Chapter No.

Agricultural Marketing System

System
 A system is a complex whole of interrelated
and interdependent constituent parts or
subsystems with pre-defined common goals
and objectives
 Similarly Agriculture marketing system

comprises of various institutions that perform

different functional activates
 An agricultural and food marketing system

comprises of all the functions and agencies

who perform those activities that are
necessary in order to profitably exploit
opportunities in the market place.
Economic Development and
Agricultural Marketing system
 Traditional Subsistence Economies
a) People earn their livelihood from farming

b) Only surplus food is brought to Market

c) Only a limited variety of agricultural crops are

produced e.g. few basic grains , pulses and
crops
d) Differences over the price and product quality
are discussed by both parties in a transaction
e) Govt. support is usually absent and products
are usually sold at very short distance from
point of production.
Transitional Agricultural Economies
 As countries develop these becomes increasingly
urbanized and more market oriented.
 Agricultural production seeks its way in
development plans.
 Private and public capital starts pouring into
farming and agribusiness hence commercial
agriculture increases
 This requires Additional services from facilitating
agencies such as grading , financing ,
risk-bearing , crop reporting and market news.
Market Oriented Agriculture
 In market Oriented Economies the urban
population is more dominant demographic
characteristics.
 Commercial agriculture becomes more

prominent producers
 The problem of food supply shift from issue

of production to issue of distribution.

 Production of new markets takes place
 More food is processed and packed
 Stakeholders in Agricultural
Marketing System
 This system is consist of 5 main stakeholders
I. Producers:-
Usually food producing agencies e.g. farmers
II. Traders:-
People who operate in the market and relate
producers with consumers e.g. Commission man ,
brokers , wholesalers and retailer.
III. Trade supporters:-
They do not directly participate in trading activities,
they support by enhancing efficiency in exchange of
food. E.g Trade development authority of Pakistan
I. Trade planner /Decision makers
This sector of stakeholders is responsible for
making decisions related to agriculture marketing
and they have social and political goals
II. Consumer
The last group in marketing chain is consumer.
Demands of a consumer

 Good quality products

 Low prices of products
 Better Services
Marketing System Productivity
 Marketing system productivity is usually
measured by the amount of usefulness often
referred to as “utility” the system adds to the
agriculture products

 Form Utility
Form utility is a conversion process through which raw
products are transformed into products as desired by
consumers as they cant be used as form. E.g. fruit into James
and juices , wheat into flour and bread
 Place utility
i. It involves transporting the product from point of production
to consumers

ii. Agriculture commodities are produced in rural areas

which are distant from consumer in the urban areas

 Time Utility
i. Storage function creates time utility as the agriculture
products are greater in number at the time of production
hence they are sold at low price

ii. Storing products for a particular time and selling when there
are no competitor in the market.
 Possession Utility
It involves transferring the ownership from the seller to the
buyer
 Analysis of Agricultural
Marketing system
 The analysis of an agricultural marketing system
helps in understanding the components of the
system and the interaction among these
components
 There are six approaches

i. The Function approaches

ii. The Institutional approaches
iii. The Commodity approaches

iv. The Behavioral system approaches

v. The Market structure , conduct , and performance

approaches
vi. The Marketing mapping approaches
Functional Approaches

 A marketing function is a major specialized

activity performed in the marketing chain for
accomplishing certain marketing activates and
process
a) Affect cost and value to consumer
b) Cannot be eliminated
c) Can be performed by anyone in the system
 a) Exchange Function
 Exchange Function is referred to those marketing
activates which are related to transfer of ownership
of goods and are mainly related to price
determination process in the marketing chain.
i. Buying Function : is mainly concerned with
finding out the sources of the supply ,
assembling of the products and the activities
with purchase
ii. Selling Function : This function is not simply
accepting the price offered by the buyer rather it
includes all activities which are termed
merchandising.
 Physical function
 The physical function includes all activities relating
to handling , movement and physical
transformation of agricultural commodities
i. Storage Function: As there is many time from time
of production to time of consumption, This
function involves processing and storing of raw
material to be used at desired time
ii. Transportation Function: It involves transporting
the product from point of production to consumer .
As the agriculture commodities are produces in
rural areas which are distant from consumer in the
urban areas
iii. Processing Function: It involves processing of
food , change the form of raw products.
 Facilitating Function : It contributes in smooth
performance of the exchange of physical function
and don’t take part directly in the exchange of title
or the physical handling of the products , In
absence of this modern marketing system cannot
work smoothly
i. The Standardization Function: It contributes in
establishment and maintenance of the uniform
measurement of both quality and quantity.
ii. The Financing Function: It contributes in
advancing of money to execute various
marketing processes and functions.
iii. Risk bearing Function: Is an acceptance of
possibility of losses in the marketing of a
product and it has following types
a) The physical Risk: It may occur due to
destruction or deterioration of the product
itself by fire, accident , wind or any factor
connected to the transport of the product

b) Market Risks: This type may arises due to

fluctuation of value of the product.

 Market Intelligence Function : It includes all

the activities relating to collection , analysis,
interpretation , dissemination of a wide
variety of data necessary for the smooth an
efficient operation of the marketing
processes.
The Institutional Approach
 The Institutional approach is a way to study
various agencies and businesses organization
involves in the performance of marketing
processes.

In this approach all the emphasis is on human

element and various roles performed by the
middleman are mainly focused.
A middleman of a particular interest can be
classified as follow
1) Merchant Middle Man: Take title to , and their for
own , the products they handle. They trade for
their personal gains and secure their income from
a margin between the buying and selling price

a) The Retailer : buys products for resale directly to

the ultimate consumer of the goods. Retailer
purchase in bulk mostly from wholesalers

b) Wholesalers: Sells his product to retailer, other

small wholesales , business consumers but does
not sell in significant amounts to ultimate
consumer
2) Agent Middleman: Act as representative for their
clients and do not take title to their for do not own
the products they handle and receive their income
in the form of fees and commission.
a) The Commission Man: Takes the physical
handling of the product , arrange the terms of
sale , collects the revenue , deduct his
commission and remits the balance to his
principals

b) The Broker : Is not given physical control of the

product and he ordinarily follows the direction of
his principals closely
3) Speculative Middleman: Take product owner ship
to seek profit due to price movement. Purchases
and sales are usually made at the same level in the
market channels “Traders” , “Scalpers” and
“spreaders” are also various terms used for
speculative middleman.

4) Processors & Manufacturers: Primary they change

the product form apart from their main process
activity , they take an active part in other
institutional aspects of marketing.

5) Facilitative Organization: It assist various

middleman in caring out their task and do not
directly participate in marketing activities and
processes like buyers and sellers , commission
The commodity Approach
 Agriculture marketing system can also be
analyzed by examining marketing processes
commodity by commodity.
 Under this method both functional and

institutional aspects of marketing analyzed

in detail for a particular commodity.
 The separate study of a large number of

commodities also point out the similarities of

many marketing problems in the system