LECTURE IX MARKETING AGRICULTURAL COMMODITIES

Marketing Functions and Services  Marketing system:  Connects buyers and sellers  Transmits information between buyers and sellers  Provide incentives for efficient decision-making.  Thus the functions and services of marketing can be defined as:  Finding a buyer and transferring ownership.  Assembly and storage.  Sorting, packing and processing.  Providing the finance for marketing and taking the risks.  Assortment and presentation to consumers

Finding buyer/transferring ownership  Is the heart of marketing.  Bartering of surplus products for other needed products is the simplest form of marketing  Since it is difficult to find someone to provide the product needed who will accept a specific product in return, it is convenient to sell to someone who is willing to pay cash.

Finding buyer/transferring ownership  In many countries the town market square is the scene of direct transaction between producers and consumers.  In this market each producer accepts full responsibility for  Advertising his/her produce  Finding customers  Obtaining information to guide him/her in bargaining over the price.  Some specialized traders buy more than the consumers need and later offer the goods in a market where there is an unsatisfied demand.

Finding buyer/transferring ownership  In large markets the producer and the consumer may be separated by  Distance  time  form requirements.  Purchasing and selling services are offered in conjunction with:  Transport  storage  processing.  These services are provided by specialized commission agents, brokers or auctioneers

Assembly and Storage  Goods are concentrated at convenient points.  Attracts buyers who could not spare the time to go make small purchases at scattered farms.  Enables the buyers to use larger, more economical transport and processing equipment.  Necessitates storage while the product is awaiting sale.  The type of storage varies widely with the nature of the product and the climatic environment.

Assembly and Storage  Storage also important for farmers to store part their crop to await seasonally high prices.  Traders who take possession of produce need some storage space so that they can choose the best time to resell.  Processing plants must have stocks of their raw material conveniently at hand.  Wholesale distributors and retailers need to maintain adequate stocks of all their items to cover variable day-to-day demands from customers.

Sorting, packing and processing  Sorting allows consumers to choose the kind of produce they want.  Produce is sort according to  Size  Shape  Flavour  Degree of ripeness  Length of staple  Any other quality that influences the commercial value of the product.  Buyers are prepared to pay a higher price for produce when they are sure of its quality.

Sorting, packing and processing  Farm products need to be packaged in order to:  Prevent physical deterioration.  Make theft, adulteration or substitution more difficult.  Ensure cleanliness.  Facilitate measurement, labeling and the attachment of instructions and descriptions.  Promote sales through their attractive appearance and suitability as an advertising medium.

Sorting, packing and processing  Type of container used varies with:  The product  The physical and climatic environment  The phase/stage of marketing served.  Containers change as the produce moves from the producer to the consumer.  A product may leave the farm in sacks or baskets but attractive packaging may be done to appeal to the consumers.  Some products undergo changes in form to adapt them to the householders’ needs and tastes.

Financing and Taking risks  Owner of goods sacrifice the opportunity to use his/her own capital elsewhere or borrow the necessary capital from some other source.  Wholesalers spend money buying the produce they handle, finance marketing facilities such as processing and storage plants as well as the transport equipment and office premises needed for business.  Retailers must pay for their sales premises and for storage of part of their stock.

Financing and Taking risks  Farmers generally want to be paid a fixed price in cash before they hand over their produce.  The buyer carries the risks of  Finding a customer who is prepared to pay enough to cover both the purchase price and the other costs likely to be incurred.  An unfavourable change in the price level.  Deterioration of the product.  The burden of these risks contributes to the cost of marketing.

Assortment and Presentation  Distribution systems must meet the demands of the consumer.  Supplies delivered to assembly points e.g. warehouses; mills, etc vary in quantity and quality.  Consumer demand also varies according to:  Season  Climate  Income  religious teaching  local customs

Assortment and Presentation  Some wholesalers simply provide the appropriate quality and quantity of supplies for use in mills or factories.  Other wholesalers may be involved in splitting up loads into smaller quantities that are suitable for sale by the retailer to individual consumers at local shops.

Assortment and Presentation  A very small retailer may concentrate on selling a single product.  But most retailers offer a selection of products that are conveniently brought together.  The ultimate form of this is the supermarket, which offers, under one roof, all the food items in general consumption.

Marketing Agencies  Carry out marketing functions or offer marketing services.  They may be  Individuals acting independently  Partnerships  Large firms  Cooperatives or  Government corporations.  They include:  Local Assemblers  Wholesalers  Commission agents and Brokers  Retailers

Local Assemblers  Are buyers undertake the initial task of assembling produce from farms or local markets.  They may be farmers who collect produce of other cultivators, landlords, village shopkeepers, wholesale merchants and processors, cooperatives or government procurement agencies.  The local assembler may either act on commission or purchase on his/her account.  He/she may furnish credit to the farmer and probably arrange the transport for his/her purchase to a central processing or wholesaling point.  He/she relieves the farmer of further direct marketing responsibilities.

Wholesalers  These agents take produce from farmers or local assemblers.  They sell to retailers, to other wholesalers in domestic and foreign markets and to manufacturers.  Wholesalers may finance the movement of goods themselves, or with the aid of banks; in general they bear most of the marketing risks.  Wholesalers who are willing to take greater risks than others are often called speculators.

Wholesalers  They also perform a useful service known as arbitrage i.e. they buy when demand is low and resell when demand is high.  They may also buy and sell in different areas where demand differs.  If there is competition, this kind of buying and reselling is useful because it can prevent prices from fluctuating between wider extremes.  A wholesaling enterprise may be owned and operated privately, cooperatively or publicly.

Commission agents and Brokers  Producers and wholesalers frequently want to offer their produce on markets that they cannot conveniently attend in person.  Commission agents specialize in buying and selling for such people and take charge of goods on their behalf.  They are encouraged to do well for their client by being paid a percentage of the price obtained.

Commission agents and Brokers  Commission agents run no risk, but must do better than the clients could do for themselves, if they are to attract business.  Commission agents are used where direct offers tend to be low, as for perishable fruits and vegetables for sale on distant markets.  By continuing to carry the risk, the seller retains the possibility of obtaining a much higher price.

Commission agents and Brokers  Brokers bring potential buyers and sellers together  Their service is to provide an intimate knowledge of supplies, requirements and prices in various markets.  The term ‘broker’ is best restricted to agents who do not own or physically handle goods.  The actual transfer of ownership takes place between the original buyer and seller, with the broker acting as counselor and intermediary in return for a fee.

Commission agents and Brokers  Brokers are in touch with a wide selection of specialized dealers and are well supplied with up-to-date information on markets.  Brokers can thus offer a wider market to a buyer or seller than would otherwise be accessible to him/her.

Retailers  The function of the retailer is to obtain supplies and display them for sale in forms and at times and places convenient to consumers.  Usually, the retailer buys from one or more wholesale distributors, often on credit, and serves consumers buying small quantities on a day-to-day basis.  Frequently, retailers sort, process and repack goods to suit consumers’ individual requirements as the customer watches or behind scenes.