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LECTURE IX MARKETING AGRICULTURAL COMMODITIES Marketing Functions and Services Marketing system: Connects buyers and sellers Transmits information between buyers and sellers Provide incentives for efficient decision-making. Thus the functions and services of marketing can be defined as: Finding a buyer and transferring ownership. Assembly and storage. Sorting, packing and processing. Providing the finance for marketing and taking the risks. Assortment and presentation to consumers Finding buyer/transferring ownership Is the heart of marketing. Bartering of surplus products for other needed products is the simplest form of marketing Since it is difficult to find someone to provide the product needed who will accept a specific product in return, it is convenient to sell to someone who is willing to pay cash. Finding buyer/transferring ownership In many countries the town market square is the scene of direct transaction between producers and consumers. In this market each producer accepts full responsibility for Advertising his/her produce Finding customers Obtaining information to guide him/her in bargaining over the price. Some specialized traders buy more than the consumers need and later offer the goods in a market where there is an unsatisfied demand. Finding buyer/transferring ownership In large markets the producer and the consumer may be separated by Purchasing and selling services are offered in conjunction with: Distance time form requirements. Transport storage processing. These services are provided by specialized commission agents, brokers or auctioneers Assembly and Storage Goods are concentrated at convenient points. Attracts buyers who could not spare the time to go make small purchases at scattered farms. Enables the buyers to use larger, more economical transport and processing equipment. Necessitates storage while the product is awaiting sale. The type of storage varies widely with the nature of the product and the climatic environment. Assembly and Storage Storage also important for farmers to store part their crop to await seasonally high prices. Traders who take possession of produce need some storage space so that they can choose the best time to resell. Processing plants must have stocks of their raw material conveniently at hand. Wholesale distributors and retailers need to maintain adequate stocks of all their items to cover variable day-to-day demands from customers. Sorting, packing and processing Sorting allows consumers to choose the kind of produce they want. Produce is sort according to Size Shape Flavour Degree of ripeness Length of staple Any other quality that influences the commercial value of the product. Buyers are prepared to pay a higher price for produce when they are sure of its quality. Sorting, packing and processing Farm products need to be packaged in order to: Prevent physical deterioration. Make theft, adulteration or substitution more difficult. Ensure cleanliness. Facilitate measurement, labeling and the attachment of instructions and descriptions. Promote sales through their attractive appearance and suitability as an advertising medium. Sorting, packing and processing Type of container used varies with: The product The physical and climatic environment The phase/stage of marketing served. Containers change as the produce moves from the producer to the consumer. A product may leave the farm in sacks or baskets but attractive packaging may be done to appeal to the consumers. Some products undergo changes in form to adapt them to the householders’ needs and tastes. Financing and Taking risks Owner of goods sacrifice the opportunity to use his/her own capital elsewhere or borrow the necessary capital from some other source. Wholesalers spend money buying the produce they handle, finance marketing facilities such as processing and storage plants as well as the transport equipment and office premises needed for business. Retailers must pay for their sales premises and for storage of part of their stock. Financing and Taking risks Farmers generally want to be paid a fixed price in cash before they hand over their produce. The buyer carries the risks of Finding a customer who is prepared to pay enough to cover both the purchase price and the other costs likely to be incurred. An unfavourable change in the price level. Deterioration of the product. The burden of these risks contributes to the cost of marketing. Assortment and Presentation Distribution systems must meet the demands of the consumer. Supplies delivered to assembly points e.g. warehouses; mills, etc vary in quantity and quality. Consumer demand also varies according to: Season Climate Income religious teaching local customs Assortment and Presentation Some wholesalers simply provide the appropriate quality and quantity of supplies for use in mills or factories. Other wholesalers may be involved in splitting up loads into smaller quantities that are suitable for sale by the retailer to individual consumers at local shops. Assortment and Presentation A very small retailer may concentrate on selling a single product. But most retailers offer a selection of products that are conveniently brought together. The ultimate form of this is the supermarket, which offers, under one roof, all the food items in general consumption. Marketing Agencies Carry out marketing functions or offer marketing services. They may be Individuals acting independently Partnerships Large firms Cooperatives or Government corporations. They include: Local Assemblers Wholesalers Commission agents and Brokers Retailers Local Assemblers Are buyers undertake the initial task of assembling produce from farms or local markets. They may be farmers who collect produce of other cultivators, landlords, village shopkeepers, wholesale merchants and processors, cooperatives or government procurement agencies. The local assembler may either act on commission or purchase on his/her account. He/she may furnish credit to the farmer and probably arrange the transport for his/her purchase to a central processing or wholesaling point. He/she relieves the farmer of further direct marketing responsibilities. Wholesalers These agents take produce from farmers or local assemblers. They sell to retailers, to other wholesalers in domestic and foreign markets and to manufacturers. Wholesalers may finance the movement of goods themselves, or with the aid of banks; in general they bear most of the marketing risks. Wholesalers who are willing to take greater risks than others are often called speculators. Wholesalers They also perform a useful service known as arbitrage i.e. they buy when demand is low and resell when demand is high. They may also buy and sell in different areas where demand differs. If there is competition, this kind of buying and reselling is useful because it can prevent prices from fluctuating between wider extremes. A wholesaling enterprise may be owned and operated privately, cooperatively or publicly. Commission agents and Brokers Producers and wholesalers frequently want to offer their produce on markets that they cannot conveniently attend in person. Commission agents specialize in buying and selling for such people and take charge of goods on their behalf. They are encouraged to do well for their client by being paid a percentage of the price obtained. Commission agents and Brokers Commission agents run no risk, but must do better than the clients could do for themselves, if they are to attract business. Commission agents are used where direct offers tend to be low, as for perishable fruits and vegetables for sale on distant markets. By continuing to carry the risk, the seller retains the possibility of obtaining a much higher price. Commission agents and Brokers Brokers bring potential buyers and sellers together Their service is to provide an intimate knowledge of supplies, requirements and prices in various markets. The term ‘broker’ is best restricted to agents who do not own or physically handle goods. The actual transfer of ownership takes place between the original buyer and seller, with the broker acting as counselor and intermediary in return for a fee. Commission agents and Brokers Brokers are in touch with a wide selection of specialized dealers and are well supplied with up-to-date information on markets. Brokers can thus offer a wider market to a buyer or seller than would otherwise be accessible to him/her. Retailers The function of the retailer is to obtain supplies and display them for sale in forms and at times and places convenient to consumers. Usually, the retailer buys from one or more wholesale distributors, often on credit, and serves consumers buying small quantities on a day-to-day basis. Frequently, retailers sort, process and repack goods to suit consumers’ individual requirements as the customer watches or behind scenes.