Agricultural marketing covers the services involved in moving an agricultural product from the farm to the consumer. Numerous interconnected activities are involved in doing this, such as planning production, growing and harvesting, grading, packing, transport, storage, agro- and food processing, distribution, advertising and sale. Some definitions would even include “the acts of buying supplies, renting equipment, (and) paying labor", arguing that marketing is everything a business does. Such activities cannot take place without the exchange of information and are often heavily dependent on the availability of suitable finance.
Marketing systems are dynamic; they are competitive and involve continuous change and improvement. Businesses that have lower costs, are more efficient, and can deliver quality products, are those that prosper. Those that have high costs, fail to adapt to changes in market demand and provide poorer quality are often forced out of business. Marketing has to be customer-oriented and has to provide the farmer, transporter, trader, processor, etc. with a profit. This requires those involved in marketing chains to understand buyer requirements, both in terms of product and business conditions.
In Western countries considerable agricultural marketing support to farmers is often provided. In the USA, for example, the USDA operates the Agricultural Marketing Service. Support to developing countries with agricultural marketing development is carried out by various donor organizations and there is a trend for countries to develop their own Agricultural Marketing or Agribusiness units, often attached to ministries of agriculture. Activities include market information development, marketing extension, training in marketing and infrastructure development. Since the 1990s trends have seen the growing importance of supermarkets and a growing interest in contract farming, both of which impact significantly on the way in which marketing takes place.
Agricultural marketing support
In the United States the Agricultural Marketing Service (AMS) is a division of USDA and has programs for cotton, dairy, fruit and vegetable, livestock and seed, poultry, and tobacco. These programs provide testing, standardization, grading and market news services and oversee marketing agreements and orders, administer research and promotion programs, and purchase commodities for federal food programs. The AMS also enforces certain federal laws. USDA also provides support to the Agricultural Marketing Resource Center at Iowa State University and to Penn State University.In the United Kingdom support for marketing of some commodities was provided before and after the Second World War by boards such as the Milk Marketing Board and the Egg Marketing Board, but these were closed down in the 1970s. As a colonial power Britain established marketing boards in many countries, particularly in Africa. Some continue to exist although many were closed down at the time of the introduction of structural adjustment measures in the 1990s.
Agricultural marketing development
Well-functioning marketing
systems necessitate a strong private sector backed up by appropriate policy and
legislative frameworks and effective government support services. Such services
can include provision of market infrastructure, supply of market information
(as done by USDA, for example), and agricultural extension services able to
advise farmers on marketing. Training in marketing at all levels is also
needed. One of many problems faced in agricultural marketing in developing
countries is the latent hostility to the private sector and the lack of
understanding of the role of the intermediary. For this reason “middleman” has become
very much a pejorative word.
Agricultural advisory services and the market
Promoting market orientation in
agricultural advisory services aims to provide for the sustainable enhancement
of the capabilities of the rural poor to enable them to benefit from agricultural
markets and help them to adapt to factors which impact upon these. As a study
by the Overseas
Development Institute
demonstrates, a value
chain approach to
advisory services indicates that the range of clients serviced should go beyond
farmers to include input providers, producers, producer organizations and
processors and traders.
Market infrastructure
Efficient marketing
infrastructure such as wholesale, retail and assembly markets and storage facilities is essential for cost-effective marketing, to
minimize post-harvest
losses and to reduce
health risks. Markets play an important role in rural development, income generation, food security, developing rural-market linkages and gender
issues. Planners need to be aware of how to design markets that meet a
community's social and economic needs and how to choose a suitable site for a
new market. In many cases sites are chosen that are inappropriate and result in
under-use or even no use of the infrastructure constructed. It is also not
sufficient just to build a market: attention needs to be paid to how that
market will be managed, operated and maintained. In most cases, where market improvements
were only aimed at infrastructure upgrading and did not guarantee maintenance
and management, most failed within a few years.Rural assembly markets are located in production areas and primarily serve as places where farmers can meet with traders to sell their products. These may be occasional (perhaps weekly) markets, such as haat bazaars in India and Nepal, or permanent. Terminal wholesale markets are located in major metropolitan areas, where produce is finally chanelled to consumers through trade between wholesalers and retailers, caterers, etc. The characteristics of wholesale markets have changed considerably as retailing changes in response to urban growth, the increasing role of supermarkets and increased consumer spending capacity. These changes require responses in the way in which traditional wholesale markets are organized and managed.
Retail marketing systems in western countries have broadly evolved from traditional street markets through to the modern hypermarket or out-of-town shopping center. In developing countries, there remains considerable scope to improve agricultural marketing by constructing new retail markets, despite the growth of supermarkets, although municipalities often view markets as sources of revenue rather than infrastructure requiring development. Effective regulation of markets is essential. Inside the market, both hygiene rules and revenue collection activities have to be enforced. Of equal importance, however, is the maintenance of order outside the market. Licensed traders in a market will not be willing to cooperate in raising standards if they face competition from unlicensed operators outside who do not pay any of the costs involved in providing a proper service.
Market information
Efficient market
information can be shown
to have positive benefits for farmers and traders. Up-to-date information on
prices and other market factors enables farmers to negotiate with traders and
also facilitates spatial distribution of products from rural areas to towns and
between markets. Most governments in developing countries
have tried to provide market
information services to
farmers, but these have tended to experience problems of sustainability.
Moreover, even when they function, the service provided is often insufficient
to allow commercial decisions to be made because of time lags between data
collection and dissemination. Modern communications technologies open
up the possibility for market information services to improve information
delivery through SMS on cell phones and the rapid growth of FM radio stations in many developing countries offers the
possibility of more localised information services. In the longer run, the
internet may become an effective way of delivering information to farmers.
However, problems associated with the cost and accuracy of data collection
still remain to be addressed. Even when they have access to market information,
farmers often require assistance in interpreting that information. For example,
the market price quoted on the radio may refer to a wholesale selling price and
farmers may have difficulty in translating this into a realistic price at their
local assembly market.Various attempts have been made in
developing countries to introduce commercial market information services but
these have largely been targeted at traders, commercial farmers or exporters.
It is not easy to see how small, poor farmers can generate sufficient income
for a commercial service to be profitable although in India a new service
introduced by Thompson
Reuters was reportedly
used by over 100,000 farmers in its first year of operation. Esoko
in West Africa attempts to subsidize the cost of such services to farmers by
charging access to a more advanced feature set of mobile-based tools to businesses.
Marketing training
Farmers frequently consider
marketing as being their major problem. However, while they are able to
identify such problems as poor prices, lack of transport and high post-harvest
losses, they are often poorly equipped to identify potential solutions.
Successful marketing requires learning new skills, new techniques and new ways
of obtaining information. Extension officers working with ministries of
agriculture or NGOs are often well-trained in horticultural production techniques
but usually lack knowledge of marketing or post-harvest handling. Ways of helping them develop their
knowledge of these areas, in order to be better able to advise farmers about
market-oriented horticulture, need to be explored. While there is a range of
generic guides and other training materials available from FAO and others,
these should ideally be tailored to national circumstances to have maximum
effect.
Enabling environments
Agricultural marketing needs to be conducted within a
supportive policy, legal, institutional, macro-economic, infrastructural and bureaucratic
environment. Traders and others cannot make investments in a climate of
arbitrary government policy changes, such as those that restrict imports and
exports or internal produce movement. Those in business cannot function if
their trading activities are hampered by excessive bureaucracy. Inappropriate
law can distort and reduce the efficiency of the market, increase the costs of
doing business and retard the development of a competitive private sector. Poor
support institutions, such as agricultural
extension services, municipalities that operate markets inefficiently and
export promotion bodies, can be particularly damaging. Poor roads increase the
cost of doing business, reduce payments to farmers and increase prices to
consumers. Finally, the ever-present problem of corruption can seriously impact on agricultural
marketing efficiency in many countries by increasing the transaction costs
faced by those in the marketing chain.
Recent developments
New marketing linkages between agribusiness, large retailers and farmers are
gradually being developed, e.g. through contract farming, group marketing and other forms of collective action. Donors and NGOs are paying increasing
attention to ways of promoting direct linkages between farmers and buyers within a value chain context. More
attention is now being paid to the development of regional markets (e.g. East
Africa) and to structured trading systems that should facilitate such
developments The growth of supermarkets, particularly in Latin America and East
and South East Asia, is having a significant impact on marketing channels for
horticultural, dairy and livestock products. Nevertheless, “spot” markets will
continue to be important for many years, necessitating attention to
infrastructure improvement such as for retail and wholesale
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