AMBO UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

Department of Marketing Management

AGRICULTURAL AND COMMODITY MARKETING
(MKTM4062)

March 2023
Ambo, Ethiopia

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 CHAPTER ONE

OVERVIEW OF AGRICULTURAL MARKETING

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 1.1 DEFINITION OF AGRICULTURAL MARKETING

• Agricultural marketing can be defined as all activities associated

with the flow of agricultural products, inputs, and services from
producers to consumers, in such a way that consumers’ needs are
satisfied and producers are fairly rewarded.

• Agricultural marketing is a form of marketing that encompasses all

goods and services related to the field of agriculture.

• All these products directly or indirectly support the effort to produce

and deliver agricultural products from the farm to the consumer.
 Approaches to Agricultural Marketing

There are several approaches to the description of agricultural marketing.

Each approach has its own importance. The most common ones are:

Functional Approach,

Commodity Approach, and

Institutional Approach.

A. Functional approach

 In this approach the different functions performed by the marketing system are
enumerated and analyzed.

 Agricultural marketing performs various kinds of activities or functions.

 Cont’d

These functions are categorized into three

Exchange functions
refer to the selling and buying functions of marketing

Physical functions
 refers to the storage, transportation, processing, and packaging. These activities
are carried out with the physical handling of the product.

Facilitating functions
It include such functions as standardization and grading, financing, risk bearing
and market intelligence.
 The commodity approach
• It is describing the marketing of a specific commodity from farms to
consumers.

• In this approach, similar commodities are sometimes grouped together and

described as grain marketing, fruit marketing, livestock marketing, vegetable
marketing, etc, or even sometimes

• each grain crop can be described independently as; wheat marketing, maize
marketing, barely marketing, etc, and each fruit as; banana, orange, etc.

• and vegetable market as; potato, tomato, etc marketing.

 Institutional approach

• The ''institutional,'' approach is based on an examination of the different kinds of

middlemen or agencies or institutions involved in the marketing system, such as
retailers, wholesalers, brokers, etc.

• In this approach, the different institutions involved are classified as:

 Merchant middlemen: Retailers and Wholesalers

 Agent middlemen: Brokers and Commission men

 Speculative middlemen: who take the title of products with the major purpose
of profiting from price movements.

 Facilitative organizations: aid the various middlemen in performing their tasks

 Characteristics of Agricultural
products

Perishability: all farm products, being parts of living organisms, are good
Media for bacteria and are therefore perishable

Bulkiness: further complicates marketing

Seasonality: Volume of production varies with the weather, from one season
to another, and from one region to another

Quality Variation: is subject to many conditioning factors, the weather

again being not the least among them

Raw Materials: the outputs of the agricultural sectors are mostly raw
materials for future production
 Importance of agricultural marketing for Least developed countries

 Optimization of Resource Use & Output Management.

 Increase in Farm Income

 Widening of Markets

 Growth of Agro-based Industries

 Adoption and Spread of New Technology

 Employment

 Addition to National Income

 Better Living

 Creation of Utility
 Characteristics of Developed Markets of Agricultural Marketing

 A developed market is the sine qua non or absolutely needed of any

developing economy.

A well-developed market should possess the following characteristics.

 A good market should provide commodities, which the consumer wants and
are ready to pay for.

 It should provide a wide variety of products

 The retailing service should be available in the market for small consumers.

 There should not be any inefficiency or wastage in the market.

 Prices should be fair and uniform.

 No harmful products should be offered for sale in the market.

 PROBLEMS OF AGRICULTURAL MARKETING

• Production conditions:- source/lack of supplier

• Transport and communication

• Handling, packaging, and processing

• Storage and warehousing

• Sharp price differences and fluctuations.

• Lack of seed, fertilizer, and other inputs

• Sale of ungraded products

• Lack of finance
 Linkage between agriculture and the food industry linkage

The link between agriculture and food continually evolves. Food manufacturers
will have particular expectations of agriculture as a supplier of their raw
materials, including:-

 High Quality: To build a profitable business

 Low Cost: It is able to find the lowest cost source for any given level of quality

 Reliability: Producers judged on their reliability in all of these respects

 Non-seasonality

 Product differentiation

 Processing

 Health aspects
 Agricultural and food marketing enterprises

• The principal components of any marketing system are the institutions and
enterprises of which it is comprised.

• Three of the principal forms of enterprise to be found in developing

countries are as follows.

Private companies

Marketing boards

Co-operatives
 Private enterprise

• Private enterprise has much to commend, including a much higher level of

financial independence from the government than public enterprises.

• According to Abbott, successful indigenous private enterprises, in agriculture,

have several distinguishing characteristics, particularly those that are owner-
operated.

• Personal initiative: The entrepreneurial spirit is in evidence when an individual

shows a willingness to accept calculated risks.

• Independence of spirit and persistence: Entrepreneurs need a good deal of self-

confidence i.e. they must be prepared to back their own judgments rather than rely
on the views and support of others.

• Willingness to work hard, for long and/or irregular hours: There is a direct
relationship between effort and the level of success in private enterprise.
 CONT’
D

Abbott also highlights several particular strengths of private enterprise,

including:

• Low operating costs: Nothing concentrates the mind on cost control rather than
ownership. The private entrepreneur has every motivation to contain costs since
to do otherwise erodes his/her profit margin.

• High levels of equipment utilization: Since private enterprise has as its prime
objective, profit, everything is done to maximize the use of capital equipment
and thereby lower unit costs.

• Adaptability: Decision-making within private enterprise tends to be quicker,

because of the absence of a weighty bureaucracy, than in public enterprise
equivalents
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 Marketing boards

• Marketing boards are, in most instances a government agency

and/or statutory organization having the function of intervening in
the marketing process, with a view to serving the cause of
efficient and orderly marketing

• Less frequently they are voluntary organizations established by

farmers/producers.

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 Main roles played by marketing boards

• Change agent: Marketing boards can establish marketing

practices and procedures for raw and/or processed products.

• Regulatory role: Marketing boards may act as

“watch-dogs”/seriously/ over agreed marketing practices and
procedures e.g. credit arrangements, weights, and measures,
quality control, etc.

• Facilitator: Marketing boards may provide all or some of the

facilitating services e.g. credit, market intelligence, and risk
management.
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 CONT’D

The role of marketing boards in bringing about more

efficient marketing is most often framed by policymakers in
terms of modifying the market structure.

In these circumstances, the price-makers are the middlemen

and both producers and consumers are price-takers.

Marketing boards may try to rationalize the system through,

for example, a system of licenses.

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 CONT’D

Buying operations of marketing boards: takes place at official buying

points where there are either appropriate storage facilities for the
production or transportation

Selling operations of marketing boards: Some marketing boards, like

grain boards, are concerned entirely with domestic consumer markets

The two types of markets are quite different from one another

these two types of boards by referring to Food Marketing Boards (FMBs)

and Export Marketing Boards (EMBs)

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 CONT’D

First, governments have no control over demand in export markets

whereas they can, and do, exert control over demand within the
domestic market.

Second, since governments have to take account of the interests of

domestic consumers of staple crops, they sometimes instruct FMBs to
adjust their marketing strategies to meet social and/or political rather
than commercial objectives.

The interests of consumers in export markets are of no direct concern to

the government of the exporting nation.

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 CONT’D

Selling operations of EMBs: tend to favor early sales. That is, they try to
minimize the time period between buying and exports.

Most EMBs practice ‘forward selling’ which as the term itself suggests,
means signing sales contracts well in advance of delivery.

Sometimes it means selling the crops well in advance of their being

harvested, or sometimes even before they are planted.

Selling operations of FMBs: In many developing countries the FMB's

selling price is set by the government.

Concern for the welfare of consumers often encourages governments to

set low prices. This means the gross trading margin of an FMB is often
small.
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 CONT’D

The effectiveness of a particular marketing board is often

viewed in terms of three factors:

Its contribution to orderly and efficient marketing

The reduction in the capacity of intermediaries to

manipulate margins at the expense of producers and
consumers

The generation of producer-oriented monopoly power

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 Co-operatives

• The cooperative enterprise has its origins in the 19th century

and has become one of the most ubiquitous examples of forms
of business/economic enterprise.

• Co-operatives exist in all countries of the world and operate

under diverse political systems: from communism to
capitalism.

• The majority of these co-operatives are, through their national

apex organizations, ultimately in membership of the
International Co-operative Alliance (ICA), the representative
world body of co-operatives of all types. 24
 The Structure and organization of co-operatives

• There are two principal forms of cooperative organizations: primary

co-operatives and secondary co-operatives.

A primary cooperative is one in which the shareholder is

individuals; each of them having an equal share in its control.

• In many cases, primary co-operatives will combine several functions

e.g. an agricultural co-operative may provide consumer supplies to
its members.

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 Cont’d

• Primary co-operatives may also own and run subsidiary enterprises

related to their main functions, such as a consumer co-operative
with its own manufacturing/processing or servicing business.

Secondary co-operatives: While a primary co-operative has

individual persons as members, a secondary (or federal) co-
operative is one in which other co-operatives are the members.

Apart from this basic difference the structure and organization of

both types follow a very similar pattern.

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 The weakness of co-operatives

There are a number of problems that inhibit cooperative

development and adversely affect performance. These are:-

• Realism of objectives: Commitment and purpose are two

important ingredients in motivation. Objectives are expressions of
purpose and expectation. To serve as motivators and guides to
action they have to be attainable.

• Conflict between economic and social purposes: Economic

success is basic to the achievement of the cooperative purpose and
in the long run, unprofitable enterprises cannot be sustained.
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 Cont’d

• Misuse of co-operatives to pursue political objectives:

Attempts to divert the purpose and resources of co-operatives
to the support of particular political objectives adversely affect
the co-operative movement.

• Management: There has been a tendency to argue that a major

cause of cooperative failure is the constraint imposed on the
exercise of management skills and authority by the democratic
nature of the enterprise.

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