basic principles and applications

AGRICULTURAL MARKETING: Basic Principles and Applications

IITA – Ibadan, Nigeira14 June 2007Melba D. Davis - Mussagy

AGRICULTURALMARKETING



WHAT IS AGRICULTURAL MARKETING

≠ SELLING

≠ PROMOTION

Chairman of a Cooperative:

“Involves finding out what your customers want and supplying it to them at a profit”

= CUSTOMER-ORIENTED

= it is a commercial process that it has to provide profit for it to become sustainable



A more detailed definition:

It is the PROCESS of finding out what customers will buy, and producing and performing all the activities involved in getting agricultural products from the farm where they are produced to the final consumers, at the right place, time and form desired by the consumer, and at a price the customer is willing and able to pay for the product.



1. RESEARCH AND ANALYSIS

2. Assembly

3. Buying and selling

4. Storage

5. Transporting

Activities in Agricultural Marketing



6. Packaging

7. Processing

8. Standardization and grading

9. Financing

10. Marketing information and dissemination

11. Risk bearing (associated with the vagaries or unpredictable

changes in weather, incidence of pests and diseases, and seasonal

patterns of harvests, demands, prices, etc.)



Remember PDCA Cycle:

RESEARCH

AND ANALYZE

PLAN

DO

CHECK

ACT



THE PRODUCTION AREA

problems (constraints) and opportunities (primary selling

points) of the area

must cover crop production to product consumption (if possible)

WHAT TO RESEARCH



THE MARKET

customers needs and wants

the suppliers

the competitors

etc.



THE MARKETING SYSTEM

how the market works

relationships of the different participants in the marketing chain



Government policies and programs affecting food production,

pricing behavior, and distribution system. Examples are the

Department of Agriculture’s various production programs;

government’s price regulation policies and changes; Import and

export policies.

Large members, spatial distribution and conflicting objectives of thedifferent marketing participants, buyers and sellers, distance fromeach other, and the varying interests of the marketing participantsaffect the marketing of a commodity.

What Else to Know to Better Understandthe Agricultural Marketing Process and System



Motivations, strategies, reactions, and survival tactics ofmarketing participants in response to changes in infrastructure,organization, institution, management, and technology.COMPETITION is the engine of markets. However, it shouldalways be taken as a challenge for product or serviceimprovement. A good business competitor is one that stays in thefield for a long period of time.

Problems and constraints of those marketing participants

actually involved in producing, processing, distributing and

consuming.

Geographic dispersion of production. Demand areas are usually

located afar from producing areas.



1. Know who the customers are.

Could be identified as hotels, restaurants, wholesalers,exporters, retailers, cooperatives, processors.

2. Know the customers needs/wants before planning to makeit.

Commodity, form, frequency of need, price, volume requiredper unit of time, etc

GUIDING PRINCIPLES OFAGRICULTURAL MARKETING



3. Determine how much to produce.

Based on principle no. 2, determine the extent of productvolume that should be provided given the existing resources

4. Produce the product(s) that the customer wants to buy, notproducts which the producer finds convenient to produce.

5. Organize a distribution system.

The delivery or distribution system should match the customers’habits, rather than just correspond to any convenient time that theproducer can offer.



6. Feedback mechanism. Make production (or collection) and distribution(or dissemination) decision based on feedback from customers.

Timely, adequate and appropriate feedback system can be attainedthrough maintenance of records, regular monitoring, andsurveillance/spot checking.

The feedbacks will tell the producer whether changes that need to be introduced.



1. Characteristics of the product

a) Perishability

Delayed disposal of agricultural products would mean quality deterioration, weight loss, and eventually reduced price. The role of marketing system then is to get products to the consumers before the above actions take place.

b) Seasonality

When product is in season, price is low, and vice versa. Thus consumers usually pay high prices during scarcity of supply and low prices when the product is in season. Marketing certainly becomes simpler if desired products are available in the market centers with the right volume, quality, form and time.

SOME PROBLEMS AFFECTING AGRICULTURAL MARKETING



c) Bulkiness

Small farmers usually have no choice but to sell their produce

to, and accept whatever price is dictated by, traditional or

village traders. This is generally true due to small volume of

production. In marketing, the greater the volume of produce,

the stronger the bargaining power of a farmer/producer.

d) Non-homogeneity

When farmers sell a number of different products at smallvolumes, it will take time for the assemblers/traders beforethey can collect enough to transport. Also, they may requiredifferent marketing procedures like different buyers/outlets,different packaging, different transport requirements, differentpricing procedures, and different services. These factors surelyadd up to their costs, which eventually cause them to lowertheir prices.



2. Number of Producers.

Large and scattered number of producers create problem for assemblers/traders to efficiently collect, store and transport agricultural products.

3. Characteristics of consumers.

It is difficult to move with the changing demands of consumers. They usually differ in demand due to differences in income, age, taste/preferences, occupation, place of residence, religion, weather, habit because of cultural influence, change in price of substitutes, and the like.



1. Production-oriented

2. Dependence on traditional traders due to small marketable surplus

3. Limited credit availability

4. Ineffective rural assembly

5. Lack of credit-marketing tie-up

6. Lack of marketing information

Related Problems ON, and OF, FARMERS:



7. Inefficient marketing and postharvest practices

8. Lack of specialization

9. Lack of group action due to lack of trust and unity

10. Lack of knowledge and expertise on marketing



1) Is there a demand?

- whose demand and where

- excess of local demand vs. supply

- products brought in from outside; import

substitution

- suitability to local and neighboring markets

- financially viable

- answers needs/preferences of consumers

2) Agro-climatic condition

3) Soil/geology

4) Slope

CONSIDERATIONS IN SELECTING PRIORITY PRODUCTS (NEW OR FOR EXPANSION)



5) Other physical factors:

- flooding hazard; drainage; land capability; present vegetation

6) Elevation

7) Economic benefits

8) Availability of production technology

9) Availability of postharvest technology and other support facilities (ifnecessary)

10) Socio-cultural acceptability

11) Comparative advantage



12) Knowledge, skills, experience, and production equipment oflocal producers.

13) Availability and sufficiency of planting materials and raw materials

14) Availability of technical support to assist production

15) Potential farmers’ organizations and cooperatives

16) Synergy with existing products and ecological requirements

17) Adequacy of transport facilities for product distribution

18) Operational or proposed community development plans to intensify activities and provide support

basic principles and applications

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