Transcript Food Markets, Production, and Marketing

AGRICULTURAL AND FOOD MARKETS,
PRODUCTION, AND MARKETING

Market functions,
institutions, and
behaviors
 Food marketing
issues
 Characteristics of
markets
 Trends in agricultural
markets
MKTG 442
MARKETS, PRODUCTION, AND MARKETING
Lars Perner, Instructor
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AGRICULTURAL
PRODUCTS
FOOD
FINAL
MKTG 442
TEXTILE
INGREDIENT
PAPER
FEEDING
ENERGY
PACKAGING
MARKETS, PRODUCTION, AND MARKETING
TEXT
Lars Perner, Instructor
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Functions in Agricultural Markets—
one way to analyze

Selling
 Storage
 Transportation
 Processing
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MKTG 442
Facilitating
Standardization
Financing
Risk bearing
Market Intelligence
MARKETS, PRODUCTION, AND MARKETING
Lars Perner, Instructor
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Selling to

Processors
For final products (e.g., flour)
 For manufacturing of ingredients
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Intermediaries
Wholesalers
 Retailers

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Customers
Consumers
 Institutions
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MKTG 442
MARKETS, PRODUCTION, AND MARKETING
Lars Perner, Instructor
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Storage
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Storage
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Seasonal
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MKTG 442
Timing of production
vs. cost of storage
Feasibility of timing
market (turkeys vs.
wheat)
Queuing
MARKETS, PRODUCTION, AND MARKETING
Lars Perner, Instructor
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Transportation

Cost vs. speed
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Perishability
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Value of freshness to
customers
 Ability to predict
demand
 Need for bulk
reduction (see
processing)
MKTG 442
MARKETS, PRODUCTION, AND MARKETING
Lars Perner, Instructor
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Processing

Treatment of product
(e.g., wheat to flour)
 Reduction of bulk
(oranges to
concentrate—not
orange juice yet)
 Creation of labor
saving food products
(e.g., frozen pizza)
MKTG 442
MARKETS, PRODUCTION, AND MARKETING
Lars Perner, Instructor
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Facilitating

Farmers’ agents
Matching demand and supply
 Other information search—e.g., demand
forecast
 Negotiations
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Logistics handling
MKTG 442
MARKETS, PRODUCTION, AND MARKETING
Lars Perner, Instructor
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Standardization

Agricultural grades
and labeling
 Food branding
MKTG 442
MARKETS, PRODUCTION, AND MARKETING
Lars Perner, Instructor
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Financing
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Long term lending
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Short term lending
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Farm mortgages
Equipment loans
Advances against
harvests
Financing of store
and processor
inventory
Futures contracts
MKTG 442
MARKETS, PRODUCTION, AND MARKETING
Lars Perner, Instructor
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Risk Bearing

Futures contracts
 Investments in new
food products (most
will fail)
 Evaluation of credit
worthiness of
farmers and other
parties
MKTG 442
MARKETS, PRODUCTION, AND MARKETING
Lars Perner, Instructor
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Market Intelligence

Market research
 Forecasting
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Demand
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MKTG 442
For existing
products
Spread of new
products
Supply
MARKETS, PRODUCTION, AND MARKETING
Lars Perner, Instructor
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Institutions

Marketing middle people
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Merchant
Retailer
 Wholesaler
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Agent
Brokers
 Commission
 Speculative
 Processors/manufacturers
 Facilitative organizations
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MKTG 442
MARKETS, PRODUCTION, AND MARKETING
Lars Perner, Instructor
13
Behavioral Systems
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Input-output
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Communications
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Different parties provide goods and services
moving toward final products
Matching supply and demand
Adaptation to outside changes—e.g.,
Consumer tastes
 World supply
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MKTG 442
MARKETS, PRODUCTION, AND MARKETING
Lars Perner, Instructor
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Food Marketing Efficiency
Getting final products to consumers at
lowest cost for given services
 Lower spread between farm costs and
retail food costs does not necessarily
mean greater efficiency—intermediate
functions may add value
 Types of efficiency
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Operational
 Pricing
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MKTG 442
MARKETS, PRODUCTION, AND MARKETING
Lars Perner, Instructor
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Agricultural Production and
Marketing
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Structure of U.S. agriculture
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Product characteristics
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Dominated by small, family farms
Raw material
Bulkiness and perishability
Quality variation
Production characteristics
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MKTG 442
Total product
Annual variability
Seasonality
MARKETS, PRODUCTION, AND MARKETING
Lars Perner, Instructor
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Production characteristics
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Total product
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Increase due to productivity
Annual variability
 Seasonality
 Geographic concentration
 Varying production costs
 Farm supply industry (derived demand)
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MKTG 442
MARKETS, PRODUCTION, AND MARKETING
Lars Perner, Instructor
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Marketing Problems
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Lack of control over


Own output
Market supply

Lag in results of adjustment efforts
 Decision of whether to engage in marketing
efforts
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Free rider problem

Superior bargaining power of large buyers
 Cost squeeze
MKTG 442
MARKETS, PRODUCTION, AND MARKETING
Lars Perner, Instructor
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Some Trends

Differentiated products
 Specialty/nice products
 Interdependence of
manufacturers and
suppliers
 High price risk
 Science and innovation
 Closed information
systems
MKTG 442
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Private and proprietary
research
 Resource and
environmental
conservation
 Managerial and
interpersonal skills
 Industrialization
 Global competition
 Farm incomes moving
toward incomes of other
sectors
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Lars Perner, Instructor
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