UNIT IV

Agricultural Marketing
Concept & Definition
Classification & Difference

Definition of Agri Market

The word market means a place where business is
conducted. It means any place where persons assemble
for the sale or purchase of all commodities intended for
satisfaction of human wants/needs
In business parlance, agicultural market is the sphere
within which price determining forces operate and an area
where forces of demand and supply converge to establish
a single price
Agricultural market exists when rural or urban buyers
wishes to exchange the money for acquiring goods or
services
For a market to exist, certain conditions must be satisfied:
(a) existence of goods/commodities for transaction (b)
existence of buyers and sellers (c) business relationship
between buyers and sellers

Supply & Demand

Demand refers to quantity of product or service which
the buyers are likely to purchase at different prices in a
given market in a given time. Demand represents
willingness and ability to buy under specified condition
Supply refers to schedule or quantity of product that will
be offered for sale at different price at a given time and
in a given market. The higher the price the larger the
quantity that is offered for sale and vice versa.
There are two sources of supply of farm products one is
production at local level and the other is import.
The factors that affect the domestic production are :
irrigation, weather, technology, land suitability,
availability of inputs and relative output price, net imports
and carry over of stock

Marketable & Marketed Surplus

Marketable Surplus:
It is the quantity of produce which is or can be made
available by the farmers to the non farm population after
meeting his family consumption & farm needs.
Marketed Surplus:
It is that quantity of produce which the farmer actually sells
in the market irrespective of his requirements for family
consumption, farm needs and other needs.
Poor and subsistence farmers sell that part of the produce
to enable them to meet their cash obligations. This results
in distress sale.
There is an inverse relationship between price and
marketable surplus

Factors
Factors affecting Marketable surplus are:
Size of Holding
Subsistence farming
Level of Production
Mode of production
Nature of crops
Price of communication
Size of the family
Requirement of Seeds
Consumption habits
Cash requirements
Defective agricultural marketing

Agricultural Marketing
Its one of the most important multiplier of agricultural
development
Technological breakthrough (high yield variety) has led
to substantial increase in production and larger
marketable and marketed surplus
Importance of agricultural marketing:

Optimization of resource usage

Increase in farm income
Widening of market
Growth of agro industry
Adoption of new technology
Employment creation
Addition to national income
Better living
Price signals

Agricultural Marketing
It involves movement of farm inputs by farmers (input
marketing) and movement of farm produce to consumers
(output marketing) including grading, storage and
distributions
Marketing of agricultural commodities is different from
marketing of manufactured commodities because of special
characteristics such as :
perishability, seasonality, bulkiness, variation in quality,
irregularity and scattered production directly linking the
supply and demand
It comprises of all operations and the agencies conducting
them, involvement in the movement of farm produced goods
and the effects of such operation on farmers and consumers
Agricultural marketing is directly linked with food habits and
income of consumer
See Link Agricultural Marketing

Minimum Support Price

Marketing of Agri Inputs

Fertilizer
Agro chemicals
Seeds
Farm & Irrigation equipments
Credit

Agri Inputs
Following chart illustrates some of the Agri inputs
Fertilizers

Agro Chemical

Seeds
Farm equipment

Credit
Water

Technology

Agro Inputs
Agro inputs can be classified into two categories:
(a) consumable inputs and (b) durable inputs.
Consumable inputs include fertilisers, seeds , feeds,
consumable for power generation, veterinary medicines,
packing materials, agro chemicals & pesticides etc. which are
required by farmers season after season
A no. of corporate bodies are engaged in manufacturing and
marketing of agro inputs such as fertilisers, pesticides, seeds,
farm machinery ( tractors/pump sets), resulting an estimated
business of Rs 20,000 crores per annum
Durable inputs include tractors, motors, pump sets, farm
machinery, irrigation equipments, transportation equipments/
systems, farm animals etc. which are purchased once
sometimes for life or for longer period

Determining Factors
While some input enjoy free and unrestricted market,
some inputs are to be marketed as per direction of
governments.
Marketing of input is decided on three factors:
product characteristics,
user characteristics and
use characteristics.
These factors help to decide the element of :
marketing mix,
size of marketing organisation and
appropriate marketing strategies

Explanation of Characteristics
Product characteristics:

Consumable or capital
High value or low value
High volume or low volume
High cost or low cost
Manufactured or locally produced
High or low shelf life

User characteristics
Planter/big or small farmer
Dealers or blenders

Use characteristics;

Irrigated or dry farming

Cash or food crop
Progressive or traditional farmers
Market oriented or subsistence

Marketing Examples
Marketing of Fertilizers:
Fertilizer consumption greatly depends upon region wise
suitability, availability, and profitability. There are three types
namely: straight ( supply only one nutrient N or P or K)
compound (mixture of N, P and/or K) or complex mixture
( three nutrients in proportion)
Marketing of fertilizers is tightly controlled by government
regulations and governed by Essential Commodities act (ECA),
Fertilizer Control Order (FCO)
Pricing until recently was under control of Governments. Now all
varieties are free EXCEPT Urea. However, to benefit the
farmers, Government gives ad-hoc subsidy to manufacturers
Fertilizer is a high volume high value product.
It is sold through distribution network with about four months
production stocked at regional godowns while factory head
stocks about two months production

Marketing of Agro chemicals

The chemicals used for control of pests, plant diseases,
rodents etc. are broadly termed as agro chemicals.
The agro chemical market is dominated by insecticides
(80%) and the rest being by fungicides/herbicides.
Ten manufacturers alone account for 80% of market.
In addition, formulators also import technical grade materials
and prepare various formulations for ultimate users at
different concentrations for different crops, pests and
diseases.
All manufacturers and formulators have to register
themselves with Central Insecticides Board under the
insecticides Act 1968
Agro chemicals are high value low volume product with a
relatively short shelf life . These are distributed though
channels

Marketing of Seeds

Seed is both a means of production and also a product

Quality of seeds influence adoption of other inputs
Timely access to seeds is crucial
Seeds are basically of two types, namely: breeder seeds
and foundation seeds whose usages were 74,000 quintals
and 800,000 quintals respectively in 2010-11
With entry of multinationals in production and marketing of
hybrid and high yielding seeds , the market of seeds have
undergone huge changes.
There are 14 state seed corporations and two national level
seed corporations and about 100 major private sector seed
companies are operating in India

Marketing of Seeds
Seed quality is enforced through following legislations.:
Seeds Act 1966
Seeds rules 198
Seeds control Order 1983
Seeds Bill 2004 (awaiting approval)
In seed marketing, public sectors usually adopt and operate
passive distribution systems
Cattle, poultry & aqua feeds are new area for scientifically
prepared balanced feds
Some of the MNC engaged in seed area are : Cargill( now
Monsanto). Hoechst, Pioneer seeds, Pet seeds, Harrison
Vander Have, Indo-American hybrid seed co etc

Farm Machinery Marketing

The choice of appropriate HP of tractor will depend upon
type of soil, purpose for which the tractor will be used
and the load it is expected to carry after harvest. The
marketing person should be able to advice the farmer on
these points
The implements commonly used are disc harrows, seed
cum fertilizer drills, spray pumps, threshers, combines,
potato planters, cane crushers, sugarcane cutter-cumplanters, bed planters trailers, balers etc.
Several government initiatives to promote use of farm
machinery include: demonstrations, financial assistance,
institutional credit, reduction/exemption in excise duties

Agri Output Marketing

Marketing the products flowing from rural to urban areas.
It includes products and services. It is reverse of
procurement
Processing and manufacturing is to add value to the
agricultural produce, called post harvest activities
Linking point of manufacture with point of product sale is
done through transportation and distribution.
Two concepts that play major role in output marketing
are: (i) whole selling and (ii) retailing

Characteristics
Disposable incomes of rural consumers depend upon
proper marketing systems of rural produce
Urban producers keenly watch the scenario to decide
their marketing strategies
Peculiar characteristics of agricultural produce are:
Bulkiness
Perishability
Variety difference
Dispersed production
Processing need variation
Seasonality

Marketing Concept
The concept for Agri output marketing in India is mainly in
the form of
(i) farm gate purchase
(ii) local markets
(iii) assembly markets
(iv) direct sales which again can be :
(a) farmers market
(b) wholesale market
(c) retail market

Marketing Concept
Farm gate purchase: this is characterized by contracts made
prior to harvesting and the buyers normally constitute
marketing group, cooperatives or traders. This minimizes the
gap between supplier price and consumer price
Local market: where farmers sell their produce on specific
days in a central place. Normally small traders are the buyers.
Quality of produce are non standard as these are procured
from several sources
Assembly markets: where the traders who procured from
local markets are the sellers in bulk and the buyers are usually
the whole sellers
Direct sales: to the consumers and hence volume is low and
loses are high

Marketing Flow
The produce has to be collected or assembled from
numerous small units of production
Since the agricultural production is seasonal and the
consumption is spread out, equalization in supply and
demand is required
This necessitates transportation and storage facilities
Another requirement is processing the produce to bring it
to consumable form
This give rise to intermediaries who in turn seek returns
commensurate with

Function of intermediaries
The function include:
Collection and Assembling
Financing
Grading and Standardization
Storage
Transportation
Processing
Wholesaling
Retailing
These functions are generally performed by village
merchants, commission agents, various operators and
retailers