AGR 165

AGRICULTURAL PRODUCTS MARKETING

CHAPTER 1INTRODUCTION

Assessment • 3 tests x 10% : 30%

• Assignment : 10%

• Presentation : 10%

• Final examination: 50%

Recommended text book

• Kohls, R.L. and J.N. Uhl 1996. Marketing of Agricultural Products, MacMilan, NY

QUIZ…

• Define what is AGRICULTURAL MARKETING in 3 minutes & your TARGET for this subject..

The Product Definition

• Any physical goods or services or ideas that satisfies wants & needs of the consumers.

• Physical goods – in a raw forms such as fruits, vegetables produced by farmers.

• Services – the farmer will store the goods so that the physical appearances of the goods will be at original conditions.

• Ideas – the farmer will deliver the information of how to plant vegetables to the customer

AGRICULTURAL MARKETINGAGRICULTURAL MARKETING

OTHERS TERMS IN AGRICULTURAL MARKETING

• Barter• The exchange of product from consumer A to consumer B.

• Society • Is a process to identify the need of certain groups in a society such

as the need of a bus station for waiting and shelter purposes.

• Agribusiness Marketing• The marketing operations from the first handler to the final

consumer-beginning with suppliers to farmers and covering producing, processing, and marketing to the final consumer.

MARKETING SCOPE• Marketing is related to business activities and for the

purpose of the consumer satisfaction in exchange of goods and monetary value between the producer and the customer.

• Scope of marketing is not only focused to buying and selling also include activities such as transportation, storage, grading, financing, risks involvements, products design, price determination, promotions, distribution and developing marketing channels.

• Grade – influence price, quality, consumer selection. • E.g. Rice – based on % of dust (5%)

MARKETING MODULE(Marketing circle)

In 1960’s Mc Carthy introduced a module on marketing. This module is known as Marketing Modules or Agricultural

marketing circle.

TARGET CUSTOMER

ENVIRONMENTAL FACTORS

4’P

• Environmental Factors:• 1. Political and legal• 2. Demographic• 3. Economic• 4. Technology• 5. Legal’s and regulation• 6. Social and cultural

• 4 P’s• 1. Price• 2. Products/services• 3. Place• 4. Promotion

• Target customer

First

CircleSecond Circle

First CircleTarget customer

• Examples: Clothes made from silk which is high quality products. The target consumer is of high income and high class social status

Cont…

• Second Circle - Marketing Mix or Four (4) P’s that can be controlled via- Promotion, Price, Place, Product / Services

Price -The amount of money that a consumer has to pay for the purchase of goods and services rendered by the producer.

-Listing of prices, discounts, allowance, credit, periods of payments, sale of products

Products /services

-Goods and services that a producer offers to the target market in a certain locations

-Quality, styles, characteristics, brand name, sizes, services etc

Place -Refers to the company's activities that make the product available to the target consumers at a specific location or geographical vicinity (area)

-Channels, coverage, locations, inventories, transportation

Promotion -Activities that persuade the consumers to buy the products

-Publicity, sales enhancements, direct selling, web sites, advertisements

Second Circle4 P

Cont...

Third CircleEnvironmental Factors

(macro that cannot be controlled)

1)Political & Legal

•It will influence the marketing activities of firms and organization and the countries economic growth. It can be categorized :

•Monetary and fiscal policy

•Laws and regulation

•Relation of government and industries

Cont...

2) Demographic

• Based on geographical regions, the characteristics of the population, market segmentation and the distribution on various aspects such as :

Wants factors: Urban, town, rural areas. Age, education levels. Sex and occupation. Race and religion. Family lifestyle.

Sociological factors :Groups either family or social group Physiological factors : Personality, attitude of buying

behavior

Cont...

3) Economic• Influence the level of macro economy from the aspects of growth

of gross national products, inflation rate, consumption, money supply, credit support, income and credit flexibility.

4) Technology• Influence the market by:

• Transportation (faster), Automobile ,Television (advertising) , Retailers (purchasing), Packaging (safe) , Advances in technology (new tech.) , Market receptiveness to technology (in marketing process).

Cont...5) Legal's & Regulation

• Agricultural products are mostly substitute or complementary , bulky & easy to deteriorate.

• E.g.: The application of excessive insecticides to vegetables & a proper packaging of the products.

6) Social and Cultural• Will influence the economic, political, & technology of certain

countries because of shifts in populations, better job opp., attitudes towards new tech., & trends in using computers

• Social aspects of the society can be seen through the various changes of consumer products such as artificial to natural ingredients, product safety or environment & consumerism awareness (a social movement that tries to increase the rights and power of consumers in relation to sellers.

MARKETING UTILITY• Utility refers to the value of marketing which adds to goods

and services.

1)Form utility - change raw materials to a finished products.

2)Time utility - availability of products at a specific time.

3)Place utility -available in convenient locations and place.

4)Possession utility - Exchange or transfer of ownership between buyers and sellers.

5)Information utility - To informs the buyers that the products exist through promotions.

Management philosophy according to which a firm's goals can be best achieved through

identification and satisfaction of the customers' stated and unstated needs and

wants.

MARKETING CONCEPT

Orientation towards

Concentration Purposes

Producer Production.Total output of products offered for sale in the market.

Producer does not require prior feedback of consumer wants and needs.Profits gained from sale of products.May occurred surplus of products in the market

Consumer Consumer needs & wants.Total output of products offered for sale depends on consumer’s wants and needs.

Producer produce based on the feedback of the consumer.Profit gained from sale of products.Surplus of products might not occur in the market.

SPECIALIZATION

NATIONAL INCOME

PHYSICAL FUNCTION

CAREER OPPORTU

NITIES

IMPORTANCE OF MARKETING

1) Specialization

• E.g. One village with one particular products. So, it will increase the family income & expand the markets.

• Also leads to the growth of urban areas where people can migrate to towns or the farmers can concentrate and produce efficiently.

2) National Income

• Farmers can increase their income either by producing more, send to factories for processing or self - marketing the products at a higher sensible price.

Continued..

3) Physical Function

• Marketing lead to the provisions of adequate transport and communication facilities (e.g. road, railways etc.), storage facilities and financial arrangements.

4) Career opportunities

• To the farm products and by generating employment in such areas professional selling, marketing research, advertising, distribution and etc.

• The contribution will grow as the scope of marketing expand.

ROLE OF AGRICULTURE TOWARDS PRODUCTION OF AGRICULTURAL

PRODUCTS

Raw materialBulky and perishable productQuality

variation

Total Output

Seasonable variability in production

Annual variability

Geographic concerntration of production

Characteristics of product

1) A raw material Output largely a raw material E.g. livestock to meat, wheat to cereal From farm product to food Successful farmers must be more market oriented-

A business approach that focuses on identifying and meeting the stated or hidden needs or wants of customers..

Continued..

2) Bulky and perishable product Agricultural products are more bulky and perishable Bulk effect marketing functions with physical handling.

E.g. fruits, vegetables and meats are quite bulky. How to reduce bulkiness?

Transport high value or value added instead of raw material This perishable products require speedy handling and often

special refrigeration.

Continued..3) Quality variation

Varies from year to year and season to season So, standardization and grading need to facilitate the

sorting of different variation in grades Also change the marketing pattern Variation in qualities and prices due to:

Level of grading of products Natural disasters such as earthquake, floodsChanging of marketing strategies , demand and suppliesManagement in efficiencies in dealing with crops practices

How to control quality variation?Use the same planting material

CHARACTERISTICS OF PRODUCTIONS

1) Total output Upward trend in food production because of

increased in population thus increased per capital food supplies

Population growth is faster than agricultural growth so its difficult to maintain fair prices

When output decreased, consequences?

Continued..

2) Annual variability in production Aggregates (whole) farm output varies from year to year due to

farmer responses to the price government programs & uncontrollable factors such as weather & disease

Changes of farm output influence the food marketing process and the use of the food marketing systems capacity.

Give an impact to the purchase prices, need for storage facilities, and plant utilization rates of food marketing firms.

Continued..

3) Seasonable variability in production Agricultural production in highly seasonal Some products are produced all year round while some are

seasonal e.g. fruits How do we solve the problem of seasonal variation?

• Fruits produced should be processed and tinned or canned immediately.

• The availability of storage is required, so supply can be maintained periodically

• The efficiency and availability of transportation

• Efficiency of management in handling such cases

Continued..

4) Geographic concentration of production Geographic specialization of farm

production This depend on the climatic, soil and

environmental factors where certain commodities are grown.

E.g. Sarawak (pepper), Johor (pineapple)

Continued..

5) Varying cost of production Cost of production varies by regions and among farmers.

Factors that might contribute to the varying cost of production are :

• Weather

• Changes in technology

• Types of crops planted – annual, biannual, perennial

• Management efficiency in handling the cost of materials

• Land sizes of the plantation or land tenure.

HOW OVERCOME THE PROBLEMS?

• Proper Management Practices

• Proper Timing Applications Of Insecticides

• The Need Of Storage Facilities

• The Availability Of Transportation

• Credit Facilities

NATIONAL AGRICULTURAL POLICY (NAP)

• The objective of the National Agricultural Policy is to maximize income from agriculture through the efficient and effective use of the nation’s resources and to stimulate the contribution of this sector towards the overall economic growth of the nation.

Three NAP • Since 1984, three NAP were formulated to develop agricultural

sector:

• Emphasize on NAP 1 (1984-1991)• To develop the export oriented sector

• NAP 2 (1992-1998)

• NAP 3 (1998-2010)• Increasing competitiveness of the agricultural sector

• Maximizing income through optimum utilization of resources

- being in the original position

Strong growth in exports of electronics & electrical products to US

The value of the ringgit dropped from MYR 2.50 per USD to at one point, MYR 4.80 per USD.Malaysia refused economic aid packages from the International Monetary Fund (IMF) and the World Bank and by refusing aid from IMF, Malaysia was not affected to the same degree in the Asian Financial Crisis as Indonesia, Thailand, and the Philippines.

SPECIFIC OBJECTIVE OF NAP 3

• Enhance food security

• Increase productivity & competitiveness of the agriculture sector

• Deepen linkages with others sector

• Create new sources of growth for the sector

• Adopting sustainable development, utilization and management of natural resources

STRATEGIES OF THE NAP3

1)Agroforestry approached. Agriculture and forestry are mutually compatible and complementary for joint development. This approached will addressed the increasingly scare resources and raw material availability.

2)Product based approached. Address on key products and market identified based on demand and supply, preferences and potential to consumers.

PROBLEMS FACED BY AGRICULTURE

1)Gross Domestic Products in 1980 has declined in the contribution of GDP even though the value-added products of agriculture has increased.

2)Land expansion has been a hindrance (obstacle) because some of the arable land has been allocated for industrialization, urbanization and housing projects.

3)Market protection less has been taken into consideration as compared to automobile industries e.g. Export taxes.

4)Trade and fiscal (financial) measures has been hampered (disadvantage) for export purposes.

5)Fiscal incentives did not favor in agriculture so that’s why large companies did not enjoy such incentives as compared to manufacturing industries.

Strategies For Achieving The NAP Objectives

1) Optimizing The Resources Use • Land, labor, capital and management are to be utilized effectively.

2) Human Resources Development• The use of technologies in the agricultural sectors e.g.

mechanization in planting and harvesting (paddy) will improved efficiency in used of labor.

• Manpower training is required to handle such cases, efficient agribusiness in marketing, and agro-based processing.

Continued..

• Enhancement Of Research And Development And Technological Diffusion• Would maintained the competitiveness of the agricultural sectors

e.g. rubber, oil palm, rice and other commercial products & must be market driven, commercially orientated and environmentally friendly.

• Greater Role Of The Private Sectors• Incentives, promotion and packages will enhanced the sale of

products for export purposes.

Continued..

• Reformed Marketing Strategies of the producers• Products should be view as commodity and plays it’s role in the

export of the products to various countries like Middle East, African, Latin America and China as traditionally to the U.S.A.

• Expanded Food Production• The finished products should supply first for the demand of the

domestic populations.

• The products produced must be competitive in nature.

Continued..

• Development Of Viable And Self-Reliant Farmers Institution• The needs of this institution is highly required to reduce or less

the burden of the farmers.

• Some farmers are incapable to supply their products because lack of facilities such as financial strength, marketing, storage and transportation purposes.