Agricultural marketing - AbsoluteAstronomy.com

Agricultural marketing covers the services involved in moving an agricultural product from the farm

Farm

A farm is an area of land, or, for aquaculture, lake, river or sea, including various structures, devoted primarily to the practice of producing and managing food , fibres and, increasingly, fuel. It is the basic production facility in food production. Farms may be owned and operated by a single...

to the consumer

Consumer

Consumer is a broad label for any individuals or households that use goods generated within the economy. The concept of a consumer occurs in different contexts, so that the usage and significance of the term may vary.-Economics and marketing:...

. Numerous interconnected activities are involved in doing this, such as planning production, growing and harvesting, grading, packing, transport, storage, agro- and food processing

Food processing

Food processing is the set of methods and techniques used to transform raw ingredients into food or to transform food into other forms for consumption by humans or animals either in the home or by the food processing industry...

, distribution, advertising

Advertising

Advertising is a form of communication used to persuade an audience to take some action with respect to products, ideas, or services. Most commonly, the desired result is to drive consumer behavior with respect to a commercial offering, although political and ideological advertising is also common...

and sale. Some definitions would even include “the acts of buying supplies, renting equipment, (and) paying labor", arguing that marketing is everything a business does. Such activities cannot take place without the exchange of information and are often heavily dependent on the availability of suitable finance.

Marketing systems are dynamic; they are competitive and involve continuous change and improvement. Businesses that have lower costs, are more efficient, and can deliver quality products, are those that prosper. Those that have high costs, fail to adapt to changes in market demand and provide poorer quality are often forced out of business. Marketing has to be customer-oriented and has to provide the farmer

Farmer

A farmer is a person engaged in agriculture, who raises living organisms for food or raw materials, generally including livestock husbandry and growing crops, such as produce and grain...

, transporter, trader, processor

Food processing

, etc. with a profit. This requires those involved in marketing chains to understand buyer requirements, both in terms of product and business conditions.

In Western countries considerable agricultural marketing support to farmers is often provided. In the USA, for example, the USDA operates the Agricultural Marketing Service

Agricultural Marketing Service

The Agricultural Marketing Service is a division of the United States Department of Agriculture, and has programs in five commodity areas: cotton and tobacco; dairy; fruit and vegetable; livestock and seed; and poultry...

. Support to developing countries with agricultural marketing development is carried out by various donor organizations and there is a trend for countries to develop their own Agricultural Marketing or Agribusiness

Agribusiness

In agriculture, agribusiness is a generic term for the various businesses involved in food production, including farming and contract farming, seed supply, agrichemicals, farm machinery, wholesale and distribution, processing, marketing, and retail sales....

units, often attached to ministries of agriculture. Activities include market information development, marketing extension

Agricultural extension

Agricultural extension was once known as the application of scientific research and new knowledge to agricultural practices through farmer education...

, training in marketing and infrastructure development. Since the 1990s trends have seen the growing importance of supermarkets and a growing interest in contract farming

Contract farming

Contract farming is agricultural production carried out according to an agreement between a buyer and farmers, which establishes conditions for the production and marketing of a farm product or products. Typically, the farmer agrees to provide established quantities of a specific agricultural...

, both of which impact significantly on the way in which marketing takes place.

Agricultural marketing support

In the United States the Agricultural Marketing Service (AMS) is a division of USDA and has programs for cotton, dairy, fruit and vegetable, livestock and seed, poultry, and tobacco. These programs provide testing, standardization, grading and market news services and oversee marketing agreements and orders, administer research and promotion programs, and purchase commodities for federal food programs. The AMS also enforces certain federal laws. USDA also provides support to the Agricultural Marketing Resource Center at Iowa State University and to Penn State University.

In the United Kingdom support for marketing of some commodities was provided before and after the Second World War by boards such as the Milk Marketing Board

Milk Marketing Board

The Milk Marketing Board was a government agency established in 1933 to control milk production and distribution in the United Kingdom. It functioned as buyer of last resort in the British milk market, thereby guaranteeing a minimum price for milk producers...

and the Egg Marketing Board

Egg Marketing Board

The Egg Marketing Board was an agricultural marketing organization set up by the British government in December 1956 to stabilise the market for eggs due to a widespread collapse in sales. The Board purchased all the eggs produced in the UK, graded them to a national standard, and then marketed...

, but these were closed down in the 1970s. As a colonial power Britain established marketing board

Marketing board

A marketing board is an organization created by many producers to try to market their product and increase consumption and thus prices. They most commonly exist to help sell farm products such as milk, eggs, or beef and are funded by the farmers of those crops. Marketing boards often also receive...

s in many countries, particularly in Africa. Some continue to exist although many were closed down at the time of the introduction of structural adjustment

Structural adjustment

Structural adjustments are the policies implemented by the International Monetary Fund and the World Bank in developing countries. These policy changes are conditions for getting new loans from the International Monetary Fund or World Bank, or for obtaining lower interest rates on existing loans...

measures in the 1990s.

In recent years several developing countries have established government-sponsored marketing or agribusiness units. South Africa, for example, started the National Agricultural Marketing Council (NAMC) as a response to the deregulation of the agriculture industry and closure of marketing boards in the country. India has the long-established National Institute of Agricultural Marketing (NIAM). These are primarily research and policy organizations, but other agencies provide facilitating services for marketing channels, such as the provision of infrastructure, market information and documentation support. Examples include the National Agricultural Marketing Development Corporation (NAMDEVCO) in Trinidad and Tobago and the New Guyana Marketing Corporation.

Several organizations provide support to developing countries to develop their agricultural marketing systems, including FAO's agricultural marketing unit and various donor organizations. There has also recently been considerable interest by NGOs to carry out activities to link farmers to markets.

Agricultural marketing development

Well-functioning marketing systems necessitates a strong private sector backed up by appropriate policy and legislative frameworks and effective government support services. Such services can include provision of market infrastructure, supply of market information (as done by USDA, for example), and agricultural extension services able to advise farmers on marketing. Training in marketing at all levels is also needed. One of many problems faced in agricultural marketing in developing countries is the latent hostility to the private sector and the lack of understanding of the role of the intermediary

Intermediary

An intermediary is a third party that offers intermediation services between two trading parties. The intermediary acts as a conduit for goods or services offered by a supplier to a consumer...

. For this reason “middleman” has become very much a pejorative word.

Agricultural advisory services and the market

Promoting market orientation in agricultural advisory services aims to provide for the sustainable enhancement of the capabilities of the rural poor to enable them to benefit from agricultural markets and help them to adapt to factors which impact upon these. As a study by the Overseas Development Institute

Overseas Development Institute

The Overseas Development Institute is one of the leading independent think tanks on international development and humanitarian issues. Based in London, its mission is "to inspire and inform policy and practice which lead to the reduction of poverty, the alleviation of suffering and the achievement...

demonstrates, a value chain

Value chain

The value chain, is a concept from business management that was first described and popularized by Michael Porter in his 1985 best-seller, Competitive Advantage: Creating and Sustaining Superior Performance.-Firm Level:...

approach to advisory services indicates that the range of clients serviced should go beyond farmers to include input providers, producers, producer organisations and processors and traders.

Market infrastructure

Efficient marketing infrastructure such as wholesale

Wholesale marketing

The consumption and production of marketed food are spatially separated. Production is primarily in rural areas whilst consumption is in urban areas. Agricultural marketing is the process that overcomes this separation, allowing produce to be moved from an area of surplus to one of need...

, retail and assembly markets and storage

Warehouse

A warehouse is a commercial building for storage of goods. Warehouses are used by manufacturers, importers, exporters, wholesalers, transport businesses, customs, etc. They are usually large plain buildings in industrial areas of cities and towns. They usually have loading docks to load and unload...

facilities is essential for cost-effective marketing, to minimise post-harvest losses

Post-harvest handling

In agriculture, postharvest handling is the stage of crop production immediately following harvest, including cooling, cleaning, sorting and packing. The instant a crop is removed from the ground, or separated from its parent plant, it begins to deteriorate...

and to reduce health risks. Markets play an important role in rural development

Rural development

Rural development in general denotes economic development and community development actions and initiatives taken to improve the standard of living in non-urban neighbourhoods, remote villages and the countryside...

, income generation, food security

Food security

Food security refers to the availability of food and one's access to it. A household is considered food-secure when its occupants do not live in hunger or fear of starvation. According to the World Resources Institute, global per capita food production has been increasing substantially for the past...

, developing rural-market linkages and gender

Gender

Gender is a range of characteristics used to distinguish between males and females, particularly in the cases of men and women and the masculine and feminine attributes assigned to them. Depending on the context, the discriminating characteristics vary from sex to social role to gender identity...

issues. Planners need to be aware of how to design markets that meet a community's social and economic needs and how to choose a suitable site for a new market. In many cases sites are chosen that are inappropriate and result in under-use or even no use of the infrastructure constructed. It is also not sufficient just to build a market: attention needs to be paid to how that market will be managed, operated and maintained. In most cases, where market improvements were only aimed at infrastructure upgrading and did not guarantee maintenance and management, most failed within a few years.

Rural assembly markets are located in production areas and primarily serve as places where farmers can meet with traders to sell their products. These may be occasional (perhaps weekly) markets, such as haat bazaars in India and Nepal, or permanent. Terminal wholesale markets are located in major metropolitan areas, where produce is finally channelled to consumers through trade between wholesalers and retailers, caterers, etc. The characteristics of wholesale markets

World Union of Wholesale Markets

The World Union of Wholesale Markets is a non-profit association that engages in all fields and activities related to the promotion, development and international exchange of expertise and information on food markets....

have changed considerably as retailing changes in response to urban growth, the increasing role of supermarkets and increased consumer spending capacity. These changes require responses in the way in which traditional wholesale markets are organized and managed.

Retail marketing systems in western countries have broadly evolved from traditional street markets through to the modern hypermarket or out-of-town shopping centre. In developing countries, there remains considerable scope to improve agricultural marketing by constructing new retail markets, despite the growth of supermarkets, although municipalities often view markets as sources of revenue rather than infrastructure requiring development. Effective regulation of markets is essential. Inside the market, both hygiene rules and revenue collection activities have to be enforced. Of equal importance, however, is the maintenance of order outside the market. Licensed traders in a market will not be willing to cooperate in raising standards if they face competition from unlicensed operators outside who do not pay any of the costs involved in providing a proper service.

Market information

Efficient market information

Market Information Systems

Market information systems are information systems used in gathering, analyzing and disseminating information about prices and other information relevant to farmers, animal rearers, traders, processors and others involved in...

can be shown to have positive benefits for farmers and traders. Up-to-date information on prices and other market factors enables farmers to negotiate with traders and also facilitates spatial distribution of products from rural areas to towns and between markets. Most governments in developing countries have tried to provide market information services

Market Information Systems

to farmers, but these have tended to experience problems of sustainability. Moreover, even when they function, the service provided is often insufficient to allow commercial decisions to be made because of time lags between data collection and dissemination. Modern communications technologies open up the possibility for market information services to improve information delivery through SMS

Short message service

Short Message Service is a text messaging service component of phone, web, or mobile communication systems, using standardized communications protocols that allow the exchange of short text messages between fixed line or mobile phone devices...

on cell phones and the rapid growth of FM

FM broadcasting

FM broadcasting is a broadcasting technology pioneered by Edwin Howard Armstrong which uses frequency modulation to provide high-fidelity sound over broadcast radio. The term "FM band" describes the "frequency band in which FM is used for broadcasting"...

radio stations in many developing countries offers the possibility of more localised information services. In the longer run, the internet may become an effective way of delivering information to farmers. However, problems associated with the cost and accuracy of data collection still remain to be addressed. Even when they have access to market information, farmers often require assistance in interpreting that information. For example, the market price quoted on the radio may refer to a wholesale selling price and farmers may have difficulty in translating this into a realistic price at their local assembly market. Various attempts have been made in developing countries to introduce commercial market information services but these have largely been targeted at traders, commercial farmers or exporters. It is not easy to see how small, poor farmers can generate sufficient income for a commercial service to be profitable although in India a new service introduced by Thompson Reuters was reportedly used by over 100,000 farmers in its first year of operation. Esoko

Esoko

Esoko is an agricultural market information platform. It is a response to the explosive growth of cellular services in Africa. Managed on the web and delivered via mobile, individuals, agri-business, government and projects use Esoko to collect and send out market data using simple text messaging...

in West Africa attempts to subsidize the cost of such services to farmers by charging access to a more advanced feature set of mobile-based tools to businesses.

Marketing training

Farmers frequently consider marketing as being their major problem. However, while they are able to identify such problems as poor prices, lack of transport and high post-harvest losses, they are often poorly equipped to identify potential solutions. Successful marketing requires learning new skills, new techniques and new ways of obtaining information. Extension officers working with ministries of agriculture or NGOs are often well-trained in horticultural production techniques but usually lack knowledge of marketing or post-harvest handling.
Ways of helping them develop their knowledge of these areas, in order to be better able to advise farmers about market-oriented horticulture, need to be explored. While there is a range of generic guides and other training materials available from FAO and others, these should ideally be tailored to national circumstances to have maximum effect.

Enabling environments

Agricultural marketing needs to be conducted within a supportive policy, legal, institutional, macro-economic

Macroeconomics

Macroeconomics is a branch of economics dealing with the performance, structure, behavior, and decision-making of the whole economy. This includes a national, regional, or global economy...

, infrastructural and bureaucratic environment. Traders and others cannot make investments in a climate of arbitrary government policy changes, such as those that restrict imports and exports or internal produce movement. Those in business cannot function if their trading activities are hampered by excessive bureaucracy. Inappropriate law can distort and reduce the efficiency of the market, increase the costs of doing business and retard the development of a competitive private sector. Poor support institutions, such as agricultural extension

Agricultural extension

Agricultural extension was once known as the application of scientific research and new knowledge to agricultural practices through farmer education...

services, municipalities

Municipality

A municipality is essentially an urban administrative division having corporate status and usually powers of self-government. It can also be used to mean the governing body of a municipality. A municipality is a general-purpose administrative subdivision, as opposed to a special-purpose district...

that operate markets inefficiently and export promotion bodies, can be particularly damaging. Poor roads increase the cost of doing business, reduce payments to farmers and increase prices to consumers. Finally, the ever-present problem of corruption

Political corruption

Political corruption is the use of legislated powers by government officials for illegitimate private gain. Misuse of government power for other purposes, such as repression of political opponents and general police brutality, is not considered political corruption. Neither are illegal acts by...

can seriously impact on agricultural marketing efficiency in many countries by increasing the transaction costs faced by those in the marketing chain.

Recent developments

New marketing linkages between agribusiness

Agribusiness

, large retailers and farmers are gradually being developed, e.g. through contract farming

Contract farming

, group marketing and other forms of collective action

Collective action

Collective action is the pursuit of a goal or set of goals by more than one person. It is a term which has formulations and theories in many areas of the social sciences.-In sociology:...

.
Donors and NGOs are paying increasing attention to ways of promoting direct linkages between farmers and buyers. The growth of supermarkets, particularly in Latin America and East and South East Asia, is having a significant impact on marketing channels for horticultural, dairy and livestock products. Nevertheless, “spot” markets will continue to be important for many years, necessitating attention to infrastructure improvement such as for retail and wholesale markets