AGRICULTURAL MARKETING: CONCEPT AND DEFINATION

Market for Agricultural Commodities was neglected till 1970

especially the developing countries like India. The National
Commission on Agriculture (1976) had emphasized the
importance of market for different commodities in Agriculture.

The term Agricultural marketing is composed of two words-

Agriculture and Marketing.

Agriculture means activities aimed at use of natural resources

for human welfare i.e., primary production activities such as
crop production and livestock and other related activities.

Marketing involves series of activities involved in moving of

goods from the point of production to ultimate consumption. It
includes all activities involved in creation of time, place, form
and possession utility.
According to Philip Kotler-marketing is a human
activity directed at satisfying human wants and
needs through exchange process, wants are the
desires capable of satisfaction by using goods and
services.

According to Thomsen – Agricultural marketing

comprises of all operations and agencies involved in
movement of farm produced foods, raw materials
and their derivatives and the effect of such
operations on farmers, middleman and consumers.
This definition neglect input side of agriculture.
 AGRICULTURAL MARKETING SYSTEM IN INDIA IS
COMPOSED OF TWO MAJOR SUB-SYSTEMS

1. Product Marketing: Which are includes farmers,

village traders, wholesalers, processors, importers,
exporters and other who make available various farm
products to the consumers.

2. Factor Marketing: Which are includes input

manufacturers, distributors, processors, importers,
exporters and others who make available farm production
inputs to the farmers.

NCA – (1976) – agricultural marketing is a process which

starts with a decision to produce a farm commodity, market
structure both functional and institutional based on technical
and economic including pre and post harvest operations,
assembling, grading, storage, transportation and distribution.
IMPORTANCE OF AGRICULTURE MARKETING
Agricultural Marketing system helps in identifying the
bottlenecks of the existing marketing system with a view to
provide efficient services in the transfer of farm products and
inputs from producers to consumers. An efficient marketing
system minimises cost and enhance the benefits of all sections
of the society. The success of the marketing system depends
on activities involved in marketing.
Producers: Producer – farmer want the marketing system to
purchase the produce with most minimum time and provide
maximum share in the consumer rupee. Similarly, they want
the system to supply the inputs at the low cost possible price.
Consumers: Marketing system must provide the consumers
food and other items of good quality at low cost possible price.
Market Middleman and Traders: Expect the marketing
system to provide steady and increasing income from the
purchase and sale of agricultural commodities.
Government: The objectives and expectations of producers,
consumers and market middleman are conflict with one another.
The government has to act as a watch dog to safe guard the
interest of the groups associated in marketing.

The overall objective of agricultural marketing system is a

developing country like India should help the farmer is getting
remunerative price for their produce on the one hand and
provide right type of goods at the right place, in right quantity
and quality at right time and at right prices to processors and
ultimate consumers.
 AGRICULTURE MARKETING AND ECONOMIC
DEVELOPMENT
Agricultural marketing plays an important role not only in
stimulating production and consumption, but in accelerating the
pace of economic development. Its dynamic functions are of
primary importance in promoting economic development.
Optimization of Resource use and Output Management:
Increase in Farm Income
Widening of Markets:
Growth of Agro-based Industries:
Price Signals:
Adoption and Spread of New Technology
Employment:
Addition to National Income:
Better Living:
Creation of Utility:
 Agricultural Marketing and Economic
Development
• Orderly and efficient marketing of food grains plays an
important role in solving the problem of hunger. Most of those
who go hungry do so because they can not pay higher prices
for food grains.
• If marketing system is not efficient, price signals arising at the
consumers' level are not adequately transferred to the
producers, as a result farmers do not get sufficient price
incentive to increase the production of the commodities which
are in short supply.
• Thus, an inefficient marketing system adversely affects the
living standards of both the farmers and consumers. In
agricultural-oriented developing countries like India, agricultural
marketing plays a pivotal role in fostering and sustaining the
tempo of rural and economic development. Markets trigger the
 Agricultural Marketing and Economic
Development
• The development of an efficient marketing system is
important in ensuring that scarce and essential
commodities reach different classes of consumers.
• Marketing is not only an economic link between the
producers and the consumers but it also helps to
maintain a balance between demand and supply.
• The objectives of price stability, rapid economic
growth and equitable distribution of goods and
services cannot be achieved without the support of an
efficient marketing system
Scope of Agricultural Marketing:

The subject of agricultural marketing includes product marketing

and input marketing. Output marketing is as old as civilization.
Off late, the output marketing has given prior importance due to
increased marketable surplus of the crops which is attributed to
technological break through in agriculture. Input marketing is
comparatively new subject. Farmers in the past used local seeds
and farm yard manure which are available at cheaper rate. In
the recent past, production of farm products is input responsive.
Thus scope of agricultural marketing must include both product
and input marketing.
 The subject of agricultural marketing includes marketing
functions, agencies, channels, efficiency and costs, price
spread and market integration, producer’s surplus,
government policies and research, training and statistics on
agricultural marketing and import/export of agricultural
commodities, difference between marketing of agricultural
and manufactured goods.
The special features of the agricultural sector affect the
supply and demand of agricultural products. The features of
agriculture sector are
1. Perishability of the product: Most of the products
are perishable in nature which varies from few months to
few hours. Because of irregular supply, the price of crops
fluctuates between years or with in the year.
Processing helps in reducing the perishable nature of the
commodity.
2. Seasonality in production: Farm products are not
produced through the year. During the harvest season
the price falls but in case of manufactured goods, the
production and its prices can be regulated depending
upon the demand for products.

3. Bulkiness of products: Bulkiness of agricultural

products makes us to transportation, storage different
and expensive. The price spread in bulky products is higher
due to higher cost of transportation, storage and handling.
4. Variation in quality of products: There is a large
variation in the quality of products which makes grading
and standardization difficult. There is no such difficulty in
manufactured goods.
 5 Irregular supply of Agricultural Products: The supply of
agricultural commodities is uncertain and irregular because
of dependence of agricultural production on nature. With
variations in supply and the demand almost constant, the
prices of agricultural commodities fluctuate substantially.

6 Small size of holding and scattered production: Majority of

the farmers are small farmers with lesser holding size makes the
estimation of supply difficult and creates problems in
marketing. The farmers share in total supply is limited leading to
inelastic demand for most of the farm products. Market price is
determined independent of supply.

7 Processing: The processing agricultural commodities increases

the price spread. This process sometimes acts as disincentives
for the producers and may have adverse effect on production in
the next year.
 MARKET STRUCTURE:
Market structure refers to the size, shape and design of the
market which influence the nature of competition, pricing and
affect the conduct of business firms. The knowledge of market
structure is essential for identifying the imperfections in the
performance of a market.

COMPONENTS OF MARKET STRUCTURE:

1. Concentration of market power: The concentration of
market power is an imperfect element in determining the
nature of competition and consequently of market conduct
and performance. This is measured by the number and size of
firms existing in the market. The extent of concentration
represents the control of an individual firm or a group of
firms over the buying and selling of the produce. A high degree
of market concentration restricts the movement of goods
between buyers and sellers at fair and competitive prices
and creates an oligopoly or oligospony situation in the market.
 2. Degree of product differentiation: The market structure is
affected whether the product is may be homogeneous or not, if the
products are homogeneous, no much price variation in the market.
When the products are heterogeneous, the firms have the
tendency to change different prices for their products. Everyone
tries to prove that his product is superior to the products of
others.

3. Conditions for entry of firms in the market: Sometimes, a

few big firms do not allow new firms to enter the market or make
their entry difficult by their dominance in the market. These
may also be some government restrictions on the entry of firms.

4. Flow of market information: A well organized market

intelligence information system helps all the buyers and sellers to
freely interact with one another in arriving at prices and striking
deals.

5. Degree of integration: The firms plan their strategies in respect

of the methods to be employed in determining prices, increasing
sales, co-ordinating with competing firms and adopting
predating practices against rivals or potential entrants. The
structural characteristics of the market govern the behaviour of
the firms in planning strategies for their selling and buying
operations.
 Criteria for measuring market performance and
Efficiency of market structure
1. Efficiency in the use of resources, including real cost of
performing various functions.

2. The existence of monopoly or monopoly profits.

3. Dynamic progressiveness of the system in adjusting the size

and number of firms in relation to the volume of
business.

4. The problem of inequalities in inter-personal, inter regional

or inter group incomes.

The market structure, therefore, has always keep on

adjusting to the changing environment if it has to satisfy the
social goals. A static market structure soon becomes absolute
because of changes in physical, economic, institutional and
technological factors.
 For satisfactory market performance, the market
structure should keep pace with following changes

1. Production Pattern: Significant changes occur in the

production pattern because of technological, economic, and
institutional factors..

2. Demand pattern: The demand for various products keeps

on changing because of change in incomes, pattern of
distribution and consumers tastes and habits.

3. Costs and patterns of marketing Functions:

Transportation, storage, financing and information
dissemination and govt. policies changes over a period of time

4. Technological Change in Industry

Technological changes necessitate changes in the

market structure through adjustments in the scale of business,
the number of firms etc.