AGRICULTURAL MARKETING

1. Marketing
 A series of services involved in moving a product from the point of production to the point of consumption
Service/s
 a function performed on or for a product that alters its form, time, place or possession characteristics
 add value to the product & thus entails cost
 may or may not involve physical handling
Point of Production
 the point of usual first sale by the farmer
 maybe done in the farm, farmer’s house, along the road, mountain trail, or assembly market
 transaction occurs between the farmer & the buyer
Point of Consumption
 the point of last purchase or sale
 transaction occurs between the buyer & the seller
2. Market
 a group of buyers and sellers with facilities for trading with each other
 a place where buyers & sellers meet to exchange goods or services
 a large geographic area wherein a given set of supply & demand forces operate to set prices
 consists of 3 elements (buyers, sellers, trading facilities)
3. Why Marketing is Costly & Complex?
 Farms are scattered throughout the country
 Small production unit of several commodities
 Large production unit of a single commodity
 Highly perishable
 Varied in quality
 Seasonal
 Performance of marketing services involves a large amount of money
4. Marketing is productive – because it creates utility
4 types of utility
1. form – if good posses the required properties
- change the form of raw materials & create something new
2. place - when products are made available where they are most wanted
(ex. Moving hogs from Mindanao to Metro Manila)
3. time - when products are made available when they are most wanted
4. possession – when goods are transferred or are placed under the control of the persons who desire
to use them
5. Agricultural Marketing System
 an inter-organizational system made up of a set of interdependent activities aimed at expanding agricultural
production
Components of Agricultural Marketing System
1. Producer Subsystem – initiator of production
2. Channel Subsystem – the actors often branded as the “necessary evil”
3. Flow Subsystem – product, financial & information flows
4. Functional Subsystem – marketing processes & marketing functions
5. Environmental Subsystem – climatic, physical, socio-cultural, economic, technology
6. Consumer Subsystem – final repository of products produced by farmers
6. Approaches to the study of Agricultural Marketing
Commodity Approach
 studying the commodity concerned
 product-oriented than marketing –oriented
 study may cover the characteristic of the product, market demand & supply situation, prices, consumer
preferences, market potential of new products, etc.
Institutional Approach
 studying the various agencies & business transactions involved in the marketing processes
 attempts to answer the question “who”
 considers the nature & character of various middlemen & related agencies; also the arrangement &
organization of the marketing machinery

Middlemen – those individuals or business concerns that specialize in performing the various marketing
functions involved in the purchase & sale of goods as they are moved from producers to consumers
Classification of Middlemen:
1. Merchant middlemen – take title to & therefore own products they handle; buy & sell for their own gain
(contract buyers, grain millers, wholesalers, shipper, wholesaler-retailer, assembler)
2. Agent middlemen – act as representative of their clients, do not take title to & therefore do not own the
products they handle; income is in the form of fees & commission
 Commission agent – normally takes over the physical handling of the product, arranges the terms
of sale, collects, deducts his fees, & remits the balance to his principal
 Broker – usually does not have the physical control of the product, ordinarily follows the
instructions of his principal closely & has less discretionary power in the price negotiations than
the commission agent
 3. Processors & manufacturers – change form of the products
4. Facilitative organizations (auction markets) – aid the various middlemen in performing their tasks
5. Market Associations – buying & selling of goods
Buying – seeking out sources of supply
Selling – merchandising activities; proper unit of sale, proper packaging, best market channel
Functional Approach
 Attempts to answer “what” in the question “who does what”
 Marketing process
Marketing function - is a major specialized activity performed in accomplishing the marketing
Process
Functions are classified as follows:
1. exchange function – activities involved in the transfer of title of goods
they represent a point at which price determination enters into the study of agricultural
marketing
2. physical functions – those activities that involve handling , movement & physical change of the actual
commodity itself; answer when, what, & where of marketing
a. storage – making goods available at a desired time
b. transportation – making goods available at the proper place
c. processing – manufacturing activities 9carrying/freezing/drying)
3. facilitating function – makes possible the smooth performance of the exchange & physical functions;
acts as the grease of the agricultural marketing machinery
a. Standardization – the establishment & maintenance of uniform measurement
b. Financing – the advancing of money to carry-out the various aspects of marketing
c. Risk-bearing – the acceptance of the possibility of loss in the marketing of a product
d. Packaging – to preserve the product & to protect it from contamination, to make it easier to
handle, & to make the product more attractive to the buyer. Packaging is especially important
to protect the product from damage during transport
e. Market Intelligence – the job of collecting, interpreting & disseminating the large variety of
data which are necessary to the smooth operation of the marketing processes
f. Market research – alternative marketing channels, routes, marketing functions,, market
potential of new products, policies, etc.
g. Demand creation – effective advertising & use of promotional devices

Market-Structure-Conduct-Performance Approach – how market behaves

 Market Structure – refers to how a market is organized that determines the relationship among the various
sellers & buyers in the market (degree of buyer-seller concentration, degree of product differentiation, the
condition of entry to the market & the degree of knowledge of the market)
Classification of market structure
Purely Competitive/Pure Competition – thousands of buyers & sellers; products are homogenous
Monopolistic Competition – hundreds of buyers & sellers; products are differentiated
Pure Monopoly – one seller market situation
Oligopoly – few seller market situation
Pure Oligopoly – where the products for sale are identical.
Differentiated Oligopoly – when the products being offered for sale are not homogeneous
Collusion– a secret agreement between two or more persons or institutions to achieve certain
objectives among the industries or firms
Oligopsony – a few-buyer market situation
Monopsony – a one-buyer market situation

 Market conduct – the behavior or pattern that the firm exhibits in the market
 Market performance – appraisal of how much the economic resource of the industry’s market behavior a
conduct deviates from the best possible contribution it can make to achieve relevant socio-economic goals
7. Price Determination
Price
 the amount of money which is needed to acquire in exchange some combined assortment of a product & its
accompanying services
Role of Price
1. tell producers what & how much to produce
2. allocates productive resources to the production of goods & services that consumers demand
3. guides goods through the channels of trade so they end up where consumers want them, when they want them,
& in the form they want them
4. rations the goods & services to those who demand them moat urgently & in proportions that will all be
consumed
Price Determination in a Perfect Market
- price serves the dual role of (1) informing producers of consumer wants and (2) informing consumers
of the varying conditions of production
- price is determined by supply & demand
- price differential caused by the difference in time, location & form of the product
- (demand & supply graphs)

Price Determination in Imperfectly Competitive Market

 a. Monopoly – sellers will attempt to set price that will maximize his profit; price is determined without
regulation from the demand curve where MC-MR
b. Monopolistic Competition & Oligopoly
- MR=MC is applies
- price competition is avoided in monopolistic competition because of threat of retaliation; direct
price competition is avoided in oligopolistic market, price leader is followed
8. Price Behavior over time
Fluctuations in prices occur because of:
Fluctuations in demand
Fluctuations in supply
Experimentation in the price discovery
Types of Price Fluctuations
1. Seasonal price variation – these are price fluctuations that tend to follow a more or less uniform pattern within the
year & are observed to conform to this pattern over a period of years
2. Annual price variation – methods of price determination under pure competition can be applied to directly explain
year to year product price variation; typically greater for crops without price support/annual average
3. trend – associated with general inflation & deflation in the economy; changes in the tastes & preferences of
consumers; increases in production & income; technological change in production
4. Cyclical price movement – prices fluctuate in regular pattern (Cobweb model)
5. irregular or random price movement – price that “just happen”; unpredicted & unpredictable price shifts caused by
unanticipated forces (inventions, strikes, physical destruction from typhoons, floods or earthquakes)
9. Operational Aspects of Pricing Process
1. Individual negotiations
 A simple bargaining process between individual buyers & sellers for each transaction
2. Organized Markets
 Became popular because haggling buyers & sellers become too cumbersome, too time consuming & too costly
Types of Organized markets:
a. commodity exchanges – provide a site for trading to take place under specified rules
types: (1) spot or cash market – trading of actual commodity on the basis of samples and (2) future trading –
future contract
b. auctions markets – used for commodities which are difficult to standardize; most widely used where actual
inspection of the product is desirable to determine its quality; prices are determined by progressively
bidding for each transaction made through public outcry
c. terminal livestock exchanges – livestock producers consign their animals to a commission firm at the
terminals; the commission agent seeks-out buyers for the livestock, negotiates the best possible price,
collects payment, deduct yardage fees & commissions & refunds the remainder to the seller
3. Administered prices – almost exclusively a government function with the following objectives: (1) a provide a floor
price so as to minimize price fluctuation when there is a large crop, (2) to provide incentives to increase production,
(3) to assure farmers of a fair or equitable price
4. Collective Bargaining – bargaining associations through which farmers can negotiate for higher prices

10. Marketing Channel

 An inter-organizational system made up of a set of interdependent agencies & institutions involved in the task of
moving products from the point of production to the point of consumption; product delivery

Choice of Marketing Channel depends on:

1. Nature of the Product – perishability/unit value/newness of the product
2. Nature of the Market – consumer buying habits/size of average sale/total sales volume/concentration of
purchases/seasonality of sales

Marketing Channels of Selected Farm Products:

1. Contract-buyers – a contract is made between the producer & the buyer
2.Wholesalers – merchant middlemen who sell to retailers & other merchants but not to consumers
3.Commission Agents – buy products in local areas & sell to viajeros or assembler-wholesalers; just get commission as
payment for their services
4. Wholesaler-Retailers – get produce in large quantities and sell to retailers on wholesale basis as well as to
consumers on retail basis
5. Assembler-Wholesalers – they buy from producers & contract buyers, assemble the products in large volume
& transport to market centers; also known as viajeros
6. Butcher-Retailers - buy live poultry & livestock & sell them in dressed or carcass form
7. Retailers – sell to ultimate consumers

12. Marketing Margins & Costs

Marketing Margin
o Refers to the difference between prices at different levels of the marketing system
o The difference between what the consumers pay & what the producers receive for their agricultural price
o “price spread”
Components of Marketing Margin
1.a. Marketing Costs – returns to factors of production used in providing the processing & marketing
services rendered between the farmers & consumers
 1.b.Marketing Charges – returns according to the various agencies or institutions involved in the
marketing of products
2. net return - profit component

Breakdown of Consumer’s Peso

o A series of figures representing the absolute margins of different types of middlemen or assignable to
different marketing functions divided by the retail price
Grading & Standardization
Grading – sorting of products into lots or units according to one or more of its attributes
Standardization
Transportation (Space Dimension of Marketing)
– the establishment & maintenance of uniform measurement

Primary Concern: Time & Transfer Cost

Storage (Time Dimension of Marketing)
Primary Concern:
– help balance supply & consumption
- to balance periods of plenty & periods of scarcity
Reasons for Storage:
1. Seasonal nature of production
2. Demand for the different products thru-out the year
3. Time required to perform the various marketing services
4. Need for a carry-over into the following season

Place of Storage:
1. farms
2. Producing areas
3. Terminal markets
4. Consumer centers
Cost of Storage:
1. The costs necessary to provide & maintain the physical facilities for storage & for moving the products into & out of
storage (repairs/depreciation/ insurance/handling fee/utilities)
2. Interest on the amount of capital invested in the stored products
3. Cost of quality deterioration, shrinkage, insect & rodent damage
Risk in Storage:
2. Risk of loss due to price change
– the most important risk
Marketing Program
(4 Ps of Marketing)
A marketing mix strategy consists of four parts:

1. Product strategies

2. Pricing strategies

3. Place strategies

4. Promotion strategies
A. Product Strategies
Product – is anything offered for sale, attention, and acquisition
Categories of Agricultural Products:
1. Raw or fresh
2. Semi-processed
3. processed

Product Classifications:
a. Consumption & tangibility
1. Durables
2. Non-durables
3. services
b. Effort & Risk
1. Convenience products
2. Preference products
3. Shopping products
4. Specialty products
c. Levels of Products

1. Core product
2. Augmented product
3. Formal Product
a. Product Mix – refers to the number of products a firm is handling. It can be:

a. wide – if there are a lot of product lines

b. deep – if there are several products within each line

c consistent – if the products being produced are related

b. Branding
Brand – is a letter, word or symbol used to identify products. It has 3 parts: the name, the mark &
the trademark
c. Packaging – is the total presentation of the product
Benefits of packaging:
1. Protects the goods in storage & transit
2. It makes handling convenient
3. It promotes the product
4. It enhances the product
Characteristics of a good package:
1. Attractive 5. textural
2. Recognizable 6. dependable
3. Informative 7. functional
4. Immediate 8. labeling
A label is a part of a package which carries information about the product. It shows the brand, manufacturer, expiry date &
etc.
B. Pricing Strategies
Manufacturer’s Pricing Strategies
1. Skimming the Market – holding prices at relatively high level& promoting the product’s effectiveness &
value
2. Moving down the demand curve – prices are set at a relatively high point & held there until the market
available at that point is pretty well saturated
3. Penetration Pricing
– aims at getting an immediate mass market
4. Pre-emptive pricing – set the price of the product so low that the market is unattractive to competitors
5. Extinction pricing – price of the product is set based on the variable costs in order to force firms in weak financial or
marketwise positions to discontinue their production
6. Formula pricing – pricing agreement is negotiated with the buyer
7. Tie pricing – negotiate a sale that provides for the inclusion in the purchase of a sought-for product a
quantity of the unwanted product.
Retailer’s Pricing Strategies
1. Competitive pricing – set price to be near or equal to those in other stores for products bought on a
regular or irregular basis.

2. Psychological pricing – odd-centavo pricing to give the appearance of having cut prices to the base
Minimum/ even-centavo pricing to gain a quality image
3. Unit pricing – pricing items in units of two or more.
4. Price Lining – offering tow or more classes of the same product at different prices
5. Special prices – offering items as specials for a given period of time

C. Distribution Strategies (Place)

Considerations:

1. Number of potential consumers

2. complexity of the products

3. distribution budget

4. seller’s sales & distribution experience

5. geography
D. Promotion Strategies
Promotion
– is the personal and/or impersonal process of assisting a prospective customer to buy a commodity or to
act favorably upon an idea that has commercial significance to the seller.
Importance of Promotion:
1. makes the buyers aware of alternative goods & services
2. Shorten the distance between the market & the manufacturers
3. regulate the level & timing of demand
Methods of Promotion:
1. Advertising – any paid form of non-personal presentation of promotion of the
products
2. Personal Selling – oral presentation of the product

1. Sales Promotion – are price off, bonuses, lotteries, etc

1. Publicity – non-personal form of promotion which aims to attract buyers by publishing

commercially significant news about the product in different media.