CHAPTER VI MARKET CHANNELS, MARKETING COST, PRICE...

CHAPTER VI

MARKET CHANNELS, MARKETING COST, PRICE SPREAD AND

MARKETING EFFICIENCY

Agricultural marketing plays a vital role in agricultural development which

is a pre-requisite for development in other sectors and for the overall development

of the economy. The agricultural marketing is defined as the operations involved

in the movement of food and raw materials from the farmers to the final consumer

and the effect of such operations on producers and middlemen.1 In India, there

exists an elaborate and inter-connected system of agricultural produce markets

through which the produce flows from the producer to the consumer. The market

system in India comprises 30,000 rural primary markets, 7,000 wholesale

assembling markets at the secondary stage and terminal distribution markets in

every urban city or town.2

An efficient marketing is a sine qua non in the economy of all countries, in

general and of agricultural countries, in particular. It definitely exerts a powerful

influence on a country’s production and consumption pattern; it plays a prominent

1Lallan Singh, “Relationship between Apex and Primary Co-operative Marketing

in Bihar”, The Co-operator, Vol.XXII(9), 1984, p.245.

2Harish Nayyar and P. Ramasamy (Ed.), Globalization and Agricultural

Marketing, Rawat Publications, New Delhi, 1995, p.28.

193

role in regulating supply and demand; and it helps in the elimination of

duplication of services and wastages of valuable resources.3

Marketing perhaps has its greatest and most enduring role to play in the

economic changes in developing countries. An efficient internal marketing system

for agricultural commodities holds the key for rural development and for meeting

the challenges thrown up by explosive growth of population in developing

countries. Marketing holds the key for agricultural development which could

determine the quality of urban life.4

The present study is confined to the study of marketing system of banana

in Tirunelveli district. Hence, the present chapter makes an attempt to study the

marketing system in terms of marketable surplus, marketing channels and the like.

Further, an attempt has been made to anlayse marketing cost, marketing margin,

price-spread and marketing efficiency.

3A.P. Gupta, Marketing of Agricultural Produce in India, Vora & Company

Publications Pvt. Ltd., 1975, p.1.

4Food and Agricultural Organisation, “Report on FAO/RED Workshop on the Effective Use of Marketing for the Development of Small Farms in Asia”, held in

Thailand, 1976, p.5.

194

For better exposition, the present chapter is organised under the following

headings:

i. Marketable surplus of banana;

ii. Market Structure;

iii. Marketing cost, Marketing margin and Price-spread;

iv. Marketing Efficiency and

v. Marketing problems.

6.1. MARKETABLE SURPLUS OF BANANA

Marketable Surplus is the estimated quantity to be marketed by producer

and is arrived at after providing some percentage for various items of retention.

These items include provision for seed purpose, payment of wages in kind,

domestic consumption and the like. Hence, this section makes an attempt to

analyse the retention and marketable surplus of the selected farmers producing

banana. Further the functional analysis was made to identify the determinants of

marketable surplus of banana.

Marketable Surplus and Retention

The marketable surplus and percentage of retention of the selected farmers

producing banana are furnished in Table 6.1.

195

TABLE 6.1

MARKETABLE SURPLUS OF BANANA (Quintals per acre

Sl.

No.

Size of Farmers Total

Production

Total

Retention

Total

Marketable

Surplus

Percentage

to Total

Production

1. Small 24.69

(100)

1.91

(7.74)

22.78

(92.26)

92.26

2. Large 23.16

(100)

2.87

(12.39)

20.97

(87.61)

87.61

3. Overall 47.85

(100)

4.78

(9.99)

43.07

(90.01)

90.01

Source: Primary data.

Note : Figures in brackets represent percentages to total.

The total production in sample farms was 47.85 quintals with retention of

4.78 quintals per acre. The variation in the percentage of marketable surplus to

production among the group was found to be minimum. The maximum was 92.26

per cent in small farms and the minimum was 87.61 per cent in large farms.

Purpose-wise Retention

The farmers retain a certain portion of banana harvested for the domestic

use, seeds and other purposes like giving to relatives, friends and labourers. The

analysis of retention would provide an idea of marketable surplus of banana. The

purpose-wise retention of banana in the selected farms is presented in Table 6.2.

196

TABLE 6.2

PURPOSE-WISE RETENTION OF BANANA IN SAMPLE FARMS (Quintals per acre)

Sl.

No. Purpose

Small

Farmers

Large

Farmers Total

1. Domestic use 1.56

(81.68)

2.28

(79.44)

3.84

(80.34)

2. Others 0.35

(18.320

10.59

(20.56)

0.94

(16.66)

Total Retention 1.91

(100)

2.87

(100)

4.78

(100)

Source: Survey data.

Note : Figures in parentheses are percentages of the total.

It is observed from table 6.2 that farmers have retained 1.91 quintals to

2.87 quintals of banana per acre. The quantity of banana retained for several

purposes by small and large farmers constitutes 7.74 and 12.39 per cent

respectively of the total production of banana (Vide in Table 6.1). Out of total

retention, 80.34 per cent is for domestic use and 19.66 per cent is for other

purposes. The marketable surplus is the difference between the total production

and total retention per acre. The marketable surplus creates its own effect on the

marketable decisions of the farmers.

Determinants of Marketable Surplus

In order to identify the determinants of marketable surplus of banana in the

study area, a Multiple Linear Regression Model of the following type was used

for the present study:

197

Y = β0 + β1 X1 + β2 X2 + β3 X3 + U ...... (6.1)

where,

Y = Marketable surplus per farm in quintals

X1 = Area under banana in acres

X2 = Family size

X3 = Price received in rupees per quintal

U = Error term

β0, β1... β3 are the parameters to be estimated. The above 6.1 model

was estimated by the Method of Least Squares and the results are furnished in

Table 6.3.

TABLE 6.3

DETERMINANTS OF MARKETABLE SURPLUS OF BANANA

Number of

Observations

Regression Coefficients R

2 F

ββββ0 ββββ1 ββββ2 ββββ3

300 3.51 75.69*

(5.033)

-0.49

(-0.893)

0.81*

(2.903) 0.09 29.14**

Source: Computed.

Note : Figures in parentheses are the t-values.

* Indicates that the coefficients are statistically significant at the 5 per cent level.

**F-value is statistically significant at the 1 per cent level.

According to Table 6.3, R2

value is indicates that all the three explanatory

are jointly responsible for 81 per cent variation in the marketable surplus of

198

banana expressed in quintals per farm. Further, R2 value indicates that the

function was considered to be a good fit and the interpretation was made for the

significant variables only. The F value shows that the fitted regression is

statistically significant at one per cent level.

Out of three variables included in the regression model, the area under

banana and price of banana were statistically significant at the 5 per cent level

which was also found to be positively related to the marketable surplus. It

indicates that an acre increase in area under banana cultivation, ‘other things

being equal’ would increase the marketable surplus by 75.69 quintals. Similarly,

one rupee increase in price of banana per quintal would result in an increase of

0.79 quintals of marketable surplus per farm.

Thus, it may be concluded from the analysis that the area under banana was

found to be highly significant and it had greater influence on marketable surplus

compared to the variable, price per quintal.

6.3. MARKETING CHANNELS

The marketing channel is the route taken by the title to the goods as they

move from producer to ultimate consumer.5 Marketing channels are combinations

of agencies through which the seller who is often, though not necessarily

5William J. Stanton, Fundamentals of Marketing, McGraw-Hill, Kogakusha

Ltd., 1975, p.254.

199

manufacturers, markets his product to the ultimate consumer.6 Parashwar has

defined market channel as the vehicle of marketing system, the unit within which

all marketing activity takes place.7 Bilgrani has defined market channel as a

distributory that is involved in direct and indirect transfer of title to a product as it

moved from producers to consumers or industrial users.8 In the present study,

marketing channel refers to the collection of agencies and movements associated

with the exchange of banana from the primary producer to the ultimate consumer.

The banana in Tirunelveli district is sold through middlemen namely

commission agents, village traders, wholesalers cum retailers and commission

agents. The marketing channels identified are,

Channel I = Producer – Village Traders – Consumer

Channel II = Producer – Wholesaler cum Retailers– Consumer

Channel III = Producer- Commission Agent – Retailer - Consumer.

The farmers in the study area have chosen only the commission agents in

most cases as the main intermediary. Eighty per cent of the total produce is passed

through the commission agents and wholesalers cum retailers.

6A. Howard John, Fundamentals of Marketing, p.211.

7P.K. Parashwar, “Marketing Channels in Developing Countries”, Agricultural

Situation in India, 23(7), 1991, p.129. 8S.M. Bilgrani, “The Role of Distribution in Marketing”, Indian Journal of

Marketing, 4(5), 1974, pp.25-27.

200

Choice of the Middlemen

It is not only the number of days stored but also the agent or the merchant

middlemen through or to whom the produce sold influences the net price realised

by the farmers. Table 6.4 shows the different types of middlemen through whom

the sample farmers are selling their banana.

TABLE 6.4

MIDDLEMEN CHOSEN BY THE SAMPLE FARMERS

Sl.

No. Middlemen

Small

Farmers

Large

Farmers Total

1. Village Traders 14

(7.37)

14

(12.73)

28

(9.33)

2. Wholesaler cum

Retailers

30

(15.79)

28

(25.45)

58

(19.33)

3. Commission Agents 146

(76.84)

68

(61.82)

214

(71.34)

Total 190

(100)

110

(100)

300

(100)


Note : Figures in parentheses are the percentages of the total

It is observed from Table 6.4 that 71.34 per cent of farmers sold their

produce through the commission agents in the study area. The remaining 19.33

and 9.33 per cent sold their produce through wholesaler cum retailers and village

traders respectively. The commission agents are the most preferred middlemen by

the small farmers than the large farmers because of the facilities offered by them.

The large farmers are more or less equally distributed in all the three channels.

201

Sale to Village Traders

The number of farmers selling and the quantity of banana sold through

village traders are analysed and presented in Table 6.5.

TABLE 6.5

NUMBER OF FARMERS AND QUANTITY OF BANANA SOLD

THROUGH VILLAGE TRADERS (Tonnes per acre)

Sl.

No. Size of Farmers

Number of

Farmers

Percentage

to Group

Concerned

Average

Quantity of

Banana

sold (in

quintals per

acre)

Percentage

of marketed

surplus of

the group

concerned

1. Small 16 8.21 3.81

(8.85) 16.72

2. Large 12 6.15 1.21

(2.81) 5.96

3. Overall 28 9.33 5.02

(11.66) 11.66



It is seen from Table 6.5 that in total, 28 farmers are selling their banana

through the village traders. Out of 28 farmers, 16 are small farmers and the

remaining 12 are large farmers. The percentages of quantity sold to the marketed

202

surplus to the group concerned are 16.72 and 5.96 per cent of their respective

totals.

In order to rank the reasons for selling banana through various middlemen

like village traders, commission agents and wholesalers and retailers, the Garrett’s

Ranking Technique9 was adopted.

The respondents were given the reasons and asked to rank them according

to their choice. The order of merit given by the respondents was converted into

ranks by using the formula:

100 (Rij – 0.50)

Per cent Position = ------------------------- ................. (6.3)

Ni

Where,

Rij = Rank given for (ith

factor by jth

farmer)

Ni = Number of constraints ranked by jth

households.

The per cent position of each rank thus obtained was converted into scores

using the table given by Garrett. The scores of individuals representing each

reason were added together and divided by the total number of farmers for whom

the scores were added. The mean scores for all the reasons were analysed in the

ascending order, ranks assigned and the important factors identified.

9Garrett E. Henry, Statistics in Psychology and Education, Vakils and Simons

Pvt. Ltd., Bombay, 1969, pp.328-331.

203

The reasons for selling the banana through village traders are analysed and

presented in Table 6.6.

TABLE 6.6

REASONS FOR SELLING BANANA THROUGH VILLAGE TRADERS

Sl.No. Reasons Score Rank

1. Easy method of sale 52.66 V

2. No price difference 71.16 II

3. Long-term practice 44.22 IV

4. No transport cost 73.11 I

5. No commission charges 67.15 III

6. Immediate payment 31.26 VI


Table 6.6 shows that among the reasons to sell the banana through village

traders, no transport cost ranks first followed by no price difference, no

commission charges, no storage cost, easy method of sale, long term practice and

immediate payment.

Wholesaler cum Retailers

The number of farmers and quantity of banana sold to the wholesalers cum

retailers are analysed and presented in Table 6.7.

204

TABLE 6.7


THROUGH WHOLESALER CUM RETAILERS (Tonnes per acre)

Sl.

No. Size of Farmers

Number of

Farmers

Percentage

to Group

Concerned

Average

Quantity of

Banana

sold (in

quintals per

acre)

Percentage

of marketed

surplus of

the group

concerned

1. Small 18 9.23 4.30

(9.98) 18.88

2. Large 40 38.10 6.03

(14.00) 29.72

3. Overall 58 19.33 10.33

(23.98) 23.98



It is observed from Table 6.7 that 38.10 and 9.23 per cent of large and

small farmers sold their produce through wholesaler cum retailers respectively.

The average quantity of banana sold per acre by small and large farmers is 4.30

and 6.03 quintals respectively. The percentage to the marketed surplus of the

group concerned namely small and large farmers is 18.88 and 29.72 per cent

respectively.

The reasons for selling banana through wholesaler cum retailer are ranked

and presented in Table 6.8.

205

TABLE 6.8

REASONS FOR SELLING BANANA THROUGH WHOLESALER CUM

RETAILERS


1. Easy method of sale 71.66 II

2. Long term practice 66.24 III

3. No commission charge 75.14 I

4. Credit facilities 31.22 VI

5. Better price 57.13 V

6. More off-take 62.24 IV


Table 6.8 shows that among the reasons, no commission charge ranks first

followed by the reasons namely, easy method of sale, long term practice and more

off-take are ranked II, III and IV whereas the Vth

and VIth

ranks are assigned to

reasons namely better price and credit facilities.

Sale to Commission Agent

The most popular and dominant channel in the district is the commission

agent. The commission agent advances loans with or without interest to the

farmers whenever they need it. The commission agent recovers the entire amount

206

from the farmers at the time of sale. The number of farmers and quantity of

banana sold through commission agent are discussed and presented in Table 6.9.

TABLE 6.9


THROUGH COMMISSION AGENT

(Tonnes per acre)

Sl.

No. Size of Farmers

Number of

Farmers

Percentage

to Group

Concerned

Average

Quantity of

Banana

sold (in

quintals per

acre)

Percentage

of marketed

surplus of

the group

concerned

1. Small 161 82.56 6.81

(15.81) 64.40

2. Large 53 50.48 9.52

(22.11) 64.32

3. Overall 214 71.33 16.33

(37.92) 64.36



It is observed from Table 6.9 that 71.33 per cent of the farmers selected

commission agent to sell their produce. Out of the small farmers 82.56 per cent

sold through the commission agents. In the case of large farmers, 50.48 per cent

have selected the commission agents. The average quantity sold per acre varied

from 14.67 tonnes to 13.05 tonnes with respect to small and large farmers. The

percentages of quantity sold to marketed surplus are 64.40 and 64.32 per cent of

their respective total in the case of small and large farmers.

207

The reasons for the choice of commission agents are presented in

Table 6.10.

TABLE 6.10

REASONS FOR SELLING BANANA THROUGH COMMISSION AGENT


1. Availability of credit facilities 79.66 I

2. Better price 51.43 III

3. Immediate cash after sale 69.26 II

4. Long term practice 36.26 V

5. Higher off-take 41.22 IV


Most of the farmers prefer the commission agents as their intermediary

because the commission agents provide credit facilities to the farmers whenever

they need. Therefore it is ranked first. Other reasons namely immediate cash after

sale, better price, high off-take and long term practice are ranked II, III, IV and V.

6.4. MARKETING COST, MARKETING MARGIN AND

PRICE-SPREAD

Price-spread would explain in detail the actual price received by the

producers, the price paid by the consumers, costs incurred and margins earned by

the various market intermediaries in the process of marketing banana. The net

price received by the producers, total marketing costs and margins will be

208

analysed in the present study, to evaluate the functional efficiency of different

marketing channels. With this end in view, an attempt has been made in this

section, to analyse the marketing cost, marketing margin and price-spread of

multiplier banana in different channels of marketing in the study area.

Marketing Cost and Marketing Margin

The marketing expenses incurred by the banana cultivators are the

expenses which are incurred after the harvest and prior to the sale of banana. The

expenses are incurred for several purposes like transport, unloading, weighing and

stitching, charity, sample, commission and other purposes. The marketing

expenses very as the farmers sell their produce through different channels. The

cost per quintal incurred by the producer was analysed for large and small farmers

separately in all the three channels and the results are presented in Table 6.11.

210

It is observed from Table 6.11 that the average marketing costs incurred by

the farmers per tonnes of banana was Rs.206.26, Rs.214.21 and Rs.173.20 in the

case of small farmers and Rs.177.74, Rs.203.47 and Rs.170.88 in the case of large

farmers through channels I, II and III respectively.

The cost of marketing through Channel I was found to be 80 per cent

higher as compared to other two channels in both small and large farms. This is

due to the payment of commission charges to the commission agent. The

contribution of commission charges are 42.46 and 42.38 per cent to the respective

total marketing cost in small and large farms respectively. In both farms, the

commission charges, storage cost and transportation cost ranked first, second and

third in the marketing cost.

In Channel II, both small and large farmers have incurred Rs.42.18 and

Rs.40.73 per tonnes respectively on the storage facilities. The cost of marketing

through Channel II was found to be higher as compared to other two Channels I

and III.

211

Marketing Cost Incurred by the Intermediaries

Certain expenses relating to marketing were incurred by intermediaries

namely, village traders, regulated markets and commission agents too. These

expenses are borne by the intermediaries from the purchase of banana to the sale

of banana.

Generally, the marketing cost of intermediaries includes labour charges,

transport cost, packaging cost, loading and unloading charges, weighment

charges, shop rent, tax, cost towards wastage and the like. In the study area, the

wholesalers themselves do the retailing business also. No exclusive wholesaler

was found in the market that purchased for the purpose of selling banana to the

retailers. All the intermediaries sold banana only with a profit motive. Their profit

was highly determined by the marketing cost incurred by them. Hence, separate

analysis of marketing cost by village traders, commission agents and wholesalers/

retailers are attempted.

Price – Spread

Price-spread is the difference between the actual price received by the

producers, the price paid by the consumers, costs incurred and margins earned by

the various market intermediaries in the process of marketing of banana. The net

price received by the producers, total marketing costs and margins were analysed

separately for small and large farmers in order to evaluate the marketing

efficiency of different marketing channels.

212

The results of price spread are presented in Table 6.12.

TABLE 6.12

MARKETING COST AND MARKETING MARGIN IN SMALL FARMS

(Rupees per tonnes)

Particulars

Channels

I II III

Amount Percen-

tage Amount

Percen-

tage Amount

Percen-

tage

PRODUCER

Net Price Received 2348.80 83.37 2393.70 84.97 2406.91 85.44

Marketing cost 206.26 7.32 214.21 7.60 173.20 6.15

Gross Price received or paid by Village

Trader/Commission Agent / Wholesaler /

Retailer

2555.06 90.69 2607.91 92.57 2579.39 91.56

VILLAGE TRADER

Marketing cost 91.65 3.25 -- -- -- --

Marketing Margin 61.21 2.17 -- -- -- --

Price received or paid by Commission Agent/

Wholesaler / Retailer

2707.92 96.12 -- -- -- --

COMMISSION

AGENT

Marketing cost -- -- -- -- 99.61 3.54

Marketing Margin -- -- -- -- 63.15 --

Price received or paid by Commission Agent

/Miller / Retailer

-- -- -- -- 2747.12 2.25

REGULATED

MARKETS

Marketing Cost 83.15 2.95 116.26 4.13 36.21 1.29

Marketing Margin 26.15 0.93 93.05 3.30 38.14 1.36

Price received or by

the consumer 2817.22 100.00 2817.22 100.00 2817.22 100.00

Source Primary data.

213

It is observed from Table 6.12 that the net price received by the farmer was

maximum in channel III which is Rs.2406.91 per tonne compared to Rs.2393.70

and Rs.2348.80 per tonne channel II and Channel I respectively. But the gross

price received is higher in Channel II which is Rs.2607.91 per tonne than in

Channel I (Rs.2555.06) and in Channel III (Rs.2579.39). The net price received is

less, due to the higher marketing cost incurred by the farmers in Channel I

towards the payment of commission charges. The net price received by the

farmers in the consumer’s price is 83.37 per cent, 84.97 per cent and 85.44 per

cent in Channels I, II and III respectively.

The marketing costs incurred by the farmers, village traders and wholesaler

cum Retailer constitute 7.32, 3.25 and 2.95 per cent respectively of the

consumers’ price in Channel I. The marketing margins of village trader and

wholesaler cum retailers constitute 2.17 and 0.93 per cent of the consumer’s price

respectively.

The percentages of marketing cost to consumers’ price in Channel II are

7.60 and 4.13 for farmers, and wholesaler cum retailers respectively. The

marketing margins to consumer price are 7.60 in Channel II.

In Channel III, the percentages of marketing cost to consumer’s price for

farmers, commission agents and retailers are 6.15, 3.54 and 1.29 per cent

214

respectively while the percentage of marketing margin to the commission agent

and retailers is 2.25 and 1.36 per cent respectively.

Nature of Price-Spread in Large Farms

There is no major difference in the nature of price-spread between small

and larger farmers. The net price received by the large farmers are a little higher

than that by the small farmer in all the three channels due to the fixed overheads

in the marketing channels.

The large farmers are benefited by price-spread than the small farmers due

to the advantage of lesser marketing cost. The analysis of price-spread in large

farms is presented in Table 6.13.

215

TABLE 6.13

MARKETING COST AND MARKETING MARGIN IN LARGE FARMS

(Rupees per tonne)

Particulars

Channels

I II III

Amount Percen-

tage Amount

Percen-

tage Amount

Percen-

tage

PRODUCER

Net Price Received 2316.75 82.24 2321.16 82.39 2341.15 83.10

Marketing cost 177.74 6.315 203.47 7.22 170.88 6.072

Gross Price received or paid by Village

Trader/Commission Agent / Wholesaler /

Retailer

2494.49 88.54 2524.63 89.61 2512.03 89.17

VILLAGE TRADER

Marketing cost 93.16 3.31 -- -- -- --

Marketing Margin 56.21 1.99 -- -- -- --

Price received or paid

by Commission Agent/

Wholesaler / Retailer

2643.86 93.85 -- -- -- --

COMMISSION

AGENT

Marketing cost -- -- -- -- 103.66 3.68

Marketing Margin -- -- -- -- 69.15 2.45

Price received or paid

by Wholesaler /

Retailer

-- -- -- -- 2684.84 95.30

REGULATED

MARKET/MILLER

Marketing Cost 100.26 3.56 219.27 7.79 67.23 2.39

Marketing Margin 73.10 2.59 73.32 2.60 65.15 2.31

Price received or by

the consumer 2817.22 100.00 2817.22 100.00 2817.22 100.00

Source Primary data.

216

It is observed from table 6.13 that the large farmers are highly benefited in

Channel III (commission agent) since the net price received is higher at

Rs.2341.15 per tonne while it is Rs.2321.16 and 2316.75 in Channel II and

Channel I respectively. This is due to the lesser marketing cost and margin

incurred by farmers and wholesalers/retailers.

Price- Spread in Small Farms

Price-spread analysis shows the producer’s prices, marketing margin,

marketing cost and consumer price in the three marketing channels. The higher

price- spread means higher marketing cost and margin obtained by the

intermediaries and vice-versa. The analysis of price-spread in the three marketing

channels for small farmers is presented in Table 6.14.

TABLE 6.14

PRICE-SPREAD IN SMALL FARMS UNDER DIFFERENT CHANNELS

(Rupees per tonne)

Sl.No. Particulars Channels

I II III

1. Producers’ Price 2348.80 2393.70 2406.91

2. Marketing Margin 87.36 93.05 101.29

3. Marketing Cost 381.06 330.47 309.02

4. Consumer’s Price 2817.22 2817.22 2817.22

5. Price-Spread 468.42 423.52 410.31


217

It is found from Table 6.14 that the price-spread in the small farms is

higher in Channel I at Rs.468.42 per tonne than in other channels due to higher

marketing cost. The village trader incurs higher marketing cost since he has to

bear the commission charges paid by the commission agents also. Channel III is

economical to the farmer since its price-spread is lesser at Rs.423.52 per tonne,

but the constraint is lesser off-take.

Price-Spread in Large Farms

In both small and large farms, the same type of analysis of price-spread is

carried out. The results are presented in Table 6.15.

TABLE 6.15

PRICE-SPREAD IN LARGE FARMS UNDER DIFFERENT CHANNELS (Rupees per tonne)

Sl.No. Particulars Channels

I II III

1. Producers’ Price 2316.75 2321.16 2341.15

2. Marketing Margin 129.31 73.32 134.30

3. Marketing Cost 371.16 422.74 341.77

4. Consumer’s Price 2817.22 2817.22 2817.22

5. Price-Spread 500.47 496.06 476.07


218

It is seen from Table 6.15 that the price-spread is a minimum of Rs.476.07

per tonne in Channel III and a maximum of Rs.500.47 in Channel I. The results of

price-spread analysis shows are similar in small as well as large farms. But the

large farms have a lesser price-spread than the small farms in all the three

marketing channels because of their financial strength, large-scale production and

lesser average fixed overheads.

6.5. MARKETING EFFICIENCY

Marketing is said to be efficient, if the total marketing margin is reduced

for a given marketing cost. In other words, among the marketing margins of the

different channels, that with the lowest value would reveal a channel to be

efficient. In the present study, marketing efficiency was examined for the three

different channels for small and large farms.

The marketing costs, marketing margins and efficiency indices for the three

different channels for both small and large farms were estimated separately and

they are presented in Table 6.16.

219

TABLE 6.16

MARKETING EFFICIENCY INDEX IN SMALL FARMS

(Rupees per tonne)

Sl.No. Marketing

Channel

Marketing

Cost (M.C.)

Marketing

Margin

(M.M.)

Efficiency

Index =

1 + M.M/M.C.

1. Channel I 381.06 87.36 1.22

2. Channel II 330.47 93.05 1.28

3. Channel III 309.02 101.29 1.33


It is observed from Table 6.16 that the marketing efficiency in channel III

is better than in Channels II and I due to the lesser marketing cost and higher

marketing margin.

TABLE 6.17

MARKETING EFFICIENCY INDEX IN LARGE FARMS

(Rupees per tonne)

Sl.No. Marketing

Channel

Marketing

Cost (M.C.)

Marketing

Margin

(M.M.)

Efficiency

Index =

1 + M.M/M.C.

1. Channel I 317.16 129.31 1.41

2. Channel II 422.74 73.32 1.17

3. Channel III 341.77 134.30 1.39


220

It is seen from Table 6.17 that Channel III is operating more efficiency

than Channels II and I. The efficiency index of channels I and II are 1.28 and 1.28

respectively. Channel III is efficient because of its lesser marketing cost and

higher marketing margin compared to the other channels. There is no difference in

marketing efficiency in different channels between small and large farms.

The marketing efficiency of the three channels is measured by Shepherd’s

Method, Acharya and Agarwal’s Method and Composite Index Method.

Marketing Efficiency by Shepherd’s Method

The marketing efficiency is measured with the help of the following

formula given by Shepherd:

V

ME = -------- - 1 .................... (6.2)

I

Where,

ME = Index of Marketing Efficiency,

V = Value of goods sold or consumer price and

I = Total marketing cost or marketing cost per unit.

In the present study, only the consumer price and marketing cost per

quintal of banana are taken into account to find out the marketing efficiency of the

various channels. The results are given in Table 6.18.

221

TABLE 6.18

MARKETING EFFICIENCY ANALYSIS USING SHEPHERD’S METHOD

(Rupees per tonne)

Particulars

Channels

I II III

Small

Farms

Large

Farms

Small

Farms

Large

Farms

Small

Farms

Large

Farms

Consumer Price (V) 2817.22 2817.22 2817.22 281722 2817.22 2817.22

Total Marketing Cost (I) 381.06 317.16 330.47 422.74 309.02 341.77

Shepherd’s Marketing

Efficiency: ME=(V/I)-1 6.39 7.88 7.52 5.66 8.12 7.24

Source: Computed data.

It is observed from Table 6.18 that the marketing efficiency in Channel III

for small and large farms (8.12 and 7.22) is greater than in Channel II (7.52 and

5.06) and in Channel I (6.39 and 7.88). The marketing efficiency of Channel I is

very poor because of its higher marketing cost at Rs.368.03 and Rs.316.16 per

tonne for small and large farms respectively which is two times greater than that

of Channel III.

222

Acharya and Agarwal’s Method

The marketing efficiency is measured by using the following formula given

by Acharya and Agarwal:

O

E = ----- x 100 .......................... (6.3)

I

Where,

E = Marketing Efficiency,

O = Output of the marketing system (value added, that is, difference

between consumer’s price and producer’s price) and

I = Inputs used in the marketing process (marketing cost).

TABLE 6.19

MARKETING EFFICIENCY ANALYSIS USING ACHARYA AND

AGARWAL METHOD (Rupees per tonne)

Particulars

Channels

I II III

Small

Farms

Large

Farms

Small

Farms

Large

Farms

Small

Farms

Large

Farms

Total Marketing Cost (I) 381.06 317.16 330.47 422.74 309.02 341.77

Value Added (O)

(Consumer’s Price –

Producer’s Price)

468.42 500.47 423.52 496.06 410.31 476.07

Marketing Efficiency:

ME = (O/I) 1.23 1.58 1.28 1.17 1.33 1.39

Marketing Efficiency

Index: (ME x 100) 123.00 158.00 128.00 117.00 133.00 139.00


223

It is observed from Table 6.19 that the marketing efficiency index of

Channel I is greater than that of Channel II and Channel III. The marketing

efficiency of Channel I is greater than that of Channel III. The marketing

efficiency index of large farms (158) is greater than that of small farms (123) in

Channel I. The ‘Value Added’ of the large farms is also greater than the small

farms under Channel I.

Composite Index Method

The marketing efficiency was also analysed by using composite index

method. The percentages of producer’s price, marketing cost and marketing

margin to consumer’s price per quintal were calculated and these were assigned

ranks. Total scores were found by adding the respective ranks in each Channel.

The mean scores were calculated for each channel. Where the mean score is less,

it showed the real marketing efficiency of the Channel. The results are presented

in Table 6.20.

224

TABLE 6.20

MARKETING EFFICIENCY ANALYSIS USING COMPOSITE INDEX

METHOD (Rupees per tonne)

Particulars

Channels

I II III

Small

Farms

Large

Farms

Small

Farms

Large

Farms

Small

Farms

Large

Farms

Producer’s Share

Rank

83.37

3

82.24

3

84.97

2

82.39

2

85.44

1

83.10

1

Marketing Cost

Rank

381.06

3

317.16

2

330.47

2

422.74

3

309.02

1

341.77

1

Marketing Margin

Rank

87.36

2

129.31

2

93.05

3

73.32

3

101.29

1

134.30

1

Total Score 8 7 7 8 3 3

Mean Score 2.68 2.35 2.35 2.68 1 1


It is observed from Table 6.20 that, of the three Channels, since the

producer share was found high in Channel III and marketing cost was also less

compared to Channels I and II, hence, Channel III has more marketing efficiency

than Channels II and I. The marketing efficiency of Channel II is greater than that

of Channel I for small farmers. Whereas, Channel I is greater than that of

Channel II for large farmers

225

6.6. PROBLEMS IN THE MARKETING OF BANANA

The banana cultivators have various problems like heavy commission

charges, the lack of finance, unremunerative prices, non-availability of manures,

pesticides, water scarcity, the lack of storage facilities, irregular power supply,

want of market for the produce, high transport cost, the lack of regular payment

and the like. For the present study, six of the above problems were selected. They

are analysed with the help of Garrett’s Ranking Technique. The results are

presented in Table 6.21.

TABLE 6.21

PROBLEMS FACED BY THE BANANA CULTIVATORS IN

MARKETING

Sl.No. Problems Mean Score Rank

1. Heavy commission charges 62.15 II

2. Lack of finance 47.22 III

3. Fluctuations in prices 81.33 I

4. High cost of transport 33.15 IV

5. Want of regular payment 22.16 V


It is observed from Table 6.21 that ‘huge fluctuations in the prices of

banana’ and ‘heavy commission charges’ as reported by farmers, happened to be

the major problems with a mean score of 81.33 and 62.15 respectively. The lack

of finance and high transport cost were also important. Hence the price

fluctuations and heavy commission charges were identified to be the major

problems which need the immediate attention of the policy-makers.

CHAPTER VI MARKET CHANNELS, MARKETING COST, PRICE...

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