Course Name : Agricultural Marketing

Course Code : MKT- 413

Course Teacher : Md. Shariful Islam

Week : 03
Lecture : 05 & 06
Lecture Topic : Introduction to Food Processing Marketing

Agricultural marketing. Agricultural marketing generally means the marketing of

agricultural products to the first handler. In macro (social) perspective, is the
performance of all business activities involved in the forward flow of food and fiber
from farm producers to consumers. It includes all the activities associated with
agricultural production and with food, feed, and fiber assembly, processing, and
distribution to final consumers, including analyses of consumers needs,
motivations, and purchasing and consumption behavior.

Agricultural marketing circle. It consists of;

First circle. Refers to the final consumer or targeted customer.

Second circle. Factors that can be controlled known as marketing mix
(product, price, place, and promotion).
Third circle. Environmental factors that cannot be controlled (political and
legal, economic, law and regulation, social & culture, technologies, &
demographic).

Agribusiness marketing. Agribusiness marketing has come to mean the marketing

operations from the first handler to the final consumer-beginning with suppliers to
farmers and covering producing, processing, and marketing to the final consumer.

Marketing utility. Utility will refers to the value of marketing which adds to goods
and services. The marketing function will allow to create utility. There are five types
of utilities, namely;

Form utility. To change the raw materials to a finished products. Example,

palm oil bunch to edible cooking oil.

Time utility. Making the products be available during the convenient hours.

Place utility. Making the products and services available in convenience

location and place.

Possession utility. Making the exchange of goods and services between the
buyers and sellers.

Information utility. To informs the buyers that the products exists, how to
use it, the price and other related information of the products availability.

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The importance and interdependence of the food and fiber system. The various
foods and fibers are the commodities included in agricultural marketing texts
although food usually receives the most attention. It may be helpful to think of food
and fibers as moving to the world consumers through three sectors;

Food and fiber originate in a farm sector where livestock, poultry, fruits,
vegetables, cotton, tobacco, flax, corn, wheat, other grains, and specialty crops
are produced.

More than 80% of the gross farm income is typically spent in the input sector
on items such as feed, fuel, and fertilizer. These production expenses have
risen from time to time.

Food and fiber than move through a marketing sector involving many
marketing functions, such as transportation, processing, and storage, which
are more expensive than the production costs in the farm sector.

The development of agricultural marketing. Marketing is related to the business

activities for the purposes of the consumer satisfaction in exchanges of goods and
monetary value between the producer and the consumer. Scope of marketing is not
only focused to the buying and selling but it also includes activities such as
transportation, storage, grading, financing, risks involvements, products design,
price determination, promotions, distribution and developing the marketing
channels. A brief history of agricultural marketing begins with;

Trade among tribes. Marketing begin in tribal nomadic cultures. Different

tribes lived in areas that held different fruits, game, and fish; from these
differences came products that could be traded. Supplies beyond a tribes own
needs had a low marginal value but were of higher value when traded for
other goods.

Appearance of market squares. With the advent of village life, following the
development of agriculture, specialized village craftspeople appeared.
Eventually a block of land in each village came to be designed as the market
square. Here farmers brought products for display and sale to the villagers,
and craftspeople showed their wares for farmers or others to buy.

Regional and national market centers. The modern counterpart of the

market square is the regional mall shopping center, housing a wide array of
dealers and products under one vast roof. At a wholesale market, suppliers
gather so that retailers may see, in one place, the kinds of merchandise
offered and their prices.

The role of marketing in the economy. In any economic system there are always
barriers that prevent producers from efficiently satisfying consumer needs. These
barriers include separations of space, time, information, value, and ownership. The
role of the marketing system is to bridge this gap between producers and
consumers needs and increase the efficiency of the marketing system.

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 The most familiar marketing functions to most of us are the buying
function and the selling function. They must be performed in the
marketing system if any product exchanges are going to occur. They involve
overcoming separations of ownership by transferring legal title of the
product from the seller to the buyer.

The storage function overcomes the separation of time by maintaining the

product in good condition between production and final sale.

The transportation function overcomes the separation of space by moving

the product from where it is produced to where the consumer is willing to
purchase it.

The processing function involves the transformation of a commodity to a

form that has greater value to consumer. Processing is included since what
is produced in a free market economy should be determined by the needs of
consumers. One of the purposes of the marketing system is to transmit
consumer desires to producers so they can provide the products that
consumers want. How the products are produced is a technical matter, but
what to produce is a function of marketing.

The grades and standards function involves the development of uniform

descriptions of commodities and products. It means that buyers do not have
to physically inspect each shipment of product before they purchase it. A
buyer can be assured that when he orders a certain quantity of a Grade A
product over the telephone, he knows exactly the physical specifications of
the product he will receive.

The financing function involves providing the funds necessary to pay for
the production and marketing of a product before the money is received
from its sale.

The risk taking function involves assuming the risk of loss between the
time of purchase and sale. Various forms of insurance are available to guard
against adverse changes in price as well as physical losses arising from such
things as fire, flood, theft, and spoilage. The efficiency of the marketing
system is also greatly enhanced if there is wide dissemination of
information on prices, inventory levels, embargoes, or anything else that
could influence the buying and selling of products.

The market information function involves the development of any means

to disseminate this type of information.

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The structure of product in agricultural production. The traditional structure of
farm production and farm market can each be described in terms of a single
identifying characteristic; product and production.

Characteristics of the products.

A raw material. The output of agriculture is largely a raw material that will
be used for further processing. This processing may be limited, as in
converting livestock into meat. It may be highly complex, as in converting
wheat into wheaties. Regardless of the complexity, however, the product sold
by the farmer soon loses its identity as a farm product becomes simply food.

Bulky and perishable products. Compared to most other products,

agricultural products are both bulkier and more perishable. Bulk affects the
marketing functions concerned with physical handling. Products that occupy
a lot of space in relation to their value almost automatically raise unit
transportation and storage costs. A truckload of drugs would be considerably
more valuable than a truckload of wheat. In this sense, fruits, vegetables,
grain, and meats are all quite bulky. Perishable, too, can be measured only in
relation to other products. All products ultimately deteriorate. Some
agricultural products, like fresh strawberries or fresh peaches, must move
into consumption very quickly or they completely lose their value. Such
products as cattle or poultry continue to grow and change if storage in the
form of withholding them from market is attempted. Wheat, on the other
hand, can be stored for a considerable length of time without much
deterioration. Even the most storable agricultural products, however, are
usually more perishable than other industrial products. Perishable products
require speedy handling and often special refrigeration. Quality control often
becomes a real and costly problem. Quality control often becomes a real and
costly problem. From the farmers viewpoint, withholding from the market is
extremely difficult; when the products are ready, they must move.

Quality variation. The general quality as well as the total production of

agricultural commodities varies from year to year and from season to season.
During some years the growing conditions are such that the crop in general is
of high quality. In other years, unfavorable conditions prevail and the crop is
of much lower quality. Such variations in the quantity of production make it
very hard to apply uniform standards for grades from year to year. If the
quality of the apple crop is uniformly high, the standards for top-grade
apples may be strictly adhered to. On the other hand, if the quality of the
apple crop is poor, grading standards may be relaxed somewhat to permit
some apples to be marketed as top quality. Variations in the quality may also
change marketing patterns. For example, during a year in which corn does
not mature properly, large amounts of soft corn are harvested. The corn will
spoil if it is not used before the following years. Farmers may then buy
additional feeder stock in order to utilize this corn. The marketing pattern of
these feeders, however, will be different from the usual pattern because the
feeding period is adjusted to the condition of the corn.

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 Characteristics of production.

Total output. The long run trend in food production is upward. The rising
food supply per capita has been a mixed blessing for farmers. On the one
hand, it is dramatic proof of the efficiency of agriculture and its contribution
to the rising standard of living. On the other hand, this tremendous
productive capacity of agriculture has frequently depressed farm prices and
incomes. Maintaining an acceptable balance of rising food supplies and fair
farm prices has been a difficult task for food policy.

Annual variability in production. There are years where the situation of

increasing, decreasing, and stable farm output. These are caused by farmer
responses to prices and other uncontrollable factors such as weather and
disease. Such changes in farm output influence the food marketing process
and the use of the food marketing systems capacity. Year to year changes in
farm supplies have a significant impact on the purchase prices, need for
storage facilities, and plant utilization rates of food marketing firms. The
desire to reduce the risks and uncertainties of fluctuating farm supplies is
one of the forces creating closer contractual ties between marketing agencies
and farmers.

Seasonal variability in production. In addition to the annual production

variability, much of agricultural production is highly seasonal. Livestock
receipts may vary substantially throughout the year. The harvest of such
crops as paddy, fruits, and vegetables is crowded into a relatively short
period. Egg and poultry production is larger in seasonal fest and remain
stable after the period. To the extent that the product is storable, storage
facilities must be furnished to hold the product until it is consumed. This
means that during part of the year, storage will be used at near capacity, at
other times it will be almost empty. If the product cannot be stored it must
either be processed or consumed immediately. This may result in processing
plants running at capacity for some periods and well below capacity, or even
shut down, for other periods. If the product must move directly into
consumption, transportation and refrigeration facilities must be available
immediately. These situations affect the costs of the marketing process.

Geographic concentration of production. Although a variety of farm

products is produced in all states, there is increasing geographic
specialization of farm production. For example in Malaysia, north area tends
to specialize in the production of commodities for which its resource base is
best suited: paddy, fruits, e.t.c. The marketing system, of course, must adjust
to these changing geographic production patterns.

Varying costs of production. There is no single cost of production for all

farmers. Farmers cost of production are affected by climate, technology, farm
size, and individual managerial skills. Consequently, the cost of producing a
farm commodity varies widely by regions and among farmers. Most studies
have found that the average cost of farm production falls as small farms grow
larger, but there is a point at which average cost do not fall further as farm
size increase.

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 The farm supply industry. The farm supply industry provides such
agricultural inputs as chemicals, seeds, machinery, feeds, capital, labor, land,
and so on. These may be supplied by the farm or purchased from the
industrial or farm supply sectors. The growth and importance of the farm
input sector affects farmers in several ways. It has added another market for
the farmer to operate in. The farm input markets have also been responsible
for much of the dramatic gain in agricultural efficiency in recent years,
especially the chemical and machinery markets.

Strategies of National Agricultural Policy 1992-2010. In 1984, NAP introduced

by Malaysian government because of recession, but agriculture still plays an
important role in the GNP growth of the country even-though it has decline in its
production due to industrialization and urbanization.

Problems faced by agriculture;

Gross domestic product has declined in the contribution even-though the

value-added has increased.

Land expansion has been hindrance because some of the arable land has
been allocated for industrialization, urbanization and housing projects.

Market protection less has been taken into consideration as compared to

automobile industries.

Fiscal incentives did not favor in agriculture so thats why large companies
did not enjoy as compared to manufacturing industries.

Objectives of the NAP (1992-2010);

To achieved a balanced development between agriculture and other sectors

such hunting & forestry, fishing, mining & quarrying, electricity, gas & water
supply, construction, wholesale & retail trade, hotel and restaurants,
transport, communication, education, financial, public administration, health
and social work in the country.

To enhance the economics sectors and structural integration in particular

with the manufacturing sectors.

To achieve a higher level of expansion and development of the food industry

sectors.

To achieve a wider and effective participation of the Bumiputra participation

in support services in the fields of commercial agricultural, agribusiness,
trade, distribution, selling, extension, institutional development and
marketing.

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 To ensure a sustainable development in agriculture.

To maximize income through efficient utilization of resources and

revitalization of sectors for economic development.

To developed new land and to enable for farm unit development, efficient
managerial practices for new crops growing.

To enable development of in-situ land will be carried out to resolve

unproductive, inefficient and low level of productivity of land to be
developed. Example; FELCRA, RISDA, KESEDAR e.t.c.

Strategies for achieving the NAP objectives;

Optimizing the resources uses. Land, labor, capital and management has to
be use effectively. Idle land should be develop, division of labor should be
analyzed and given the priority for development and usage, managing farm
management through skills, and increased farm sizes and mechanism while
capital such land owned by farmers has to bring together and fully utilized,
thus will reduced the cost of maintenance.

Human resources development. The use of technologies in the agricultural

sector such as mechanism in planting and harvesting will improved efficiency
in used of labor. Manpower training is required to handle such cases, efficient
agribusiness in marketing, and agro-based processing should also be
included in the development of human resources.

Enhancement of research & development, and technological diffusion.

This would maintain the competitiveness of the agricultural sectors
especially in research and development. For example; rubber, palm oil and
rice, and other product. It must be market driven, commercially oriented and
environment friendly.

Greater role of the private sectors. The greater role of the private sectors
in the land development for agricultural purposes, support by financial
strength and investment, incentives, promotion and packages will enhance
the sale of products for export purposes.

Reformed marketing strategies. The need of reformed in the marketing

strategies of the producers. Now the products should be view as commodity
and plays it role in the export of the products to various countries like Middle
East, African, Latin America and China and other countries. New product
development should be venture into the market and credit facilities can be
extended and provided to the buyers.

Expanded food production. Producer will look into the expansion of food
products to the needs of the locals and for export purposes. The finished
products should be first caters for the demand of the domestic populations.
The products produced must be competitive in nature.

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 Development of viable and self-reliant farmer institution. The
development of institution which caters into the needs of the farmers
especially when supplying the products to the consumers is considers. Some
farmers are unable of doing so because lack of facilities such as financial
strength, marketing, storage and transportation purposes. The need of this
institution is highly required so as to less the burden of the farmers.

3rd National Agricultural Policy ( NAP 3 ). The new NAP3 will focus on new policy
trust, strategies, and implementing mechanisms will be emphasized to national
concern on agricultural development an economy as a whole.

Objective of the policy;

Enhance food security.

Increase productivity and competitiveness of the agricultural sector.
Linkages with other sectors.
Create new sources of growth for the sector.
Conserve and utilized natural resources on a sustainable basis.

Strategies of the NAP3. This strategy will be focused on the upstream primary
agriculture to enhance the production and marketing of the agricultural and forestry
products. The strategies are;

Agro-forestry approached. Agriculture and forestry are mutually compatible

and complementary for joint development. This approached will addressed the
increasing scare resources and raw material availability.

Product based approach. Product based approach address on key products

and market identified based on demand and supply, preferences, and potential
consumers.