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Agricultural marketing
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Agricultural marketing covers the services involved in moving an agricultural product from the farm to the consumer. Numerous interconnected activities are involved in doing this. Agricultural marketing is best carried out by the private sector rather than governments and all stages of the chain must show a profit for the participants. Support to developing countries with agricultural marketing development is carried out by organizations such as and various donor organizations.
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Encyclopedia
Agricultural marketing covers the services involved in moving an agricultural product from the farm to the consumer. Numerous interconnected activities are involved in doing this. Agricultural marketing is best carried out by the private sector rather than governments and all stages of the chain must show a profit for the participants. Support to developing countries with agricultural marketing development is carried out by organizations such as and various donor organizations. Activities include market information development, marketing extension, training in marketing and infrastructure development. Recent trends have seen the rise of supermarkets and a growing interest in contract farming.
Agricultural Marketing
Agricultural marketing can best be defined as series of services involved in moving a product from the point of production to the point of consumption. Thus agricultural marketing is a series of inter-connected activities involving: planning production, growing and harvesting, grading, packing, transport, storage, agro- and food processing, distribution and sale. Such activities cannot take place without the exchange of information and are often heavily dependent on the availability of suitable finance. Marketing systems are dynamic. They are competitive and involve continuous change and improvement. Businesses that have lower costs, are more efficient and can deliver quality products are those that prosper. Those who have high costs, do not adapt to changes in market demand and provide poorer quality are often forced out of business. Marketing has to be customer oriented and has to provide the farmer, transporter, trader, processor, etc. with a profit. This requires those involved in marketing chains to understand buyer requirements, both in terms of product and business conditions.
Agricultural marketing in developing countries
Several organizations provide support to developing countries to develop their agricultural marketing systems, including and various donor organizations. There has also recently been considerable interest by NGOs to carry out activities to link farmers to markets. Improvement of marketing systems necessitates a strong private sector backed up by appropriate policy and legislative frameworks and effective government support services. Such services can include provision of market infrastructure, supply of market information, and agricultural extension services able to advise farmers on marketing. Training in marketing at all levels is also needed. One of many problems faced in agricultural marketing in developing countries is the latent hostility to the private sector and the lack of understanding of the role of the intermediary. “Middleman” has become very much a pejorative word.
Market infrastructure
Efficient marketing infrastructure such as wholesale, retail and assembly markets and storage facilities is essential for cost-effective marketing, to minimise post-harvest losses and to reduce health risks. Markets play an important role in rural development, income generation, food security, developing rural-market linkages and gender issues. Planners need to be aware of how to design markets that meet a community's social and economic needs and how to choose a suitable site for a new market. In many cases sites are chosen that are inappropriate and result in under-use or even no use of the infrastructure constructed. It is also not sufficient just to build a market: attention needs to be paid to how that market will be managed, operated and maintained. In most cases, where market improvements were only aimed at infrastructure upgrading and did not guarantee maintenance and management, most failed within a few years.
Rural assembly markets are located in production areas and primarily serve as places where farmers can meet with traders to sell their products. These may be occasional (perhaps weekly) markets, such as haat bazaars in India and Nepal, or permanent. Terminal wholesale markets are located in major metropolitan areas, where produce is finally channelled to consumers through trade between wholesalers and retailers, caterers, etc. The characteristics of wholesale markets have changed considerably as retailing changes in response to urban growth, the increasing role of supermarkets and increased consumer spending capacity. These changes require responses in the way in which traditional wholesale markets are organized and managed.
Retail marketing systems in western countries have broadly evolved from traditional street markets through to the modern hypermarket or out-of-town shopping centre. Despite the growth of supermarkets there remains considerable scope to improve agricultural marketing in developing countries by constructing new retail markets. However, there is little point in undertaking market development improvements unless they result in a positive socio-economic impact. Effective regulation of markets is essential. Inside the market, both hygiene rules and revenue collection activities have to be enforced. Of equal importance, however, is the maintenance of order outside the market. Licensed traders in a market will not be willing to cooperate in raising standards if they face competition from unlicensed operators outside who do not pay any of the costs involved in providing a proper service.
Market information
Efficient market information can be shown to have positive benefits for farmers and traders. Up-to-date information on prices and other market factors enables farmers to negotiate with traders and also facilitates spatial distribution of products from rural areas to towns and between markets. Most governments in developing countries have tried to provide market information services to farmers, but these have tended to experience problems of sustainability. Moreover, even when they function, the service provided is often insufficient to allow commercial decisions to be made because of time lags between data collection and dissemination. Modern communications technologies open up the possibility for market information services to improve information delivery through SMS on cell phones and the rapid growth of FM radio stations in many developing countries offers the possibility of more localised information services. In the longer run, the internet may become an effective way of delivering information to farmers. However, problems associated with the cost and accuracy of data collection still remain to be addressed. Even when they have access to market information, farmers often require assistance in interpreting that information. For example, the market price quoted on the radio may refer to a wholesale selling price and farmers may have difficulty in translating this into a realistic price at their local assembly market. Various attempts have been made in developing countries to introduce commercial market information services but these have largely been targeted at traders, commercial farmers or exporters. It is not easy to see how small, poor farmers can generate sufficient income for a commercial service to be profitable.
Marketing training
Farmers frequently consider marketing as being their major problem. However, while they are able to identify such problems as poor prices, lack of transport and high post-harvest losses, they are often poorly equipped to identify potential solutions. Successful marketing requires learning new skills, new techniques and new ways of obtaining information. Extension officers working with ministries of agriculture or NGOs are often well-trained in horticultural production techniques but usually lack knowledge of marketing or post-harvest handling.
Ways of helping them develop their knowledge of these areas, in order to be better able to advise farmers about market-oriented horticulture, need to be explored. While there is a range of generic guides and other training materials available from FAO and others, these should ideally be tailored to national circumstances to have maximum effect.
Enabling Environments
Agricultural marketing needs to be conducted within a supportive policy, legal, institutional, macro-economic, infrastructural and bureaucratic environment. Traders and others cannot make investments in a climate of arbitrary government policy changes, such as those that restrict imports and exports or internal produce movement. Those in business cannot function if their trading activities are hampered by excessive bureaucracy and form filling. Inappropriate law can distort and reduce the efficiency of the market, increase the costs of doing business and retard the development of a competitive private sector. Poor support institutions, such as agricultural extension services, municipalities that operate markets inefficiently and export promotion bodies, can be particularly damaging. Poor roads increase the cost of doing business, reduce payments to farmers and increase prices to consumers. Finally, the ever-present problem of corruption can seriously impact on agricultural marketing efficiency in many countries.
Recent developments
New marketing linkages between agribusiness, large retailers and farmers are gradually being developed, e.g. through contract farming, group marketing and other forms of collective action.
Donors and NGOs are paying increasing attention to ways of promoting direct linkages between farmers and buyers. The growth of supermarkets, particularly in Latin America and East and South East Asia, is having a significant impact on marketing channels for horticultural, dairy and livestock products
Nevertheless, “spot” markets will continue to be important for many years, necessitating attention to infrastructure improvement such as for retail and wholesale markets.
Further reading
[ftp://ftp.fao.org/docrep/fao/010/w6751e/w6751e00.pdf Abbott, J.C.; Marketing Improvement in the Developing World. FAO, Rome, 1984]
Kaynak, E., editor; World Food Marketing Systems, Butterworths, London, 1984
Padberg, E., Ritson, C. and Albisu, L.M., editors; Agro-food Marketing, CAB International, 1997.
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