Introduction to

Agricultural
Marketing
 The Agricultural Marketing System

The agricultural sector has been playing a crucial

role in Philippine economic development.
This sector accounts for 10.11% of the Gross
Domestic Product (GDP) in 2020 and contributes
22.86% to Philippine employment in 2019
(Statista.com)
However, many are not aware of the real
importance of marketing in agriculture.
Many programs and projects are geared toward
increased production and little attention was given
to agricultural marketing and sometimes neglected.
 Basic Concepts of Marketing
Marketing

Series of services involved in moving a

product from the point of production to the
point of consumption.
Direct result of specialization of production
and trading
It begins when the farmers first think of
crops/livestock to be produced to earn a
profit and at the same time satisfy the need of
the market.
Market
A place where buyers and sellers meet to
exchange goods and services.
The group of buyers and sellers with
facilities for trading with each other.
Any specific place where goods are offered
for sale.
A large geographic area wherein a given set
of supply and demand forces operate to set
prices.
Buyers and sellers do not have to meet
together face to face by using; telephone,
 Three (3) Elements of Market
1 Buyer
Ultimate buyers – buy goods to satisfy
their personal needs.
Industrial buyers – buy goods for resale/
for transforming it into another form.
2 Sellers – suppliers of goods and services
3 Trading facilities
Point of Production
Point of first sale by the farmers, typically at the farm
or at the farmer’s home. A price is established: Pf

Point of Consumption
Point where marketing ends or the point of last
sale/purchase. A price is established: Pr

Services
Functions perform on a product to alter its form,
time, place or characteristics that involve costs and
benefits to the product that somebody has to pay for
it.
 Categories of Activities/Functions:

A. Transactional Functions – including finding

buyers, buying and selling, and risk-taking.
B. Logical Functions – including grading,
assembling, packaging, storage,
transportation, and presentation to
customers; and
C. Facilitating Functions – including
dissemination of market information,
marketing research, and financing.
AGRICULTURAL MARKETING

The performance of all business

activities involved in the flow of
agricultural goods and services
from the point of agricultural
production until they are in the
hands of the ultimate consumers
Why is Marketing Complex and Costly?

1. The initial production of the raw materials

for food products takes place in many
farms scattered throughout the country.
2. Many farm products are highly perishable
and widely varying in quality.
3. Products are grown seasonally.
4. Performance of various services such as
packaging, transporting, processing, etc.
involves a large amount of money, hence,
making goods costly.
 Why is Marketing Productive?
Marketing is productive because it
creates utility.

Utility– is the want-satisfying power

of an object or service. It is the process
of making goods and services useful.
 Four (4) types of Utility:
Form utility – it changes the form of raw
materials and creates something new. It is created
if goods possess the required properties.
Example: The packers who slaughter the hogs and cut them
into pork carcasses add form utility.

Place Utility – is created when products are made

available where they are most wanted.
Example: The shipper adds place utility by moving the hogs
from Mindanao to Metro Manila slaughterhouses
 Four (4) types of Utility:
Time Utility – is created when products are made
available when they are most wanted.
Example: Meat wholesalers who freeze some of the
pork products for later use add time utility to the product.
 
Possession Utility – is created when goods are
transferred or are placed under the control of the
persons who desire to use them.
Marketing System
Also known as agricultural marketing
machinery
An inter-organizational system made up
of a set of interdependent activities aimed
at expanding agricultural production
Marketing is a system because of the
following reasons:

It requires planning to determine the

products or services to be produced
It involves the organization of economic
resources which will be utilized for creating
goods or services
 As a system, it has the following
characteristics:
 It has objectives or goals to achieve.
 It has components or participants that perform certain
functions such as transporting, processing, storage,
grading, standardization, and market information.
 It needs institutional arrangements which are necessary
for the performance of its function
 It needs planning and management decision structure,
which controls and coordinates the forces at work.
 It has spatial and temporal dimensions and is most
often commodity specific.
COMPONENTS or SUBSYSTEMS of the
MARKETING SYSTEM:
Producer subsystem – consist of
initiators of production who may be small
farmers or corporate farms.
Channel subsystem – consist of market
participants or intermediaries who are
directly responsible for making the
farmer’s products available to the user at
the right place, time and form.
Flow subsystem – facilitates products
financial and information flows.
Functional subsystem – consists of
marketing processes and functions related
to the creation of place, time and form
utilities that involve assembly,
concentrations, and dispersion and
equalization activities.
Consumer subsystem – refers to the final
repository of products produced by
farmers.
Environmental subsystem – facilitates
market performance, encompasses four
(4) factors that affect the entire marketing
subsystem:(Climatic/Physical, Socio-
cultural, Economic/technological, and
Legal/Political) factors.
 Characteristics
and Problems of
Agricultural
Marketing in the
Philippines
Knowledge of marketing and its problems will help
farmers make important decisions on the following
aspects:

What to produce and prepare it for sale?

When and where to sell?
How much of the marketing job should be done by
the farmer himself as an individual or as a member of
the group?
What can be done to expand markets?
Which of many marketing arrangements are
desirable?
How can changes necessary to correct undesirable
practices be secured?
Problem Areas in Agricultural Marketing

1. Dependence on Middlemen – the

Philippine agricultural marketing sector
is heavily dependent on middlemen in
bringing the products to the end-users.

Factors why farmers are dependent on

middlemen:
- small farm size
- poor cash position of the farmers
- unavailable marketing facilities
Problem Areas in Agricultural Marketing

2. Inadequate Market Information –

there is lacking fair dissemination of
market information. Market information is
defined as a continuing and interacting
structure of people, equipment, and
procedures to gather, sort, analyze,
evaluate, and distribute pertinent, timely,
and accurate information for use by
marketing.
Problem Areas in Agricultural Marketing

3. Inadequate Marketing Support

Services – it is particularly lacking in the
Philippines. We have government
agencies mandated to provide marketing
assistance to disseminate market
information (DA thru BAS). However, this
does not reach the majority of the farmers
and other intended clients.
Problem Areas in Agricultural Marketing

4. Unique Features of Agricultural

Products – bringing the producer from
the farm to the marketplace is not an
easy task on the part of the farmers and
traders due to the different unique
features of agricultural products.
a. Seasonality
b. Perishability
c. Handling Requirements
Problem Areas in Agricultural Marketing

5. Number of producers – the marketing

of farm products would be simple if one
farm produces only a single item or a
limited number of different items.

6. Characteristics of Consumers –
keeping pace with the changing demands
of consumers is one of the most intriguing
marketing problems.
Problem Areas in Agricultural Marketing

Characteristics of the product

◦ Perishability
◦ Seasonality of production
◦ Bulkiness
◦ Non-homogeneity
Number of producers
Characteristics of consumers
Reflecting demand of consumers
Increasing market efficiency
Five (5) Major Problems that hinder the
efficiency of marketing
Poor condition of physical infrastructure
Minimal flow of market information
Small volume of market-oriented output for
many agricultural commodities
Inadequate know-how on the part of the
farmers and traders
Absence or lack of definitive public
marketing policies and the non-enforcement
of public regulatory policies.
Roles of Marketing in the Economy

Guides production
Bridges the gap between production
and consumption
Induces economic activities that
contribute to development
TRADITIONAL AGRICULTURAL
MARKETING PRACTICES
“Suki” – refers to regulars or special
exchange partners. This was found to
affect the seller’s pricing, distribution and
promotion strategies.

Some of the marketing practices under the

“suki” system are the following
 Tawad” – is a practice in which the buyer asks for a
reduction in price or an additional unit of a
commodity.

 “Price by piece” or “tingi” – This is a practice of

selling bits and pieces rather than the whole standard
size. This is the same as economy packaging.

 “Por kilo” is another economy packaging activity.

Instead of selling the whole piece, it is chopped into
pieces and packed by the sellers.

 “Buena Mano” – is a term used to describe first sale

buyer for the day
CHAPTER 2
APPROACHES TO THE
STUDY OF
AGRICULTURAL
MARKETING
MR. ROSEWIN L. SEVANDAL
Instructor I
 Major Approaches to the analysis
of marketing problems:
1. Commodity approach
2. Institutional approach
3. Functional approach
4. Market Structure-Conduct-performance
approach
5. Behavioral system approach
 1. COMMODITY APPROACH
 Study the commodity concerned
 Product- oriented than marketing function-
oriented
 Covers the characteristics of the product,
market demand and supply situation, prices,
consumer preferences, market potential of
new products, etc.
 2. INSTITUTIONAL
APPROACH
 studies the various agencies and business
structures involved in the marketing
processes.
 attempts to answer the question “Who”.
 considers the nature and character of various
middlemen and related agencies, and also the
arrangement and organization of the
marketing machinery.
 a. MIDDLEMEN
 Those individual or business concerns
that specialized in performing various
marketing functions involved in the
purchase and sell of goods as they are
moved from producers to consumers.
TYPES OF MIDDLEMEN
1. Merchant middlemen – take title to and therefore
own products they handle. They buy and sell for their
own gain.
Examples:
a. Contract buyers
b. Grain millers
c. Wholesalers
(1) Assembly wholesalers or viajeros, (2) financier or bodegeros, (3)
shippers, (4) wholesalers, (5) wholesaler-retailer and
(6) retailers)
TYPES OF MIDDLEMEN
2. Agent middlemen – act as representative of their
clients. They do not take the title to and therefore do not
own the product they handle.
Examples:
a. Commission agent – normally takes over the physical
handling of the product, arrange the terms of sale,
collection, deducts his fees and remits the balance to the
principal.
b. Broker – usually does not have physical control of the
product.
b. Processors and
manufacturers
 Undertake some action of production to
change their form.
C. FACILITATIVE
ORGANIZATIONS
 Aid the various middlemen in performing their
task. e.g. auction market
D. MARKET ASSOCIATION
 They are active in buying and selling of
goods.
 3. functional APPROACH
 Attempts to answer the “What” in the question.
 A method of classifying the activities that occur in
the marketing process by breaking these processes
into functions.
Uses of the functional approach:
 Considers the job that must be done
 Helpful in evaluating marketing costs of various middlemen
 Useful in understanding the difference in marketing machinery by
breaking down a complex marketing task into its component
function
 MARKETING FUNCTION
 It is a task performed by an intermediary in the
channel of distribution to create form, time, place
and possession utility.

TYPES OF MARKETING FUNCTION:

1. Exchange Function
2. Physical Function
3. Facilitating function
TYPES OF
MARKETING
FUNCTION
 1. exchange FUNCTION
 It is an activities involved in the transfer of title of
goods.
 Represents the point at which price determination
enters the study of agricultural marketing

A. Buying Function – seeking out sources of supply

B. Selling function – merchandising activities
 2. physical FUNCTION
 Are those activities that involve handling, movement
and physical change of the actual commodity.
A. Storage Function – concerned with marketing goods
available at the desired time.
B. Transportation function – concerned with making
goods available at the proper place.
C. Processing function – includes all essentially manufacturing
activities that change the form of product.
 3. facilitating FUNCTION
 Make possible the smooth performance of the
exchange and physical function.
 Acts as the grease of the agricultural marketing
machinery
A. Grading – classify the product according to size, color,
etc.
B. Standardization function – the establishment and
maintenance of uniform measurements.
3. facilitating FUNCTION
C. Financing function – the advancing of money to carry
on the various marketing function.
D. Risk-bearing function – the acceptance of the possibility
of loss in the marketing of product.
E. Market intelligence – is the type of collecting, interpreting
and disseminating the large variety of data.
F. Market research – done to evaluate the possible alternative
marketing channels that may be used.
G. Demand creation – is usually achieved through effective
advertising of product.
Transportation – Space
dimension
 Major purpose is to make food products
useful by transporting them from farm to
the consumer.
 It is the key link in the food system
marketing chain connecting different
production points and consumer center.
storage – time dimension
Objective of storage: to
balance supply and
demand.
4. MARKET STRUCTURE-CONDUCT-
PERFORMANCE APPROACH
 Refers to how a market is organized based on
the characteristics that determine the
relationship among various sellers and
between the various buyers in the market.
Barriers to entry – refers to competitive
relationship between established firms and
potential entrants.

Forms of Barriers to Entry

1. Economies of scale
2. High capital requirement
3. Rules and regulations set by government
4. Inherent technical relationship in the industry
Classification of market
structure
1. Purely Competitive Market
2. Absolute monopoly
3. Monopolistic competition
4. Oligopoly
5. Monopsony
1. Purely competitive market

 Numbers of buyers and sellers is sufficiently large.

 The product is sufficiently homogeneous
 No artificial restriction such as government
intervention

2. ABSOLUTE MONOPOLY
 distinguishing a characteristic of single seller.
 3. Monopolistic competition
 refers to a market in which a large number of sellers
offer differentiated products which are close
substitute.

4. OLIGOPOLY
 refers to a market with a few seller.

5. MONOPSONY
 refers to a market with a single buyer.
5. Behavioral system
APPROACH
 It includes the input-output system, power
system, communication system and internal
and external change system.
THE END ……