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Definition and Meaning
Agricultural marketing refers to the processes and activities involved in moving agricultural products and inputs from the producer to the consumer. It includes both product marketing (selling farm produce like crops and livestock) and input marketing (procuring farm inputs like seeds, fertilizers, and machinery).
Philip Kotler defines marketing as satisfying human needs and wants through the exchange process. The American Marketing Association describes it as business activities that guide the flow of goods from producers to consumers. Thomsen broadens the definition to encompass all operations and agencies moving farm products and raw materials from farms to consumers while considering their impact on farmers, middlemen, and consumers.
Scope and Subject Matter
Agricultural marketing bridges the farm and non-farm sectors, addressing:
- Output Marketing: Deals with distributing surplus agricultural products to markets, transforming agriculture into a commercial activity.
- Input Marketing: Focuses on supplying improved seeds, fertilizers, pesticides, and machinery essential for modern, input-responsive agricultural production..
Significance of Agricultural Marketing
Agricultural marketing is essential for ensuring the effective distribution of surplus production and improving the commercial viability of farming. It facilitates the supply chain for agricultural inputs and enhances the efficiency of product delivery to consumers.
This system is vital for modern agriculture, offering a structured approach to managing both theoretical and practical aspects for maximum benefits.
Markets and Marketing
The word market originated from the Latin word 'marcatus' which means merchandise or trade or a place where business is conducted.
The word 'market' has been widely and variedly used to mean:
- A place or building where commodities are bought and sold, e.g., supermarket
- Potential buyers and sellers of a product, e.g., wheat market and cotton market
- Potential buyers and sellers of a country or region, e.g., Indian market and Asian market
- An organization which provides facilities for exchange of commodities, e.g., Bombay stock exchange
- A phase or a course of commercial activity, e.g., a dull market or bright market
There is an old English saying that two women and a goose may make a market. However, in common parlance, a market includes any place where persons assemble for the sale or purchase of commodities intended for satisfying human wants. Other terms used for describing markets in India are Haats, Painths, Shandies, and Bazar.
The word market in the economic sense carries a broad meaning. Some of the definitions of market are given below:
- A market is the sphere within which price-determining forces operate.
- A market is the area within which the forces of demand and supply converge to establish a single price.
- The term market means not a particular marketplace in which things are bought and sold but the whole of any region in which buyers and sellers are in such free intercourse with one another that the prices of the same goods tend to equality, easily and quickly.
- Market means a social institution which performs activities and provides facilities for exchanging commodities between buyers and sellers.
- Economically interpreted, the term market refers not to a place but to a commodity or commodities and buyers and sellers who are in free intercourse with one another.
- The American Marketing Association has defined a market as the aggregate demand of the potential buyers for a product/service.
- Philip Kotler defined the market as an area for potential exchanges.
- A market exists when buyers wishing to exchange money for a good or service are in contact with the sellers who are willing to exchange goods or services for money.
Thus, a market is defined in terms of the existence of fundamental forces of supply and demand and is not necessarily confined to a particular geographical location. The concept of a market is basic to most contemporary economies since, in a free market economy, this is the mechanism by which resources are allocated.
Components of a Market
For a market to exist, certain conditions must be satisfied. These conditions should be both necessary and sufficient. They may also be termed as the components of a market:
- The existence of a good or commodity for transactions (physical existence is, however, not necessary)
- The existence of buyers and sellers
- Price at which the commodity is transacted or exchanged
- Business relationship or intercourse between buyers and sellers
- Demarcation of area such as place, region, country, or the whole world
Dimensions of a Market
There are various dimensions of any specified market. These dimensions are:
- Location or place of operation
- Area or coverage
- Time span
- Volume of transactions
- Nature of transactions
- Number of commodities
- Degree of competition
- Nature of commodities
- Stage of marketing
- Extent of public intervention
- Type of population served
- Accrual of marketing margins
Any individual market may be classified in a twelve-dimensional space.
Classification of Markets
Markets can be classified on the basis of:
1. Location or place of operation
- Village Market: A market that caters to a specific village.
- Primary Market: A market which deals with the initial sale of products by the producer to buyers or intermediaries.
- Secondary Market: A market where commodities are resold by intermediaries.
- Terminal Market: A centralized location where goods are collected and distributed to retailers.
- International Market: A market that operates across national borders.
2. Area or coverage
- Local Market: Restricted to a specific local area.
- Regional Market: Operates in a larger regional space.
- National Market: Covers the entire country.
- International Market: Encompasses global operations.
3. Time span
- Short-period Market: Goods with high perishability like fruits, vegetables.
- Long-period Market: Durable goods or manufactured products.
- Secular Market: A market for commodities with a long lifecycle.
4. Volume of transactions
- Wholesale Market: Bulk buying and selling.
- Retail Market: Smaller, consumer-level transactions.
5. Nature of transactions
- Spot Market: Immediate exchange of goods for money.
- Future Market: Transactions are executed at a future date.
6. Number of commodities
- General Market: Deals with a wide range of products.
- Specialized Market: Focuses on a single or specific type of commodity.
7. Degree of competition
- Perfect Market: Numerous buyers and sellers with full knowledge of the market.
- Imperfect Market: Limited competition due to monopolies, oligopolies, etc.
8. Nature of commodities
- Commodity Market: Physical goods are traded.
- Capital Market: Deals with financial securities and bonds.
9. Stage of marketing
- Producing Market: Products originate from the producer.
- Consuming Market: Products are distributed to end-users or consumers.
10. Extent of public intervention
- Regulated Market: Operates under government control or rules.
- Unregulated Market: Operates freely without regulation.
11. Type of population served
- Urban Market: Located in cities and towns, serving urban needs.
- Rural Market: Caters to rural populations and their requirements.
12. Accrual of marketing margins
- Direct Market: Producers directly sell to consumers, avoiding intermediaries.
- Indirect Market: Involves intermediaries like wholesalers and retailers.
Markets may be classified based on the above dimensions and can vary significantly based on the context, location, and type of goods or services traded.
Characteristics of Agricultural Markets
1. Seasonal Supply
Agricultural products are typically harvested during specific seasons, resulting in a fluctuating supply. This seasonality impacts market availability and often leads to price variations.
2. Perishability
Many agricultural products, like fruits, vegetables, and dairy, are perishable and have a short shelf life. This necessitates quick sales or proper storage to avoid spoilage.
3. Bulkiness
Most agricultural products are bulky in nature, making transportation and storage challenging and costly. This adds to the overall cost of marketing.
4. Price Fluctuations
Due to irregular supply, perishability, and dependence on external factors like weather, agricultural markets often experience significant price fluctuations.
5. Variety in Products
Agricultural markets deal with a wide range of products, including cereals, pulses, vegetables, fruits, dairy, and livestock, each with its own market dynamics and requirements.
6. Geographical Specialization
Agricultural production often depends on regional climatic and soil conditions, leading to specific areas specializing in particular crops or products.
7. Role of Middlemen
Intermediaries, such as wholesalers, retailers, and commission agents, play a significant role in agricultural markets by connecting producers and consumers. However, their involvement can also lead to exploitation of farmers.
8. Lack of Standardization
Quality standards for agricultural products often vary, resulting in inconsistent pricing and making market transactions less transparent.
9. Dependence on Nature
Agricultural markets are heavily dependent on climatic conditions. Poor weather or natural disasters can drastically reduce supply and disrupt the market.
10. Limited Holding Capacity of Farmers
Most farmers, especially small-scale ones, lack the financial capacity to store their produce and wait for better prices. As a result, they are often compelled to sell immediately after harvest at lower prices.
11. Influence of Government Policies
Government regulations, support prices, subsidies, and taxation policies play a critical role in shaping agricultural markets.
12. Lack of Market Information
Farmers often have limited access to real-time market information about prices, demand, and supply trends, which affects their bargaining power.
13. Low Elasticity of Demand
The demand for agricultural products does not increase proportionally with a reduction in prices, as these are basic necessities and have limited scope for increased consumption.
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