Agricultural Marketing and International Trade

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AGRICULTURAL MARKETING AND INTERNATIONALTRADE

DEPARTMENT OF AGRICULTURAL ECONOMICSTAMIL NADU AGRICULTURAL UNIVERSITY

COIMBATORE-641003.


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INTRODUCTION

Marketing is as critical to better performance in agriculture as farming itself. Therefore, marketreforms ought to be an integral part of any; policy for agricultural development. Alothough aconsiderable progress has been achieved in technological improvements in agriculture by theuse of high yielding variety seeds and chemical fertilizers by; the adoption of plant protection

measures, the rate of growth in farming in developing countries has not attained the expectedlevels. This has been largely attributed to the fact that not enough attention has been devotedto the facilities and services which must be available to farmers if agriculture is to develop.

Agricultural marketing was, till recently, not fully accepted as an essential element in alldevelopment in the countries of Asia and far East. Although opinions differs to the extent andprecedence, there was general agreement till 1970 that the question of markets for agriculturalcommodities had been neglected. Agricultural marketing occupies a fairly low place inagricultural development policies of developing countries. The National Commission onAgriculture (1976) has emphasized that it is not enough to produce a crop or an animal product,it must be satisfactorily marketed.

Objectives of the study:

A decision of an appropriate strategy, the evolution of a proper policy and choice of policyinstruments calls for a continual flow of advice, information and assessment of the existingsystem. Every system generates impulses as a result of environmental changes. Theseimpulses have to be observed, recorded, analyzed and interpreted for the benefit of the policymakers.

A study of agricultural marketing system is necessary to an understanding of the complexitiesinvolved and the identification of bottlenecks with a view to providing efficient services in thetransfer of farm products and inputs from producers to consumers. An efficient marketingsystem minimizes costs, and benefits all the section of the society.

The expectations from the system vary form group to group and generally, the objectives are inconflict. The efficiency and success of the system depends on how best these conflictingobjectives are reconciled.

Producer: Producer-farmers want the marketing system to purchase their producewithoutloss of time and provide the maximum share in the consumers rupee. They want the maximumpossible price for their surplus produce from the system. Similarly, they went the system tosupply them the inputs at the lowest possible price.

Consumers: The consumers of agricultural products are interested in a marketing system thatcan provide food and other items in the quantity and of the quality required by them at the

lowest possible price. However this objective of marketing for consumers is contrary to theobjective of marketing for the farmer-producers.

Market middlemen: Market middlemen are interested in a marketing system which providesthem a steady and increasing income from the purchase and sale of agriculture produce. Thisobjective of market middlemen may be achieved by purchasing the agricultural products fromthe farmers at low prices and selling them to consumers at high prices.


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Government: The objectives and expectations of all the groups of society producers,middlemen and consumers conflict with one another. All the three groups are indispensableto society. The government has to act as a watch-dog to safeguard the interests of all thegroups associated in marketing. It tries to provide the maximum share to the producer at thelowest possible price, and enough margin to market middlemen so that may remain in the tradeand not think of going out of trade and jeopardize the whole marketing mechanism. Thus, the

government wants that the marketing system should be such as may bring about the overallwelfare to all the segments of society.

Scope and subject matter of Agricultural Marketing

Agricultural marketing in a broader sense is concerned with the marketing of farm productsproduced by farmers and of farm inputs required by them in the production of these farmproducts. Thus, the subject of agricultural marketing includes product marketing as well asinput marketing.

Market

The word market is a derivative of the Latin word Marcatus meaning thereby merchandiseware, traffic, trade or a place where business is conducted. The term market is widely used andit may mean and include any of the following.

It may mean a place as an open space (in a village) or a large building (public or private) whereactual buying and selling takes place.

An assembly or a meeting together of people for their private purchases and sales of goods at aparticular time and place. e.g. Periodical markets, village fairs, where both the buyers andsellers come together and conduct their transactions.

An area of operation or the geographical or economic extent of the commercial demand for

commodities. The market may extent to a locality, village, town or a country according to thedemand of a commodity. E.g. Market for Mango Fruiti, Indofil-M45.

An organization by which the exchange of goods is effected. This may be an association ofprivate individuals drawn together by common interests or an organized institutions governed bywritten rules or by state regulations. e.g. Regulated markers.

It may mean all the inhabitants of a country. e.g. Indian market. It refers to the total populationof India and its purchasing power in aggregate.

Definition of Market

Below are given a few definitions of market as given by different authors.

According to pyle (1936), Marker include both place and region in which buyers and sellers arein free intercourse with one another.

Clark and Clark (1947), defined market is a center about which ;or an area in which the forcesleading to exchange of title to a particular product operate and towards which the actual goodstend to travel.


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H.E. Mitchell viewed that market for most commodities may be thought of not as a geographicalmeeting place but as getting together of buyers and sellers in person, by mail, telephone,telegraph or any other means of communication.

From these definitions it may be inferred that (i) market always refer to a commodity and buyersand sellers, (ii) it deals with transfer of ownership rights.

Marketing

The term marketing has a broad social meaning. Infact, the societal view is more trulydescriptive of marketing today.

Any niter-personal or inter-organisational relationship making an exchange (transaction) ismarketing. That is, the essence of marketing is a transaction an exchange-intended to satisfyhuman wants (Philip Kotler). Consequently, marketing occurs any time one social unit strives toexchange something of value with another social unit. Marketing consists of all the activitiesdesigned to facilitate that exchange.

Definition: The task of definig marketing may be approached from three points of view.

Legalistic, oaf which the example is marketing includes all activities which are concerned witheffecting changes in the ownership and possession of goods and services.

Economic, of which the examples are, that part of economics which deals with the creation oftime, place and possession utilities.

that phases of business activity through which human wants are satisfied by exchangeof goods and services for some valuable consideration

Factual or descriptive such as the performance of business activities that direct the flow of

goods and services from producer to consumer or use

In system view marketing is defined as follows: Marketing is a total system of business activitiesdesigned to plan, promote and distribute want-satisfying goods and services to present andpotential customers at the same time earning normal profits.

This definition has the following significant implications:

It is a managerial system definition.

The entire system of business activities must be market or customer oriented. Customerswants must be reorganized and satisfied effectively.

This definition suggests that marketing is a dynamic business process a total integratedprocess rather than a fragmented assortment of institutions and functions. Marketing is notany one activity, nor is it exactly the sum of several. Rather, it is the result of interaction ofmany activities.The marketing program starts with the germ of a product idea and does not end until thecustomers wants are completely satisfied, which may be some time after the sale is made.


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The definition implies that to be successful, marketing must maximize profitable sales over thelong run. Thus, customers must be satisfied in order for a company to get the repeat businessthat ordinarily is so vital to success.

Other definitions

According to Converse, Hugey Mitchell, Marketing includes all activities involved in the creationof place, time, and possession utilities. Place utility is created when goods and services areavailable at the places where they are needed, time utility, when they are needed. Andpossession utililty, when they are transferred to those who needs them.

The process of marketing makes goods and services much more valuable when they arewanted and transferred to the people and at a place when they want them.

American Marketing Association (1960) defined, marketing as it cosists of the performance ofbusiness activities that dierect the flow of goods and services from producer to consumer oruser.

Duddy and Reizen defined marketing is an economic process by which goods and services areexchanged and their values determined in terms of money prices.

Edward W. Cundiff defined, marketing as the process by which product are matched withmarkets and through which transfer of ownership is effected.

By going through the above definitions on marketing we may observe that marketing includesfollowing.

Creation of place, time, form and possession utilities.

Satisfaction of human needs and wants.

Exchange of goods and services.

Transfer of ownership rights.

Market and marketing

Markets ate institutions in marketing e.g. Vegetable market, refers to the various functionariesinvolved viz., village merchant, commission agent, wholesale trader, retailers etc., where asmarketing of vegetables includes all those functions performed by; these agencies in directingthe flow of vegetables from the primary producer to the ultimate consumers. Sales to the villagemerchant, transport, selling through commission agents to the whole sale, purchase by; the

retailer, finally purchase by the ultimate consumers, all these functions put together is known asmarketing.

Marketing and selling

Selling focuses on the needs of the seller. It is preoccupied with the sellers need to convert hisproduct into cash. Marketing focuses on the needs of the buyer. It is preoccupied with the ideaof satisfying the needs of the customer by; means of the product and the whole cluster of thingsassociated with creasing, delivering and finally consuming it.


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Sometimes the terms, marketing, selling and merchandising are used inter-changeably or onefor the other, though there exists difference.

Marketing is a comprehensive term, the total of the marketing activities. Selling is one methodof promotion and promotion is only a part of the total marketing activities. Merchandising is

defined as product-planning. It includes internal planning needed to get the right product orservice to the market at the right time, at the right place and in the right colors, quantities andsizes.

Importance of marketing

Marketing has even greater importance and significance for the society as a whole than for any;of the individual beneficiaries of the marketing process, and can be expressed as follows.

Optimization of resource use and output management: An efficient marketing system leads tothe optimization of resource use and output management. An efficient marketing system canalso contribute to an increase in the marketable surplus by scaling down the losses arising out

of inefficient processing, storage and transportation. A well designed system of marketing caneffectively distribute the available stock of modern inputs, and there by sustain a faster rate ofgrowth in the agricultural sector.

Increase in farm income: An efficient marketing system ensures higher levels of income forthe farmers by; reducing the number of middlemen or by restricting the commission onmarketing services and the malpractices adopted by them in the marketing of farm products. Anefficient system guarantees the farmers better prices for farm products and induces them toinvest their surpluses in the purchase of modern inputs. This again results in increases in themarketed surplus and income of the farmers.

Addition to National Income: National income comprises of goods and services produced in an

economy which attain value only through marketing. Any increase in the efficiency of themarketing process resulting in lower costs of distribution and lower prices to consumers bringsabout an increase in national income.

Employment: The marketing system provides gainful employment to millions of personsengaged in various activities, such as packaging, transportation and processing. Persons likecommission agents, brokers, traders, retailers are employed in the marketing system.

Price signals: Scientific marketing has a stabilizing effect on the price level as well as theeconomy; as a whole. Producers produce what consumers want and consumers have a widechoice of products, there are no frequent ups and downs in prices.Widening of markets:A well-knit marketing system widens the market for the produce by taking

them to remote corners of the country. The widening of the market helps in increasing thedemand on a continuous basis, and thereby guarantees a higher income to the producer.

Creation of utility: Marketing ads value of goods by; changing their ownership and bychanging their time and place of consumption. Thus, marketing creates form, place, time andpossession utilities.


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Growth of Agro-based industries: An improved and efficient system of agricultural marketinghelps in the growth of agro-based industries and stimulates the overall development process ofthe economy. Many industries depend on agriculture for the supply of raw materials.

Scientific marketing helps to balance the spatial and temporal imbalance between supply anddemand of both resources and produced goods.

It adds value to the services e.g. Business, medical entertainment and educational services.

Pattern of consumption are determined both by the structure of the marketing system which isset up to carry the flow of goods and services from producers to consumers and use, and by thevalue added to these goods and services through performance of marketing activities.

The importance of marketing in underdeveloped and developing countries has been very wellindicated by Drucker. He said, Marketing occupies a critical role in respect of the developmentof developing nations. It steps speedy development in the following ways.

Development of marketing leads to the integration of various economic sectors of the

nation such as agriculture and industry.

It makes fullest utilization of the existing assets and productive capacity possible.

It makes unknown and untapped economic energy.

It contributes to the development of entrepreneur and managerial class of the people.

Significance of Horticultural Marketing

For the development of agricultural and horticultural sector, it is essential to develop marketingof agricultural and horticultural products so as to match with the production surplus resulting

from technological innovations and exploitation of the existing land and water resources. Apartfrom increasing production, marketing and distribution can significantly help in improving theavailability of goods and services and also provide a stimulus to production.

Marketing also increases demand which will provide its own incentive to increase supply. eg.development of national market for a specific commodity which is seasonal assure price andincome.

Adoption of modern techniques of production has hot to be integrate with the moderntechniques of marketing and distribution, because in the ultimate analysis, the key to prosperitydepends upon the availability of goods and services.

Marketing in sum, tries to find out the right type of production that the firm should manufacture,the right place where it is to be made available and the right channel, through which it is to bebrought notice to the consumers. It is the father of innovation and product development,promoter of entrepreneurial talent, developer of economy, simulation of consumption and higherstandard of living and guardian of price system.


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CLASSIFICATION OF MARKETS

Types of markets are determined by nature of commodities, time and nature of business, areaand importance of the products. There are several types of markets, the fundamentals of whichare the same, the pattern has been changing through out.

Classification based onArea : Local

NationalInternational

Time : Very short periodShort periodLong period

Business type : WholesaleRetail

Goods : Commodity marketProduce exchangeManufactured goodsBullion market

Capital marketMoney marketForeign exchange marketStock exchange market

Importance : PrimarySecondaryTertiary

Competition : Perfect competitionImperfect competition

On the basis of area:

Local market: Where buyers and sellers belong to a small local area (ie. a town or village) it iscalled a local market. Their requirements are limited and fulfilled in the area itself.

National markets: It is one when for a certain commodity or commodities a nation as a wholecould be regarded as one market. e.g. Turmeric market at Bombay.

World market: Certain commodities cover the whole world and that is called world market. Amarket in which buyers and sellers are drawn from the whole world. These markets exist incommodities which have a world-wide demand or supply.


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The national market may be further divided into urban and rural markets. Urban markets arethose which cover relatively high density population with a developed infrastructure. eg. citiesand towns. Rural markets are those which exist in the vast rural areas, where the density ofpopulation is low, without any significant infrastructural facilities. The rural markets aregenerally uninterested interns of communication and physical distribution facilities.

On the basis of time

Very short period markets: Markets for highly perishable goods like fruits and vegetables are ofvery short period No attention id generally paid to increase or decrease the supplies. Prices arecharged according to the intensity of demand. The markets which are held only for a few hours.

Short period markets: These markets are held relatively longer period than the very short periodand the commodities traded are less perishables and can be stored for some time. Here someconsideration is paid for the supply to meet demand, but sufficient time is not available, hence,demand stands still. Price is fixed by the demand factors to maximum extent eg.

Long period market: These are the markets of permanent nature. The commodities traded in

these markets are durables in nature and can be stored for many years. These types ofmarkets are also termed as secular markets. e.g. Manufactured goods. Here sufficient time isavailable to change the supply and the supply can be altered to any extent. Therefore, supplygoverns the demand factor and in the long run price covers the marginal cost of production.

On the basis of business type/volume

Based on the business type the markets are classified into whole sale and retail markets. It isalso determined by the volume of business.

Wholesale market: It is one in which commodities are bought by and sold in large lots or in bulk.Transactions in these markets take place mainly between traders.

Retail markets: It is one in which commodities are bought by and sold to consumers as per theirrequirements. Transactions in these markets take place between retailers and consumers.These markets are very nearer to the consumers.

On the basis of goods/commodities

Commodity markets: This classification is based on whether the good considered is needed forconsumption or production. In order to facilitate the work of classification, commodities aredistinguished with each other after giving due consideration to all the qualities of a commodityby specialists while standardizing the goods, they are often sold by a simple standard calledFAQ (Fair Average Quality). When gods are sold by description, the percentage of valuable

materials determines the quality and if any difference arises, on delivery of inferior goods, it iscompensated by playing a amount of difference. These commodity markets are further dividedinto produce exchange, manufactured goods market and bullion markets.

Produce exchange markets: Big and well organized markets for raw materials/products (likewheat, cotton, oilseeds, sugar, iron and coal) are known as produce exchange and are found incities or developed centers of a country. One market deals in one commodity only but the saleof other produce is not at all restricted. e.g. Cotton exchange of Mumbai.


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Manufactured goods markets: These are the markets of manufactured and semi-manufacturedgoods. eg. Cotton, Jute, leather goods. The best example of commodity market ofinternational importance is Leather Exchange at Kanpur.

Bullion market: These are concerned with the purchase and sale of gold, silver and preciousstones. These are highly specialized and well organized markets of the world and localized in

every developed centre of a country. e.g. Bullion markets of Mumbai, London.

Capital markets: Financial requirements of big industrial and commercial concerns are met bymoney markers/capital markets. Capital market is composed of the following types.

Money markets: It is a broad term and includes number of agencies providing finance tobusiness and industrial concerns. Such markers on the one hand help the public to invest ordeposit their surplus funds either in industrial concerns or in banks and on the other hand, toallow those who are in need of money to take loan through banks ets., for a reasonableremuneration in return for interest or discount. These are affiliated to larger trading centers likeMumbai, Delhi, Chennai and Calcutta.

Foreign Exchange Markets: Foreign exchange refers to the acquisition of means to play forpurchases made abroad. Foreign exchange is earned through exports, aid flows, remittancesand loans. The international demand for a particular currency to pay for imports/purchases byother countries determines its value in the international market.

Stock Exchange: This is the market for investment. Stocks, bonds, debentures, shares andother industrial securities are purchased and sold in these markets which are transformed in tocapital investments by the companies concerned. These markets are highly specialised andcommand a very wide area of operation. eg. Important stock exchanges in India are atMumbai, Kanpur, Calcutta and Chennai.

On the basis of importance

Markets for agricultural and horticultural produce may be broadly classified into threecategories, the primary, secondary and tertiary markets.

Primary markets: These markers are located in big towns near the centres of production ofhorticultural commodities. In these markets, a major part of the produce is brought for sale bythe producers themselves. Transactions in these markets usually take place between thefarmers and traders. These markets are also referred as primary wholesale markers.

Secondary markets: Also referred as secondary wholesale markets. These markets aregenerally located in district head quarters or important trade centres. The major transactions incommodities take place between the village traders and wholesalers. The bulk of arrivals in

these markets is from other markets. The produce in these markets is handled in largequantities. These are therefore, specialized marketing agencies performing different marketingfunctions such as Commission Agents, Brokers, Weighmen etc.

Terminal markets: These markets are those in which the produce is either finally disposed ofdirectly to consumers or processors assembled for shipment to foreign destinations or forredistribution to surrounding areas. Such markers are usually possess sufficient warehousingand storage facilities and cover a very wide area extending over even a state or too. It may be


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observed that a particular market may function as a primary wholesale market for somecommodities and as a secondary market for other commodities.

Based on competition/free intercourse

Markets have been classified on the free intercourse between the buyers and sellers so as to

reach a price at which the whole lot of a commodity is exchanged in that market.

Perfect market: There must be one price for any one standardized commodity at a particulartime in a market. There should be no; restriction on the movement of goods, and there mustbe a good number of buyers and sellers present in the market. Under perfect competition therecan be only one price for a commodity at a given time.

Imperfect market: When different prices are charged for the same commodity; at the sametime, it is said to be an imperfect market.

On the basis of extent of government intervention

Regulated markets: Markets in which business is done in accordance with the rules andregulations framed by the statutory market organization and represent different sectionsinvolved in markets. The marketing costs in such markets are standardized and practices areregulated.

Unregulated markets: These markets are the markets in which business is conducted withoutany set rules and regulations. Traders frame the rules for the conduct of the business and runthe market. These markets suffer from many ills, ranging from unstandaridsed charges formarketing functions to imperfections in the determination of prices.

On the basis of nature of transactions

The markets which are based on types o; transactions in which people are engaged are of twotypes.

Spot cash markets: A market in which goods are exchanged for money immediately after thesale is called the spot or cash market.

Forward markets: A market in which the purchase and sale of a commodity takes place at timet but the exchange of the commodity takes place on some specified date in future i.e t+1.Sometime even on the specified date in the future (t+1), they may nit be any exchange of thecommodity. Instead, the differences in the purchases and sales prices are paid or taken.


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APPROACHES TO THE STUDY OF MARKETING

The branch of marketing can be studied through one of the following four approaches.

The functional approach

The institutional approach

The Commodity approach

The Behavioral system or Decision making approach

The Functional approach

Here the marketing functions are broken down into any functions. Two major functions arebuying and selling and both are of equal importance. Supplement to the major above primary

functions, some of the physical, exchange and facilitating functions are identified.

A marketing function may be defined as a major specialized activity performed in accomplishingthe marketing process. The functions are classified as exchange function, physical function andfacilitating function.

Exchange functions are those activities involved in transfer of ownership or title. There are twoexchange functions, buying and selling. Buying and selling are complementary functionsaround which all marketing efforts revolve. They are basic to the entire marketing process.

Physical functions are those activities that involve in handling, movement and physical changeof the actual commodity itself. They are involved in solving the problems of when, what andwhere in marketing g. Storage, transportation and processing are physical functions.

Storage function is primarily concerned with making the goods at the desired time.Transportation function is concerned with making the goods available at proper place.Processing function includes all those essentially manufacturing activities that change the basicform of the product such as milling of paddy into rice, mango fruit juice.

Facilitating functions are those which make possible the smooth performance of the exchangeof title or physical handling of products. However, without them the modern marketing systemswould not be possible. They might aptly call the grease that makes the wheels of the marketingmachines go round. They are, standardization financing, risk bearing and market intelligence.

Standardization is the establishment and maintenance of uniform measurement of both qualityand quantity. This function simplifies buying and selling. To gain consumers confidence, itestablishes a rational relationship between price and quantity. It takes into account size, shape,form weight etc,

Financing is the advancing of money t carry on the various aspects of marketing.

Risk bearing is the accepting of the possibility of loss in the marketing of a product. These risksare physical and market risks. Physical risks are those which occur from destruction or


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deterioration of the product itself by fire, accident, wind, earthquake, cold and heat. Market risksare those which occur because of the charges in the value of the product as it is marketed.Changes in prices, tastes and preference of the customers may lead to losses and come undermarket risks.

Marker intelligence is the job of collecting, interpreting and disseminating the large variety of

data necessary to the smooth operation of the marketing process.

The main limitation of this approach is that too much emphasis is laid on various marketingfunctions instead of knowing how they are applied to the specific business operations.

The Institutional approach

In this approach, principles of marketing area formulated around the institutions performing themarketing functions. Marketing institutions are the wide variety of business organisations whichhave developed to operate the marketing machinery. The institutional approach considers thenature and character of various middlemen and related agencies and also the arrangement andorganization of the marketing machinery. In this approach the human element receives primary

emphasis. Hence, institutional approach is simply the study of middlemen.

Middlemen are those individuals or business concerns that specialize in performing the variousmarketing functions involved in the purchase and sale of goods as they are moved fromproducer to consumers. The middlemen are classified as merchant middlemen, agentmiddlemen, speculative middlemen, processors and manufacturers and manufacturers andfacilitative organizations.

Merchant middlemen: Merchant middlemen take title to and therefore own the products theyhandle. They buy and sell for their own gain. There are tow types of merchant middlemen viz.,wholesaler and retailer.

Whole saler sells the commodity to retailer and other wholesalers but does. Not sell insignificant amount to ultimate consumers. Wholesaler makes up a highly heterogeneous groupof varying sizes and characteristics. The local merchants who buy good in the producing areadirectly from the farmers, the traders who sell the commodities to the retailers come under thisgroup. The retailer buys products for resale directly to the ultimate consumer of the goods.From the functional view point the retailer may perform all the marketing functions.

Agent middlemen: Act only as representatives of their clients. They do not take title to andtherefore do not own the products they handle. While merchant middlemen secure their incomefrom a margin between the buying and selling prices, agent middlemen receive their incomes inthe form of fees and commission. Agent middlemen sell their services to their principals notphysical goods to customers. There are two types of agent middlemen viz., brokers and

commission agents.

Brokers: The broker on the other hand usually does not have physical control over the product.He has less discretionary power in price negotiations than commission agents.

Commission agents: Commission agent is usually granted with broad powers by the sellerswho sell through him. He normally takes over the physical handling of the product, arranges forsale, sells the goods in his name, prepares hills, collects the money from the buyer, extends


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credit to the buyers, extends credit to the buyers, deducts his fees and remits the balance to theseller.

Speculation middlemen: Are those who take title to products with the major purpose of profitingfrom price movements. All merchant middlemen, of course, speculate in the sense that theymust face uncertain conditions.

Wholesalers and retailers take a minimum risk. Speculative middlemen seek out andspecialized in taking these risks and usually do a minimum of handling and selling. Serveralnames are given to these middlemen such as scalpers and spreaders. They often attempt toearn their profits from short-run fluctuations in prices.

Processors and manufactures: They exist primarily to undertake some action on production tochange their form. e.g. oil millers. Apart from their main processing work many processorstake as active part in other institutional aspects of marketing. Some processors such as flourmillers, rice millers, oil millers etc., often act as buying agents in the producing areas. Thesegroups undertake the wholesaling of their finished products to retailers.

Facilitative organizations: These organizations aid the various middlemen in performing theirtasks. Such organizations do not, as a general rule, directly participate in the speculators. Theyfurnish the physical facilities for handling of products or for the bringing of buyers and sellerstogether. They may also aid in grading, arranging and transmitting of payment and the like.They receive their income from fees and assessments from those who use their facilities. eg.Regulated markets.

Commodity approach

Under such a study, specific commodities are selected and they are followed through from theproducer to the consumer. For example, when one studies the marketing of tomato, he willhave to begin by examining the sources and conditions of supply of tomato, study the nature

and volume of demand, for what purpose it is required, who requires it and who sells it, throughwhat methods it is transferred from the fields to the mandies and to the final consumers, whatactivities in storage, standardization, packaging, branding and financing are undertaken and bywhom. The main advantage of this approach is that it is concrete. Since all work relates to aspecific produce but it is a time consuming process and other results in excessive repetition.

Behavioural System approach

Both functional and institutional approaches are useful in analyzing the existing marketingactivities. However, the marketing process is continuously changing in its organizational andfunctional combinations. How to understand and predict change, is a major problem. Either aparticular marketing firm or an organization of firms such as marketing channel can be viewed

as a system of behaviour. Each is composed of people who are making decisions in an attemptto solve problems. They take decisions on the product, the distribution policies pricing,advertising, selling etc,. In this approach an attempt is made to find out how marketing decisionsare made and should be made.


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CHARACTERISTICS OF AGRICULTURAL AND HORTICULTURALCOMMODITIES

Many of the marketing problems associated with agricultural and horticultural commodities

marketing is due to some of the special characteristics of such produce. Similarly, themarketing of agricultural commodities is different from the marketing of manufacturedcommodities because of the special characteristics of the agricultural sector (demand andsupply) which have a bearing on marketing. These special characteristics of the products in amanner different from the governing the supply and demand of manufactured commodities. Thespecial characteristics which the agrl / hortl. Produce have:

Perishability of the products: Most farm products are perishable in nature; but the period of theirperishability varies from a few hours to a few months. Their perishability makes it almostimpossible for producers to fix the resreve price for their products. The extent of perishability offarm products may be reduced by the processing function, but they can t be made durables /non-perishables like manufactured goods.

Seasonality of production: Farm products are produced in a particular season, they can t beproduced through out the year. In the harvest season, prices fall due to excess supply. But themanufactured goods are produced throughout the year. Their prices therefore remain almostthe same through out the year.

Bulkiness of the products: The characteristics of bulkiness of most farm products make theirtransportation and storage difficult and expensive. This fact also restricts the location ofproduction to somewhere near the place of consumption or processing. The price spread inbulky products is higher because of the higher costs of transportation and storage.

Variation in quality of the products: There is a large variation in the quality, which makes theirgrading and standardization somewhat difficult. There is no such problem in manufacturedgoods, for they are products of uniform quality.

Irregular supply: The supply if farm products are uncertain and irregular be cause of thedependence of agricultural production on natural conditions. With the varying supply, thedemand remaining almost constant, the prices of farm products fluctuate substantially.

Small size of holding and scattered production: Farm products are produced through out thelength and breadth of the country and most of the producers of small size. This makes theestimation of supply difficult and creates problems in marketing.

Processing: Most of the farm products have to be processed before their consumption by theultimate consumers. This processing function increases the price spreads of agriculturalcommodities. Processing firms enjoy the advantage of monopsony, oligopsony or duopsony inthe market.

This situation creates disincentives for the producers and may have an adverse effect onproduction in the next year.


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MARKETABLE AND MARKETED SURPLUS

In any developing economy, the producers, surplus of agricultural produce plays a significantrole. This is the quantity which is actually made available to the non-producing population of thecountry. From the marketing point of view, this surplus is more important than the totalproduction of commodities. The arrangements for marketing and the expansion of marketshave to be made only for the surplus quantity available with the farmers, and not for the totalproduction.

The rate at which agricultural and horticultural products expand determines the pace ofagricultural and horticultural development, while growth in the marketable surplus determinesthe pace of economic development. An increase in production must be accompanied by anincrease in the marketable surplus for the economic development of the country. Though themarketing system is more concerned with the surplus which enters or is likely to enter the

market, the quantum of total production is essential for this surplus. The larger the production ofa commodity, the greater the surplus of that commodity and vice-versa. In a planned economythe knowledge of marketed and marketable surplus helps the policy makers in the followingareas.

Framing sound price policies: Price support and controls are an integral part of agriculturalpolicies necessary for stimulating agricultural production. The quantum of marketable surplushelps in framing these policies.

Developing proper procurement strategies: The procurement policy for feeding the PDS has totake into account the quantum and behaviour of marketable and marketed surplus.

Checking undue price fluctuations: Magnitude and extent of the surplus helps in minimization ofprice fluctuations in farm products because it enables the authorities to make properarrangements for the movement of produce from one area, where they are in surplus, to anotherwhich is deficient.

Advanced estimates of the surpluses of such commodities which have the potential of externaltrade are useful in decisions related to export and imports of the commodity. If surplus isexpected to be less than what is necessary, the country can plan for import and vice-versa.

Marketable surplus

It is the residual quantity left with the producer-farmer after meeting his requirements for family

consumption, farm needs for seeds, and feed for cattle, payment to labour in kind, payment toartisans, landlords as rent, and social and religious payments in kind. This may be expressedas follows:

MS =P - C


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Where,

Ms : Marketable surplus

P : Total production

C : Total requirements (family consumption, farm needs, payment to artisans; labour,landlord and for social and religious needs.)

Marketed surplus

Refers to the quantity of produce that is actually sold in the market by; the producer, irrespectiveof his home consumption and other requirements. The marketed surplus may be more, less orequal to the marketable surplus.

The marketed surplus is more than the marketable surplus when the farmer retains a smallerquantity of the crop than his actual requirements for family and farm needs. This is trueespecially of small and marginal farmers, whose need for cash is immediate. This situation of

selling more than the marketable surplus is called distress or forced sale. Such farmersgenerally buy the produce from the market in a later period to meet their family and/or farmneeds. The quantity of distress sale increases with the be sold to meet some fixed cashrequirements.

The marketed surplus is less than the marketable surplus when the farmers retain some of thesurplus produce. This situation holds true under the following conditions.

Large farmers generally sell less than the marketable surplus because of their betterretention capacity. They retain extra produce anticipating higher price in the laterperiods. Sometimes farmers retain even upto next production season.

Farmers substitute one crop for another either family consumption or for feedinglivestock because of the variation in prices. With the fall in the price of the first croprelative to competing crop, farmers may consume more of the first and less of thesecond.

The marketed surplus may be equal to the marketable surplus when the farmers neither retainmore nor less than his requirements. This holds true for perishable commodities and of theaverage farmers.

Importance of Marketable surplus

Agricultural and horticultural marketable surplus is highly significant for economic development

as it is used by the non-farm and urban population to meet for food and raw materials. Byraising output and also by increasing the marketable surplus, the farmers can make a positivecontribution to economic development.

Further, part of the marketable surplus would be exported to foreign countries. The increasedearning of foreign exchange will help to finance import of capital goods which are so necessaryfor individual development.


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Factors affecting marketable surplus

The marketable surplus differs from region to region, crop to crop. It also varies from to farm.On a particular farm, the quantity of marketable surplus depends on the following factors.

Level of production: Marketable surplus depends up on the size of production. Larger the size

of production, other thing being equal. The larger will be the marketable surplus. In general,marketable and marketed surplus would increase with increase in production.

Size of farm: As the size of the farm increases, the marketable surplus also increases.Although the actual quantity retained increases with the increase in the farm area, theproduction of marketable surplus is higher in medium and large size of holdings.

Size of the family: As the size of the family increases the marketable surplus decreases. Thisis so incase of food grains, milk, egg etc.,. The commercial crops have no binding with the sizeof family eg. cotton.

Consumption pattern: Marketable surplus of food grains is influenced by consumption pattern.

The marketable surplus of rice in Punjab and Haryana is more when compared to Tamil Nadubecause of the predominance of wheat in their consumption pattern.

Cash requirements: The larger the farmers demand for cash, the greater is their incentive tosell more in the market. Further, those who have to meet money obligations will have to sellmore and do the so immediately after harvest.

Price of the commodity: As the price of the selected commodity increases the farmers will try todispose as much as possible to earn better income. This will increase the marketable surplus.Price of the commodity and marketable surplus are positively related.

Measures for raising marketable surplus: This includes the magnitude as flow of marketable

surplus. This means that measures should be taken to increase the productivity as well as toensure large flow of marketable surplus, out of increased productivity. Increase in productionrequires input intensification. This involves large outlay in both private and public sectors aswell as institutional arrangements.

The specific measures measures are:Selection of crops and areas as a mens of increasing marketable surplus a recent approach.e.g. IADP.

Non-price incentives: Non-price incentives like provisions of irrigation facilities, credit,improvement in the art of crops management, skills, institutional arrangements are moreimportant in increasing marketable surplus.

Well defined price policy: Fixing up a minimum price policy will be helpful for the farmer to takea decision on area to be allotted for the particular crop, intensive use of inputs etc.,. When theminimum price fixed is attractive and when it is spelt out before the season the farmer canincrease the productivity and production leading to increased marketable surplus.

Establishments of co-operative marketing society: Linking of supply of credit to farmers by theco-operative societies with the marketing of produce.


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SELLING BEHAVIOUR OF FARMERS

A majority of farmers in India sell a large part of their produce in villages, which results in lowreturns for their produce. There is a difference in the prices prevailing at different levels of

marketing i.e. the village, primary and secondary wholesale market and retail level. The extentof village sales varies form area to area, commodity to commodity, and also with the status ofthe farmers. The village sale is 20-60 percent in food grains, 35 to 85 per cent in cash cropsand 80-90 per cent in perishables. The factors responsible for village sales are:

Farmers are indebted to village money lenders, traders or landlords. They were often forcedeither to enter into advanced sale contracts or sell the produce to them at low prices.

Transport bottlenecks: Many villages are not connected byroads. Adequate transport meansare not available even in villages connected by roads. It is difficult to carry the produce inbullock carts to market which are often situated at long distances.

There is a small quantity of marketable surplus with a majority of the farmers because of smallsize of holdings.

Farmers are hand pressed for money to meet their social and other obligations, and are oftenforced to sell their produce right in the village.

Perishability of the produce: Most of the perishable products need to be marketed in thevillages because of their low keeping quality and non-availability of quick transport means.

The information on the prices obtaining in the nearby primary and secondary wholesale marketsis not readily available to the farmers.

Problems in marketing horticultural produce

The peculiarities of agricultural and horticultural produce lead to various problem in marketingprocess. These problems related to

Distribution of inputs to the producers widely scattered

Collection of the output. Since numerous collection points are required, the collection chargesconstitute a major component of the total produce.

Perishability forces the produce either to be processed quickly or to be transported to theconsumers quickly. At the same time since the products are seasonal in nature, it leads to (i)excessive investments for processing and transport facilities and (ii) excessive unutilizedprocessing capacities in the off-season.

The seasonality creates money problems for the producers as well as traders. Farmers neemoney for inputs through out the production process, where as they get their returns only at theend of production process. And the post-harvest glut erodes the market prices and thereby theirincome. Similarly, traders are required to lock-up their money heavily at harvest times, whichmakes them to be speculate to cover their risks.


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Seasonality leads to speculative trading business like hoarding and selling in black markets.

The environment susceptibility of agricultural and horticultural produce makes the marketintelligence to risky and uncertain leading to wastages and damages.

The low value of agricultural and horticultural produce and its seasonality makes the private

corporates to sky away from investing on research and development on modern marketingprocess for agricultural and horticultural produce. Often raw exports reduce the potential foreignexchange earnings.

Besides, the uncertainties and peculiarities of agricultural and horticultural produce and itsseasonality makes it very difficult to have effective check on the marketing process. This pavesway for the emergence, existence and persistence of large scale unorganized markets forvarious agricultural produce in which various defects and malpractices begin to emerge andpersist.


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MARKETING FUNCTIONS

Any specialized activity performed in carrying a product from the point of production to theultimate consumers may be termed as a marketing function. A marketing function may have

any one or a combination of three dimensions viz., time, space and form.

The marketing functions involved in the movements of goods from the producer to the ultimateconsumer vary from commodity to commodity, market to market, the level of economicdevelopment of the country and final form of consumption.

The marketing functions may be classified in various ways. For example, Thompson hasclassified the marketing functions into three broad groups. These are

Primary functions: includes assembling or procurement, processing, dispersion or distribution

Secondary functions: includes packing or transportation, grading and standardization, quality

control storage and warehousing, price determination or discovery, risk taking, financing, buyingand selling, demand creation and determination of market information.

Tertiary functions: includes banking, insurance, communication, supply of energy.

Kohls and Uhl classification

Physical functions: storage and ware housing, processing, transportation

Exchange functions: buying and sellingFacilitative functions: standardization, financing, risk taking, dissemination of marketinformation

From the above classification, one can find that there are three principal marketing functions,assembling (procurement and concentration), processing (preparation for consumption) anddispersion (distribution) and a set of secondary facilitative services called secondary serviceslike grading, packaging, transporting, storing, financing, assuming risk and selling.

Assembling: Assembling means bringing together, collecting and concentrating goods of thesame type from the various sources of supply at centrally located places. The horticulturalcommodities are assembled chiefly for two purposes: (i) for meeting the demand of theconsumer and (ii) to provide a sufficient volume of business to middlemen, like wholesalers andretailers. The importance of assembling as a means of facilitating the orderly feeding of marketis fairly obvious where these markets are far away from the away from the multitude of smallproducers responsible for supplying them. In India where 70 per cent of farmers are small andmarginal and this function has an important role to play.

Processing: Processing helps to create a new demand and maintain the quality of the productfor a period. Processing, therefore, may be defined as the act or series of acts by which aproduct is converted into a more useful form. The processing function would include all of theseessentially manufacturing activities that change the basic form of the product. Eg. Wheat intoflour and finally into bread.


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Dispersion: It is a process exactly opposite to that of assembling. After collecting the productsof many farmers in scattered localities and processing the same, the process of dispersionbegins. This is the dispersion of these products to many thousands of consuming markets andinto the hands of millions of consumers. The dispersion function involves finding:

Where potential buyers are located

How much and what product they prefer? and

What price the are ready to often?

It also includes selling of the goods, their physical movement and handling and the transfer offunds back to central and assembling markets. It means keeping a steady flow intoconsumption of the vast volume of goods which is following into the central markets through theassembling end of the marketing system.

BUYING AND SELLING

Buying and selling are the most important activities in the marketing process. By this exchangefunction, possession utility is added to the commodities. The number of times the buying andselling activity is performed depends on the length of the marketing channel. In the shortestchannel where no middlemen is involved, this activity takes place only once, (i.e).producer toconsumer. But usually in the case of farm products, selling and buying activities areundertaken each time when the produce moves from the farmer to the primary wholesaler, fromthe wholesaler to retailer to retailer and from the retailer to the consumer.

Buying

It involves the purchase of the right goods at the right place, at the right time, right quantitiesand the right place. It involves the problem of what to buy, when to buy, from where to buy, how

to buy and how to settle the prices and terms of purchases.Buying function involves the following subsidiary functions before the actual buying functiontakes place.

Planning the purchase of goods: Deciding the quantity of each good to be purchased.

Contractual function: Determining the sources of supply and establishing contacts with them

Negotiation of price and terms and conditions of buying

Final agreement and transfer of goods.

Selling

It involves the problems of when to sell, where to well, through whom to sell, and whether to sellin one lot or in parts. The objective of selling is to dispose of the goods at a satisfactory price.The selling function thus includes the following sub-functions, the performance of which enablesto get a good price for the produce.


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Product planning and development: This sub-function includes the activities of determination ofthe variety quantity of the product to be produced, grading it and deciding about the trade orbrand names to be adopted for the product.

Contractual function: Includes the activities which are designed to stimulate already existingdesire for the satisfaction of the want of a given product. In other words, it means selling the

products with which potential consumers are not familiar.

Negotiating the prices and selling the terms and conditions of sale with the buyers.

Final selling and transfer of the produce.

Methods of buying and selling prevalent in India

Under cover of a cloth: By this method, the prices of the produce are settled by the buyer andthe commission agents of the seller by pressing the fingers of each other under cover of a pieceof cloth. This system provides opportunities for cheating the seller, for the seller is not aware ofthe price that has been offered by other buyers. This method has been abolished now by; the

government because of the possibility of cheating, though it continues to be used in somemarkets.

Private negotiation: In this method, prices, are fixed by mutual agreement. This is common inunregulated markets or village markets.

Quotations on samples taken by commission agents: In this method, commission agents takesthe samples of the produce to the buyers. The produce is given to the one whose bid is thehighest.

Dara sale method: The produce in different lots is mixed and then sold as one lot. The

advantage is within a short-time, a large number of lots can be sold. The disadvantage is thatthe produce of a good quality and one of poor quality fetch the same price.

Open auction method: The prospective buyer is gather at the shop of the commission agentaround the heap of the produce, examine it and offer bids loudly. The produce is given to thehighest bidder after taking the consent of the seller farmer. This method is preferred to anyother method because the farmers bring a superior quality of the produce receive a higher price.In most regulated markers, the sale of the product is permissible only by the open auctionmethod.

Close tender system: In this, bids are invited in the form of a closed tender rather than by aopen announcements. The prospective buyers visit the shops, inspect the lots, offer a price for

the highest. The advantage of this method of sale is time-saving and labour saving method.There is no possibility of collusion among the buyers.

PACKAGING

Packaging is a process of putting the commodities into convenient containers or wrappers. It isa very useful function in the marketing process of agricultural commodities. Most of thecommodities are packed with a view to preserving and protecting their quality and quantityduring the period of transit and storage. Packing means, the wrapping and crating of goods


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before they are transported. Goods have to be packed either to preserve them or for deliverthe buyers. Packaging is a part of packing, which means placing the goods in small packageslike bags, boxes, bottles for sale to the ultimate consumers.

Advantages of packing: Packaging contributes to efficient marketing by:

It protects the goods against breakage, spoilage, leakage during their movement fromproduction to the consumption point.

It reduces the bulk

Facilitates the handling of the commodity, specially such fruits as apples, mangoes etc duringstorage and transportationIt helps in reducing marketing costs by reducing the handling and retailing cost.

Helps in checking adulteration.

It prolongs the storage quality of the products by providing protection from the ill effects of

weather, specially for fruits, vegetables and other perishables.

Packaging with labeling facilitates the conveying of instructions to the buyers as to how to howto use or preserve the commodity. The label shows composition of the product.

TRANSPORTATION

Transportation or movement of products across regions is one of the most important marketingfunctions at every stage. This function is primarily concerned with making goods available atthe proper place resulting in creating place utility of horticultural commodities. While it is alwaysdesirable to transport horticultural commodities as far as possible to a more remunerativemarket, and it is equally important to reach these products to the consumers at proper time. An

efficient transport system enable to reach the markets far and wide and also without losing time.If transport system is not efficient, a less share of consumers rupee reaches the producer. Inorder to ensure adequate returns to the farmer, transport must be developed rapidly.

Advantages of transport function

Widening of the markets: Transport helps in the development or widening of markets bybridging the gap between the producers and consumers located in different areas.

Narrowing price difference over space: Transportation of goods from surplus areas to thescarcity helps in cocking price rise in scarcity areas and fall in surplus areas thus reduces thespatial differences in prices.

Creation of employment: Provides employment to a large number persons through constructionof roads, loading, unloading etc

Facilitates specialized farming: Farmers can go in for specialized farming suitable to theirareas, and exchange the goods required by them from other areas at a cheaper price than theirown production cost.


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Transportation helps in transformation of the economy from the subsistence stage to thedeveloped market economy.

Mobility of factors of production: Helps in increasing the mobility of capital and labour from onearea to another and there by increase efficiency in production.

Means of transport

The available means of transportation can be classified as follows.

Land

Head load: This form is largely found in hilly tracts where the roads can not be constructedeasily and the distance to be covered is a short one. eg. Fruits and vegetables. This is muchprevalent in backward areas and cheaper one.

Pack animals: Horses, buffaloes, bullocks and camels are used for carrying loads. Theseserve good purpose for transport of small quantity, when roads are damaged rainy seasons,e.g. Camel is used for transportation in the deserts of Rajastan.In spite of these advantages, the usage of bullock cart is declining in the modern world.

MEANS OF TRANSPORT

LAND WATER

INLANDROADS OCEANRAILWAYSPATHWAYS

HEAD LOAD PACK ANIMALS

BULL CART MOTOR VEHICLES


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Motor vehicles: This has become more popular in recent times because: it is efficient indelivering to the point which can not be done by railways; affordable for handling moderatequantities; flexibility in carrying capacity and charges and low capital investment needed.

Railways: The railways system all over India have made the movement of goods more speedyand reduced damages in transit and handling. It has helped to make cheap and safe

transportation of goods and resulted in greater advantage to poor cultivators; it widened marketsof horticultural produce and raw materials etc, with an increase in horticultural income; andquicker and bulk movement of perishable commodities provided better utilities for them.

Water transport

The oldest and cheapest means of transportation is water transport. It proves much useful forcarrying bulky and heavy goods to low value. Water transport may be divided in to river, canaland sea.

Air transport

It is of great importance for transporting to farthest places in a short time. Further, it provesmuch helpful in case of emergencies like flood, war etc,. India has established regular mailservices connecting all important cities. This apart only high value, low volume products aretransported through air due to the prohibitive costs.

Transportation costs

The cost involved in transportation of horticultural commodities. Transportation cost accountsfor about 50 per cent of the total cost of marketing. The efficiency of transportation depends onthe speed and the cost with which goods move from one place to another, the extent of thefacilities provided, and the degree of care with which goods are handled.

Factors affecting the cost transportation

Distance: With an increase in the distance over which a commodity is transported the totaltransportation cost increases but the transportation cost per init quantity of the producedecreases after a certain distance.

Quantity of the product: Transportation cost per unit quantity of a commodity decreases withthe increase in the volume.

Mode of transportation: In varies with the mode of transportation.

Nature of the products: Cost of transportation per unit is higher for the products having

characters such as perishability (vegetables), bulkiness (straw), fragility (tomatoes),inflammability (petrol) requirement of a special type.

Risk associated: The cost is less if the produce is transported at he owners / sender risk

Problem in transportation:

Following are some of the important problems arising out of the transportation of horticulturalcommodities.


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There are more losses and damages in transportation because of the use of poor packingmaterials, over loads, and poor handling, specially of fruits and vegetables, at the time ofloading and unloading.

Transportation cost per 100 rupees worth of produce is high, because of its bulkiness and the

prevailing practice of fixing charges on the basis of weight per volume rather than on the basisof its value.

Lack of co-ordination between different transportation agencies. E.g. railways and truckcompanies.

GRADING AND STANDARDISATION

Grading and standardisation implies the setting up of the basic measures to which the producedgoods must conform.

Standardisation: Means the determination of the standards to be established for different

commodities. Standards are established on the basis of certain characters such as weight,size, colour, appearance, texture, moisture content and performance. The characteristics, onthe basis of which products are standardized are termed grade standards. Thus,standardization means making the quality specification of the grades uniform among buyers andsellers over place and over time.

Grading: Means the sorting of the unlike of the produce into different lots according to thequality specifications laid down. It is a method of dividing products into certain groups or lots inaccordance with predetermined standards. Grading follows standardization. It is a sub-functionof standardization.

Advantages

Grading before sale enables the producer to get a higher price.Grading facilitates marketing as it specifies the quality of the produce.

Grading widens the market of a produce since buyers located at different places can purchasethe desired quality.

Grading helps the consumers to get desired quality.

Quality control

The Export Promotion Council of India, the Indian Standards Institution, the Indian Statistical

Institute, National Productivity Council, The Indian Society for Quality Control and the IndianInstitute of Foreign Trade are the responsible for generating awareness about the problems ofquality control.

There are some legislative measures helped in the production of quality goods. They arePrevention of Food Adulteration Act (1954), Fruit Products Order (1946/0, Vegetables OilProducts Control Order (1947), The Essential Commodities Act (1955), The Standards ofWeights and Measures Act (1956), The Trade and Merchandise Marks Act (1958), Forward


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Contracts (Regulation) Act (1969), The agricultural Produce (Grading and Marketing) act, 1937,the Indian Standard Institution (Certification Marks) act, 1952.

Agricultural Products: The Directorate of Marketing and Inspection, GOI is responsible for thequality control of agricultural commodities. It has fixed grade standards for a number ofagricultural commodities for domestic consumption as well as for exports. To improve the

quality of agricultural products in India, Grading and marketing were introduced under an act,1937. This act authorizes the GOI to frame rules relating to the fixing grade standards and theprocedure to be adopted to grade the agricultural commodities in the schedule.

The agricultural marketing advisor to the GOI, is the authority empowered to implement theprovision of the Act and suggest suitable modifications.

The agricultural commodities are graded under AP(GM) act, on the basis of the specificationslaid down under the grade standards. Graded products bear the label AGMARK, indicatingpurity and quality of the products. Such graded products are called Agmark Peoducts. Theagmark label bears a guarantee from the government regarding the quality of material somarked. In Tamil Nadu, agmark is functioning under the Directorate of Marketing with its head

office at Trichy. Agmark is a voluntary shame, and in the state both centralized and non-centralised commodities are graded.

Centralised: gingerly oil, groundnut oil. Coconut oil, castor oil, ground spices, honey andmustard oil.

Non-centralised: Rice, pulses, coriander, turmeric, potatoes, egg, fruits, arecanut, cane, jaggeryetc.

The grading of centralized commodities require chemical analyses carried out by Amark labsand the non-commodities are graded based on physical character of the produce like presenceof foreign matter, moister, admixture, admixture, discolored etc,. Grading is compulsory for

export.

Manufactured products

Manufactured products are graded in accordance with the standards laid down by the IndianStandard Institution, now Bureau of Indian Standards and bear the label ISI. Manufactureshave to use proper ingredients in specified proportions and follow the technique of manufacturegiven in the standards laid down by the Indian Standard Institution. The ISI label is an indicatorof the good quality of the product.

Indian Standards Institution (ISI)

Standardistion of an organized basis started in India with the establishment of ISI. It was set upin 1947 with the active support of the industrial, scientific and technical organizations in thecountry. This institution operates under an Act of Parliament (ISI Certification Marks Scheme),under which manufactured items are stamped with the ISI mark of certification. This mark actsas a third party guarantee to the purchaser that the goods bearing the mark have beenproduced in accordance with the provisions of the relevant Indian standards.


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Aims and Objectives of ISI

Preparation of standards for products, commodities, materials and possess on national andinternational bases.

Promotion of general adoption of the standards prepared by it national and internationals level.

Certification of industual products and assistance in the production of quality goods.

Dissemination of information relating to standards and standardization/ Conduct of surveys andtraining programmes for assistance to Indian industries in organising their in plant standardsactivity.

Imparting training in industrial standardization to scientists and technologist from abroad.

For effective implementation of national standards and for bringing the advantages ofstandardization with in the reach of the common consumer, the Institution is operating acertification marks scheme under the ISI (Certification Marks) act. This act enables ISI to grant

licenses to manufactures to use the ISI mark on their products. Every licence include a schemeof testing and inspection which the licence is required to follow strictly. During the operation ofthe licence, ISI carries out regular and surprise inspections of the manufacturers to make surethat the scheme of testing and inspection is being properly adhered to samples of certifiedproducts are drawn from the production line and from the open market and tested inindependent laboratories. As a safeguard for the consumer the scheme provides for freereplacement of ISI market goods found to be of sub-standard quality.

The certification sheme was started in 1955-56. The licence covers a range of 570 productsincluding consumer products and industrial products.

ISI serves the interests of the country in the field of international standardization by close

collaboration with the international organization such as ISO (International Organisation forStandardisation) and IEC (International Electro Technical Commission) for standardization. TheISI also works in close collaboration with the similar organization for standardization in othercountries of the ECAFE (Economic Commission for Asia and Far East region) with a view topromoting standardization activities. It actively participates in the work of the Asian StandardsAdvisory Committee (ASAC).

Bureau of Indian Standards

The Indian Standards Institution has been renamed as BIS with effect from April 1,1987. TheBureau has been established by the Bureau of Indian Standards Act, 1986 and has become astatutory body. As such all activities of Bureau viz, Standards formulation, product certification,

quality assurance, consultancy services, quality assessment, testing and development of testmethods have assumed statutory status.

Fruit Products Order 1955: The quality control in respect of fruit product was first enforced in1946 under the fruit products Order. This had been amended and issued under the EssentialCommodities Act, 1955. The main objectives of this Order are to develop production of qualityfoods and ensure that these are manufactured under proper hygienic and sanitary conditions. Itexercises control over the production both in the interest of manufactures and consumers.


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The Order provides for compulsory licensing of the manufacturers of fruit and vegetablesproducts with a view to ensuring that all manufactured products confirm to the minimumstandards in respect of quality, packing etc. To ensure quality control the factories areinspected by staff maintained for the purpose and samples of finished products are taken andanalysed at CFTRI in Karnataka. If substandards, the products may be destroyed and themanufacturers prosecuted.

Vegetable Oil Products Order, 1947: The Order vests power in the controller to prohibit orrestrict the manufacture, storage, distribution or sale of any variety or quality of vegetable oilproducts and prices.

Prevention of Food Adulteration Act, 1954: This lays down certain basic requirements of foodsuch as, freedom from adulterants and extraneous matter or decomposition, preparation andhandling under sanitary conditions, packing in sound containers, use of certified syntheticcolours, restrictions in the use of preservatives and other food activities, use of declarativelabels giving accurate information about the quantity and quality of the contents etc,.

STORAGE AND WAREHOUSING

Storage

Storage is an important marketing function, which involves holding and preserving goods fromthe time they are produced until they are needed for consumption. Storage is an exercise ofhuman foresight by means of which commodities are protected from deterioration, and surplussupplies in times of plenty are carried over to the season of scarcity;. The storage functiontherefore adds the time utility to the products.

Need for storage

Agricultural and horticultural products are seasonally produced but are required for consumption

through out the year. The storage, therefore ensures a continuous flow of goods in the market.

It protects the quality of perishable and semi-perishable goods from deterioration.

Helps in the stabilisation of prices by adjusting demand and supply.

It is necessary for some periods for performance of other marketing functions. e.g. the producehas to be stored till arrangements for its transpiration are made or during the process of buyingand selling or the weighment of the produce after sale and during its processing by theprocessor.

It helps in ripening for some farm commodities (banana, mango, etc,) or for improvement in their

quality (rice, pickles, cheese etc,).

It provides employment and income through price advantages. e.g. Middlemen storefoodgrains by purchasing them at low prices in the peak season and sell them when prices arehigher.Risks in storage

The storage of horticultural commodities involves three major types or risks.


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Quantity loss: The risks of loss in quantity may arise during storage as a result of the presenceof rodents, pests etc,. Dehydration too, brings about unavoidable loss in weight. It has beenestimated that about 10million tones of foodgrains are lost every year because of poor andfaulty storage.

Quality deterioration: deterioration in quality reduces the value of the stored products. These

losses may arise as a result of attacks by insects and pests, presence of excessive moistureand temperature or as a result of chemical reaction. The loss in quality of the farm productsvaries with their quality at the time of storage, method of storage and the period.

Price risks: Prices do not always rise enough during the storage period to cover the storagecosts. At times they fall steeply, involving the owner in a substantial loss. Farmers and tradersare generally store their product in anticipation pf price rise, and they suffer when prices fall.

Costs and returns on storage:

The gross return on storage may be defined as the increase in the price of the stored product atthe time of storage till it is destored and either sold or consumed. The cost of storage includes,

cost of maintenance of storage structure, interest on the value of the stored goods, risk premiumfor a possible price fall and damage during storage, and cost of protective materials, and taxpayments, payments to labour etc.,

NR = (P1-P0) C

Where,

NR = Net returns to storage

P1 = Market price at the time de-storing

P0 = Market price at the time storing

C = Cost involved storage

If NR > 0, implies positive returns on storage ; NR < 0, implies negative returns on storage. Thepercentage margin (Ms) from storage may be calculated as:

P1 - P0 - C

Ms = ---------------

P0+C

Warehousing

Warehousing is storing goods on scientific lines which enableeasyretrieval of goods stored. It ispackage of services which creates time and place utility. Warehouses are scientific storagestructures constructed for the protection of the quantity and quality of the stored products.


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Today warehousing includes a package of services required for orderly marketing. It includeshandling and transport, safety and security, standardisatation ans other related.

Scientific storage: A large bulk of farm commodities may be stored. The product is protectedagainst quantitative and qualitative and qualitative losses.

Financing: Warehousing meet the financial needs of the person who stores the product.Natonalised banks advances credit on the security of the warehouse receipt issued for thestored product to the extent of 70-80 percent of the value.

Price stabililsation: Helps in price stabilization of farm products by checking the tendency tomaking post-harvest sales among the farmers.

Market intelligence: It offers the facility of market information to persons who hold their producein them. They inform them about the prices prevailing in the periods, and advise them on whento market their products.

Types of warehouses

On the basis ownerships, private and public and bonded warehouses.

On the basis of commodities stored, General, special commodity warehouses, refrigeratedwarehouses.

Warehousing in India: The Royal commission on Agriculture in 1928 and the Rural Bankingenquiry Committee in 1950 had exphasised the need for establishing a warehousing system foragricultural produce and creation of a negotiable paper for expansion of institutional credit. TheRBI in 1944 had also proposed that every state government should enact legislation to regulatethe functioning of warehouses. However, no tangible progress could be made in this directionas warehousing is a highly capital intensive activity with low returns. The private capital was

therefore shy of entering in third field. It was only after the All India rural Credit SurveyCommittee, 1954, the concept of warehousing in the public sector took a concrete shape. Thiscommittees recommendations paved the way for the enactment of the Agricultural Produce(Development and Warehousing) Corporations Act, 1956 and later replaced by warehousingCorporations Act, 1962 and establishment of central and state warehousing corporations.

National Co-operative Development and Warehousing Board (NCDC):

It was set up in 1956 to perform the following functions.

To advance loans and grants to the state governments for financing co-operative societiesengaged in the marketing, processing or storage of agricultural produce, including contributions

to the share capital to these institutions.

To provide funds to warehousing corporations and the state governments for financing co-operative societies for the purchase of agricultural produce on behalf of central government.

To subscribe to the share capital of CWC and advance loans to CWCs and SWCs.

To plan and promote programmes through co-operative societies for the supply of inputs for thedevelopment of agriculture.


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To administer the National Warehousing Development Fund.

Central Warehousing Corporation (CWC)

This corporation was established as a statutory body in New Delhi, 1957. Under the new Act,

the Central Warehousing Corporation was formally reestablished on 18 March, 1963, the CWCsprovide safe and reliable storage facilities for about 120 agricultural and industrial commodities.

Functions

To acquire and build godowns and warehouses at suitable places in India.

To run warehouses for the storage of agricultural produce, seeds, fertilizer and notifiedcommodities for individuals, co-operatives and other institutions.

To act as an agent of the government for the purchase, sale, storage and distribution of theabove commodities.

To arrange facilities for the transport of the above commodities.

To subscribe to the share capital of SWCs.

Besides, the conventional storage godowns, the CWCs running air conditioned godowns atCalcutta, Mumbai and Delhi and provides cold storage facilities at Hyderabad. The corporationhas recently introduced a new scheme called the farmers Extension Service at selected centersto educate farmers in the benefits of scientific storage and use of public warehouses. TheCWCs also provide a package of services such as handling and transport, safety and security ofgoods, insurance, standardizations, documentation and other connected service and facilities.

State Warehousing Corporations

The area of operation of SWCs are centers of district importance. The total share capital ofSWCs is contributed equally by the concerned state governments and CWC. The SWCs, areunder the dual control of the state governments and the CWCs.

PROCESSING

Processing is an important marketing function in the present day marketing of agricultural andhorticultural commodities. The processing activity involves a change in the form of thecommodity. This function includes all of those essentially manufacturing activities which changethe basic form of the product. Processing converts the raw materials and brings the products

nearer to human consumption.

Importance

Converts raw food in to edible and palatable forms. The value added by processing to the totalvalue produced at the farm level varies. It is nearly 7 percent for rice and 86 per cent for tea.It makes possible for us to store perishable and semi-perishable commodities and facilitate theuse of surplus in one season or another or another or year. e.g. canning and pickling of fruitsand vegetables.


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It generates employment.

It serves as an adjunct to other marketing functions, such as transportation, storage andmerchandising.

Processing of fruits and vegetables:

Although fresh fruits and vegetables are still a delicacy, but with the increase in surpluses andthe need to carry the surpluses from producing of fruits and vegetables has gained importancein the recent years. The fruits are converted into such items as jam, jelly, squash and cannedfruits. Fresh vegetables are converted into pickles, sauces, dehydrated vegetables etc,. Theself life of such processed products is more than that of fresh fruits and vegetables. Though theshare of the farmers in the price paid by the consumer of such processed foods continues to below, the processing industry has helped in providing market clearance to the growers of fruitsand vegetables.

MARKET RESEARCH

Marketing research is a formalized means of obtaining information to be used in makingmarketing decisions. It is a systematic problem analysis, model building, and fact finding forthe purpose of improved decision making and control on the process of marketing goods andservices. Thus marketing research includes selection of methods for fact finding in relation tospecific problems, selection of methods regarding analysis of collected data and making validconclusions which help making marketing decisions.

The importance of agricultural marketing research has arisen due to rapid changes in theeconomy from the very little capital investment and few marketing services stage to themonetised and complex one.

Specialisation in

Agricultural Marketing and International Trade

Documents

Transcript of Agricultural Marketing and International Trade