricing Opening up of new markets Eliminating risk and speculation Encouragement o improve quality Helpful in Financial Management

Problems In standardization and Grading


Lack of standards and grades Misuse of standards and grades Lack of public conciousness Lack of testing facilities


Functions Of ISI:

Giving suggestions in respect of the product. Conducting necessary researches and experiments in field of standardization. Determining standards of different at national and international level. suggesting in respect of products. Making the standard popular. Checking new products and a standard a standard mark for them. Developing a feeling of competition for the purpose of promoting Collecting necessary data.