This presentation was produced and is copyrighted by Stewart- Peterson®, Inc. 2003-2005. Permission is granted for use by active AgEdNet.com® subscribers. All other use is prohibited.

STEWART-PETERSON and AGEDNET.COM are registered trademarks of Stewart-Peterson, Inc.

MK101 What IsAgricultural Marketing?

Marketing Library

What is marketing anyway?

• The “business activities that direct the flow of goods and services from producer to consumer or final user”

• The ag marketing processstarts when the producersells grain, soybeans,cotton, livestock, dairy,fruit, or other products.

USDA photo by Fred S. Witte.

Agricultural marketing includes:

• Selling grain or livestock from a farm

• Activities that move commodities and products from producer to consumer

• Marketing continues to the point where the consumer buys and uses a finished product such as a steak, a loaf of bread, a pizza, a shirt or a pound of cheese.

What happens along the way from producer to consumer?

• Transportation

• Processing

• Packaging

• Ownership of a commodity may change several times along the way. USDA photo by Ken Hammond.

Marketing functions:Exchanging ownership

• Takes place through buying and selling

• Buyers and sellers communicate to agree upon a price and other terms of sale.

• Buying and selling can take place several times as a commodity moves throughmarketing channels.

Marketing functions:Exchanging ownership (cont.)

• A buyer bids for supplies and wants to avoid overpaying.

• A seller chooses from market alternatives and wants the best price possible.

• Selling may involve packaging, labeling, advertising, promotion and other merchandising activities.

Marketing functions:Adding value

• Value can be added three ways:• Time utility – storing a commodity

to sell later at a higher price• Place utility – transporting a

commodity or product wherea higher price will be paid(feedlot or export shipping port)

• Form utility – added by processing(making bread out of wheat orpork chops out of a whole hog)

Marketing functions:Other “facilitating functions”

• Standardization – using grades and quality specifications

• Financing – marketers need to borrow capital and pay interest costs

• Risk shifting• Physical risks can be covered with insurance• Market risks can be shifted through forward

contracts or hedging on futures and options

Marketing functions:“Facilitating functions” (cont.)

• Market information is needed by both buyers and sellers to set a fair price.• Weather information• USDA crop reports, estimates and analysis• Private sources of market information

Who are the players in the ag market game?

• Producers – the people who grow and raise the agricultural commodities

• Processors – grain millers, meat packers, food companies, etc., who produce consumer products

• Market institutions – futures exchanges, central livestock markets, trade associations, USDA market information services

“Middlemen” play an important part …

1. Merchant middlemen buy, take ownership and resell commodities.a. Includes wholesalers and retailersb. May add value by packaging, holding

inventory, transporting, advertising, etc.

2. Agent middlemen do not own or take titleof the commodities.1. They buy and sell for others for a fee.2. Includes brokers and commission agents

“Middlemen” (cont.)

3. Speculators are middlemen who buy and hold commodities with the hopes of reselling at a higher price.a. Most operate in the

futures market

b. They buy and sellcontracts for deliveryrather than theactual product.

Photo courtesy ChicagoBoard of Trade.

This presentation was produced and is copyrighted by Stewart- Peterson®, Inc. 2003-2005. Permission is granted for use by active AgEdNet.com® subscribers. All other use is prohibited.

STEWART-PETERSON and AGEDNET.COM are registered trademarks of Stewart-Peterson, Inc.

www.agednet.com

800-236-7862