Agricultural Marketing: Concept and Definitions

Agriculture fulfils the basic need of human kind by producing food. About a century ago, farmer used to produce food commodities mostly for self-consumption or for exchange with others (cash or kind) mostly in the same village or nearby places. They were primarily selfreliant. But,now production environment has changed considerably from self- reliance to commercialization. Technological advancement in the form of high yielding varieties, use of fertilizers, insecticides, pesticides, farm mechanization has led to a substantial increase in farm production and consequently the larger marketable and marketed surplus. The improved production is accompanied by the increasing urbanization, income, changing life style & food habits of the consumers and increasing linkages with the overseas market. Today consumers are not limited to rural areas where food is produced. Further, increasing demand for processed or semi-processed food products requires value addition in the raw agricultural produce. These developments require movement of food commodities from producer to consumers in the form of value added products. Agricultural marketing brings producers and consumers together through a series of activities and thus becomes an essential element of the economy. The scope of agricultural marketing is not only limited with the final agricultural produce. It also focuses supply of agricultural inputs (factors) to the farmers.

Definitions of Agricultural Marketing

The term agricultural marketing is composed of two words- agriculture and marketing. Agriculture, generally means growing and/or raising of crops and livestock while, marketing encompasses a series of activities involved in moving the goods from the point of production to point of consumption. Many scholars have defined agricultural marketing and incorporated essential elements of time, place, form and passion utility. Some of the definitions of agricultural marketing are given below;

  • Human activity directed at satisfying the needs and wants through exchange process (Phillip Kotler).
  • Performance of business activities that directs the flow of goods and services from producers to users (American Marketing Association).
  • The study of agricultural marketing comprises all the operations, and the agencies conducting them, involved in the movement of farm produced foods; raw materials and their derivatives, such as textiles, from the farms to the final consumers, and the effect of such operations on the farmers, middlemen and consumers (Thomsen). This definition does not include the input side of agriculture.
  • Agricultural marketing is a process which starts with a decision to produce a saleable farm commodity, involves all the aspects of market structure or system, both financial and institutional, based on technical and economic considerations, and includes pre- and post-harvest operations, assembling, grading, storage, transportation and distribution (National Commission on Agriculture, 1976).
    Key aspects of agricultural marketing
  • Agricultural marketing comprising of all activities involved in supply of farm inputs to the farmers and movement of agricultural products from the farms to the consumers
  • The agricultural marketing system includes two major sub-system viz. product marketing and input (factor) marketing. The product marketing sub-system includes farmers, village/primary traders, wholesalers, processors, importers, exporters, marketing cooperatives, regulated marketing committees and retailers. The input sub-system includes input manufacturers, distributors, related associations, importers, exporters and others who make available various farm production inputs to farmers.
  • The agricultural marketing system is understood and developed as a link between the farm and non-farm sectors. A dynamic and growing agriculture sector requires fertilizers, pesticides, farm equipments, machinery, diesel, electricity, packing material and repair services which are produced and supplied by the industry and non-farm enterprises. The expansion in the size of farm output stimulates forward linkages by providing surpluses of food and natural fibres which require transportation, storage, milling or processing, packing and retailing to the consumers. These functions are performed by the non-farm enterprises. Further, if the increase in agricultural production is accompanied by a rise in real incomes of farm families, the demand of these families for non-farm consumer goods goes up as the proportion of income spent on non-food consumables and durables tends to rise with the increase in real per capita income. Several industries, thus find new markets for their products in the farm sector
  • The subject of agricultural marketing includes marketing functions, agencies, channels, efficiency and costs, price spread and market integration, producer’s surplus, government policy and research, training and statistics on agricultural marketing and imports/exports of agricultural commodities.
  • The overall objective of agricultural marketing in a developing country like India is to help the primary producers viz. the farmers in getting the remunerative prices for their produce and to provide right type of goods at the right place, in the right quantity and quality at a right time and at right prices to the processors and/or ultimate consumers on the other.

Importance of Agricultural Marketing

Agricultural marketing plays an important role not only in stimulating production and consumption, but also in accelerating the pace of economic development. It is the most important multiplier of agricultural development. In the process of shifting from traditional to modern agriculture, marketing emerges as the biggest challenge because of production surpluses generated by the shift. The importance of agricultural marketing is revealed from the following;

1. Optimization of Resource use and Output Management

An efficient agricultural marketing system leads to the optimization of resource use and output management. An efficient marketing system can also contribute to an increase in the marketable surplus by scaling down the losses arising out of inefficient processing, storage and transportation. A well-designed system of marketing can effectively distribute the available stock of modern inputs, and thereby sustain a faster rate of growth in the agricultural sector.

2. Increase in Farm Income

An efficient marketing system ensures higher levels of income for the farmers reducing the number of middlemen or by restricting the cost of marketing services and the malpractices, in the marketing of farm products. An efficient system guarantees the farmers better prices for farm products and induces them to invest their surpluses in the purchase of modern inputs so that productivity and production may increase. This again results in an increase in the marketed surplus and income of the farmers. If the producer does not have an easily accessible market-outlet where he can sell his surplus produce, he has little incentive to produce more.

3. Widening of Markets

An efficient and well-knot marketing system widens the market for the products by taking them to remote corners both within and outside the country, i.e., to areas far away from the production points. The widening of the market helps in increasing the demand on a continuous basis, and thereby guarantees a higher income to the producer.

4. Growth of Agro-based Industries

An improved and efficient system of agricultural marketing helps in the growth of agrobased industries and stimulates the overall development process of the economy. Many industries like cotton, sugar, edible oils, food processing and jute depend on agriculture for the supply of raw materials.

5. Price Signals

An efficient marketing system helps the farmers in planning their production in accordance with the needs of the economy. This work is carried out through transmitting price signals.

6. Adoption and Spread of New Technology

The marketing system helps the farmers in the adoption of new scientific and technical knowledge. New technology requires higher investment and farmers would invest only if they are assured of market clearance at remunerative price.

7. Employment Creation

The marketing system provides employment to millions of persons engaged in various activities, such as packaging, transportation, storage and processing. Persons like commission agents, brokers, traders, retailers, weighmen, hamals, packagers and regulating staff are directly employed in the marketing system. This apart, several others find employment in supplying goods and services required by the marketing system.

8. Addition to National Income

Marketing activities add value to the product thereby increasing the nation's gross national product and net national product

9. Better Living

The marketing system is essential for the success of the development programmes which are designed to uplift the population as a whole. Any plan of economic development that aims at diminishing the poverty of the agricultural population, reducing consumer food prices, earning more foreign exchange or eliminating economic waste has, therefore, to pay special attention to the development of an efficient marketing for food and agricultural products.

10. Creation of Utility

Marketing is productive, and is as necessary as the farm production. It is, in fact, a part of production itself, for production is complete only when the product reaches a place in the form and at the time required by the consumers. Marketing adds cost to the product, but, at the same time, it adds utilities to the product. The following four types of utilities of the product are created by marketing:

a.Form Utility:

The processing function adds form utility to the product by changing the raw material into a finished form. With this change, the product becomes more useful than it is in the form in which it is produced by the farmer. For example, through processing, oilseeds are converted into oil, sugarcane into sugar, cotton into cloth and wheat into flour and bread. The processed forms are more useful than the original raw materials

b. Place Utility:

The transportation function adds place utility to products by shifting them to a place of need from the place of plenty. Products command higher prices at the place of need than at the place of production because of the increased utility of the product.

c.Time Utility:

The storage function adds time utility to the products by making them available at the time when they are needed.

d. Possession Utility:

The marketing function of buying and selling helps in the transfer of ownership from one person to another. Products are transferred through marketing to persons having a higher utility from persons having a low utility.