Agriculture Marketing

Preface The term agricultural marketing is composed of two words -agriculture and marketing. Agriculture, in the broadest sense means activities aimed at the use of natural resources for human welfare, and marketing connotes a series of activities involved in moving the goods from the point of production to the point of consumption. Specification, the subject of agricultural marketing includes marketing functions, agencies, channels, efficiency and cost, price spread and market integration, producers surplus etc. The agricultural marketing system is a link between the farm and the non-farm sectors. In India Agriculture was practiced formerly on a subsistence basis; the villages were self sufficient, people exchanged their goods, and services within the village on a barter basis. With the development of means of transport and storage facilities, agriculture has become commercial in character, the farmer grows those crops that fetch a better price. Marketing of agricultural produce is considered as an integral part of agriculture, since an agriculturist is encouraged to make more investment and to increase production. Thus there is an increasing awareness that it is not enough to produce a crop or animal product; it must be marketed as well. Agricultural marketing involves in its simplest form the buying and selling of agricultural produce. This definition of agricultural marketing may be accepted in olden days, when the village economy was more or less self-sufficient, when the marketing of agricultural produce presented no difficulty, as the farmer sold his produce directly to the consumer on a cash or barter basis. But, in modem times, marketing of agricultural produce is different from that of olden days. In modem marketing, agricultural produce has to undergo a series of transfers or

exchanges from one hand to another before it finally reaches the consumer. The National Commission on Agriculture, defined agricultural marketing as a process which starts with a decision to produce a saleable farm commodity and it involves all aspects of market structure of system, both functional and institutional, based on technical and economic considerations and includes pre and postharvest operations, assembling, grading, storage, transportation and distribution. The Indian council of Agricultural Research defined involvement of three important functions, namely (a) assembling (concentration) (b) preparation for consumption (processing) and (c) distribution. II. Importance and Objectives of Agriculture Marketing The farmer has realized the importance of adopting new techniques of production and is making efforts for more income and higher standards of living. As a consequence, the cropping pattern is no longer dictated by what he needs for his own personal consumption but what is responsive to the market in terms of prices received by him. While the trade is very organised the farmers are not Farmer is not conversant with the complexities of the marketing system which is becoming more and more complicated. The cultivator is handicapped by several disabilities as a seller. He sells his produce at an unfavorable place, time and price. The objectives of an efficient marketing system are: 1. to enable the primary producers to get the best possible returns, 2. to provide facilities for lifting all produce, the farmers are

willing, to sell at an incentive price, 3. to reduce the price difference between the primary producer and ultimate consumer, and 4. to make available all products of farm origin to consumers at reasonable price without impairing on the quality of the produce. III. Facilities Needed for Agricultural Marketing In order to have best advantage in marketing of his agricultural produce the farmer should enjoy certain basic facilities. 1. He should have proper facilities for storing his goods. 2. He should have holding capacity, in the sense, that he should be able to wait for times when he could get better prices for his produce and not dispose of his stocks immediately after the harvest when the prices are very low. 3. He should have adequate and cheap transport facilities which could enable him to take his surplus produce to the mandi rather than dispose it of in the village itself to the village money-lendercum-merchant at low prices. 4. He should have clear information regarding the market conditions as well as about the ruling prices, otherwise may be cheated. There should be organized and regulated markets where the farmer will not be cheated by the -dalals- and -arhatiyas-. 5. The number of intermediaries should be as small as possible, so that the middleman's profits are reduced. This increases! the returns to the farmers. The importance of marketing in agriculture is very well illustrated by saying, “that a good farmer has one eye on the plough and the

other on the market”. This is true when agriculture is mainly for subsistence; and now, even Indian agriculture is becoming commercialized. In these days of commercial agriculture, it will be more fit to say, “a good farmer has only his hands on the plough but the eyes on the market

Since agriculture constitutes a major part of theeconomy, marketing of agricultural products also assumes considerable importance in our context. Marketed surplus is the amount of agricultural produce that is brought to the market for sale after what is retained by the producers for their own consumption. Hence it will be less than total production. It is difficult to give a correct estimation of marketed surplus, since it differs according to crop, place, season and general state of the economy.

Marketing finance is also important since the small producer will experience difficulty in waiting for payment from the whole-sale buyer, if the time lag is too long. Proper storage and handling facilities are important because otherwise, the produce will perish and become unmarketable and unusable.

Indian Farmers and Marketing Disabilities:

The present system of agricultural marketing is not wellorganized and the farmers have to depend largely on the middlemen for the disposal of the farm’s yield who have no hesitation in taking advantage of the farmer’s dependence upon them.

The real evil is the tendency of these intermediaries who exploit the ignorance and helplessness of the farmers to increase their own profit. The malpractices in the present system of agricultural marketing are very well known. The Rural CreditSurvey Committee described the position as follows: “while standards of marketing have improved, in most of the relatively few regulated markets which have been established, a number of malpractices still exist even in them since personnel and enforcement are two great problems, not always sufficiently attended to, much less solved.

Sometimes, the malpractices take fresh lease of unauthorized life just outside the market, for the private interests are strong, the advantages of evading strict regulation are many and the producer is in no position to seek eventual advantage and protection from law at the cost of the immediate disadvantage involved in the loss of powerful customers, which are also sources of credit and finance. Moreover, there is a very great lacuna that no control at all is exercised over village sales, in which the primary producer is literally, legally and in practice at the mercy of the village trader”.

Frequently large samples are also taken by the buyers with payment. The cultivators are not paid for them even when no sale is affected. Generally the transactions take place on a sample basis. Consequently, the producer does not get the full worth of his produce. The reputation of Indian agricultural producers in the world market is low.

The villagers have practically no contact with the outside world not are they in touch with the trend of market process and they mostly depend on hearsay reports received form the village bania who is always busy in earning profits from buyers by making them fools to the ignorant villagers.

In India, the following are some of the common defects agricultural marketing:

1. Lack of organization, 2. Forced sales, 3. Presence of middlemen, 4. Numerous market charges, 5. Market malpractices, 6. Lack of standard weights and measures, 7. Inadequate storage,

8. No standardization of price and quality, 9. Lack of marketing finance, and 10. Want of proper market information.

Requisites of good marketing

In the first place the quality of produce should be good. Good quality can fetch better price and confidence which can be assumed by using best seeds, by adopting correct methods of harvesting , by grading the product by storing it well and avoiding malpractices like adulteration and misrepresentation etc. The second essential of good marketing is the staying power of the seller. Therefore, the agriculturists may have the staying power to sell so that they may get better prices after the harvest. The peasant should, therefore, have enough reserve to pay land revenue and meeting other needs. Storage, Marketing and Pricing The storage, pricing and marketing of agricultural commodities is as important for high profits as the process of production. This is the reason why the government since 1951 has laid stress on the development of physical markets, on farm and off farm storage structures, facilities for standardization and grading, packaging and transportation through different Five Year Plans. Lack of proper storage facilities leads to attacks by pests and other organisms. The damage caused through such infestations

leads to a reduction in market value depending upon the extent of damage. In some cases the produce is declared unfit for consumption and has to be destroyed. This leads to a huge loss for the farmer. Sensible farmers should take pains to store their agricultural produce carefully so as to command the most optimum price in the market. Most agricultural commodity markets usually function under the regular forces of demand and supply. The government also fixes minimum support prices or statutory prices for certain crops in order to protect the interests of farmers and encourage them to increase production. If the price of these commodities falls below the support limit, the government arranges to buy these crops on state account. The government supports organized marketing of agricultural products through a system of regulated markets in India. These physical markets are meant to make sure that farmers get reasonable profits by creating an atmosphere of fair play. This fairness is with regard to the forces of supply and demand, regulation of market practices and transparency in transactions. Here is some information about local storage warehouses; marketing networks and commodity prices that will help you get a good value for your agricultural produce. Crop-wise, Market-wise and Minimum Support Prices Crop-wise and Market-wise Prices The prices of agricultural commodities are usually determined by market factors of demand and supply. If there are many farmers producing the same commodity then they will fetch a lesser price for their produce. If there is great demand from consumers for a

certain commodity then farmers can expect to get a higher price. These prices keep changing daily. Other factors that determine the price of the product are its quality, yield and pest free status. Climatic conditions, international prices, cost of production and new laws may also affect the prices of agricultural commodities. The price at different markets may be different. The government has fixed minimum support prices for certain agricultural products. Farmers also have the option to sell their produce to private dealers if they stand to get a better profit. crop-wise and market-wise prices of different agricultural commodities(External website that opens in a new window). Minimum Support Prices The main reason why the government fixes minimum support prices or MSPs is to ensure remunerative prices to farmers to encourage higher investment and production of agricultural commodities. Every year MSPs for major agricultural products are announced which are fixed after taking into account the recommendations of the Commission for Agricultural Costs and Prices (CACP). The CACP while recommending MSPs takes into account factors such as cost of production, change in prices of inputs, demand and supply, market price trends and cost of living among other factors. Government organises Price Support Schemes as PSS of commodities through various public and cooperative agencies such as Food Corporation of India (FCI)(External website that opens in a new window), Cotton Corporation of India Ltd. (CCI)- External website that opens in a new window, Jute Corporation of India Ltd. (JCI)- External website that opens in a new window, National Agricultural Cooperative Marketing Federation of India Ltd. (NAFED)- External website that opens in a new

window and Tobacco Board(External website that opens in a new window) for which the MSPs are fixed. For commodities not covered under PSS, the government arranges for market intervention on specific request from the States for a specific quantity at a mutually agreed price. The losses, if any, are borne by the Centre and State on a 50:50 basis. Location of Markets To achieve an efficient system of buying and selling of agricultural commodities, most State Governments and Union Territories have enacted legislations like the Agricultural Produce Marketing Committee Act to provide for regulation of agricultural produce markets. These regulated physical markets have been established to ensure a reasonable amount of profits to agriculturalists for their crops and other agricultural products. At the time of independence there were only around 286 regulated markets in India. Currently, there are more than 7,500 such markets in the country. Most of these regulated markets are wholesale markets. Other than these markets there are also around 30,000 rural periodical markets of which 15 per cent function under the ambit of regulation. Presently, the average reach of a single regulated market is 459 square kms. This means that farmers have to travel a long distance with their produce to avail this facility. The Central and State Governments are in the process of creating more regulated markets so that the command area of each market does not extend beyond 80 square kms. Basic facilities such as internal roads, boundary walls, electric lights, loading and unloading facilities and weighing equipment are available at more than 80 per cent of the markets. Farmers' rest houses exist in more than half of the regulated markets.

Infrastructures that the government plans to extend to all regulated markets are auction platforms, drying yards and cold storage units. Problems of Agriculture Marketing Indian system of agricultural marketing suffers from a number of defects. As a consequence, the Indian farmer is deprived 'of a fair price for his produce. The main defects of the agricultural marketing system are discussed here. 1. Improper warehouses There is an absence of proper ware housing facilities in the villages. Therefore, the farmer is compelled to store his products in pits, mud-vessels, "Kutcha" storehouses, etc. These unscientific methods of storing lead to considerable wastage. Approximately 1.5% of the produce gets rotten and becomes unfit for human consumption. Due to this reason supply in the village market increases substantially and the farmers are not able to get a fair price for their produce. The setting up of Central Warehousing Corporation and State Warehousing Corporation has improved the situation to some extent 2. Lack of grading and standardization Different varieties of agricultural produce are not graded properly. The practice usually prevalent is the one known as "dara" sales wherein heap of all qualities of produce are sold in one common lot Thus the farmer producing better qualities is not assured of a better price. Hence there is no incentive to use better seeds and produce better varieties. 3. Inadequate transport facilities Transport facilities are highly inadequate in India. Only a small

number of villages are joined by railways and pucca roads to mandies. Produce has to be carried on slow moving transport vehicles like bullock carts. Obviously such means of transport cannot be used to carry produce to far-off places and the farmer has to dump his produce in nearby markets even if the price obtained in these markets is considerably low. This is even more true with perishable commodities. 4. Presence of a large number of middlemen The chain of middlemen in the agricultural marketing is so large that the share of farmers is reduced substantially. For instance, a study of D.D. Sidhan revealed, that farmers obtain only about 53% of the price of rice, 31% being the share of middle men (the remaining 16% being the marketing cost). In the case of vegetables and fruits the share was even less, 39% in the former case and 34% in the latter. The share of middle- men in the case of vegetables was 29.5% and in the case of fruits was 46.5%. Some of the intermediaries in the agricultural marketing system are -village traders, Kutcha arhatiyas, pucca arhatiyas, brokers, wholesalers, retailers, money lenders, etc. 5. Malpractices in unregulated markets Even now the number of unregulated markets in the country is substantially large. Arhatiyas and brokers, taking advantage of the ignorance, and illiteracy of the farmers, use unfair means to cheat them. The farmers are required to pay arhat (pledging charge) to the arhatiyas, "tulaii" (weight charge) for weighing the produce, "palledari" to unload the bullock-carts and for doing other miscellaneous types of allied works, "garda" for impurities in the produce, and a number of other undefined and unspecified charges. Another malpractice in the mandies relates to the use of wrong weights and measures in the regulated markets. Wrong

weights continue to be used in some unregulated markets with the object of cheating the farmers. 6. Inadequate market information It is often not possible for the farmers to obtain information on exact market prices in different markets. So, they accept, whatever price the traders offer to them. With a view to tackle this problem the government is using the radio and television media to broadcast market prices regularly. The news papers also keep the farmers posted with the latest changes in prices. however the price quotations are sometimes not reliable and sometimes have a great time-lag. The trader generally offers less than the price quoted by the government news media. 7. Inadequate credit facilities Indian farmer, being poor, tries to sell off the produce immediately after the crop is harvested though prices at that time are very low. The safeguard of the farmer from such "forced sales" is to provide him credit so that he can wait for better times and better prices. Since such credit facilities are not available, the farmers are forced to take loans from money lenders, while agreeing to pledge their produce to them at less than market prices. The co-operative marketing societies have generally catered to the needs of the large farmers and the small farmers are left at the mercy of the money lenders. Thus it is not possible to view the present agricultural marketing in India in isolation of (and separated from) the land relations. The regulation of markets broadcasting of prices by All India Radio, improvements in transport system, etc., have undoubtedly benefited the capitalist farmers, and they are now in a better position to obtain favourable prices for their "market produce"

but the above mentioned changes have not benefited the small and marginal farmers to any great extent.

Co-operative marketing Though the above measures have improved the system of agricultural marketing to some extent, a major part of the benefits has been derived by large farmers, who have adequate marketable surplus. However, the small and marginal farmers continue to sell a major part of their produce to moneylenders to meet their credit needs and these moneylenders offer them very low prices. Therefore it is essential to form cooperatives of the small and marginal farmers to enable them to obtain fair prices for their produce. The advantages that co-operative marketing can confer on the farmer are multifarious, some of which are listed below. 1. Increases bargaining strength of the fanners Many of the defects of the present agricultural marketing system arise because often one ignorant and illiterate farmer (as an individual) has to face well-organised mass of clever intermediaries. If the farmers join hands and for a co-operative, naturally they will be less prone to exploitation and malpractices. Instead of marketing their produce separately, they will market it together through one agency. 2. Direct dealing with final buyers In cases, the co-operatives can altogether skip the intermediaries and enter into direct relations with the final buyers. This practice will eliminate exploiters and ensure fair prices to both the producers and the consumers. 3. Provision of credit The marketing co-operative societies provide credit to the

farmers to save them from the necessity of selling their produce immediately after harvesting. This ensures better returns to the farmers. 4. Easier and cheaper transport Bulk transport of agricultural produce by the societies is often easier and cheaper. Sometimes the societies have their own means of transport. This further reduces cost and botheration of transporting produce to the market. 5. Storage facilities The co-operative marketing societies generally have storage facilities. Thus the farmers can wait for better prices. Also there is no danger to their crop yield from rains, rodents and thefts. 6. Grading and standardization This task can be done more easily for a co-operative agency than for an individual farmer. For this purpose, they can seek assistance from the government or can even evolve their own grading arrangements. 7. Market intelligence The co-operatives can arrange to obtain data on market prices, demand and supply and other related information from the markets on a regular basis and can plan their activities accordingly. 8. Influencing marketing prices While previously the market prices were determined by the intermediaries and merchants and the helpless farmers were mere spectators force to accept, whatever was offered to them, the co-operative societies have changed the entire complexion of

the game. Wherever strong marketing co-operative are operative, they have bargained for and have achieved, better prices for their agricultural produce. 9. Provision of inputs and consumer goods The co-operative marketing societies can easily arrange for bulk purchase of agricultural inputs, like seeds, manures fertilizers etc. and consumer goods at relatively lower price and can then distribute them to the members. 10. Processing of agricultural produce The co-operative societies can undertake processing activities like crushing seeds, ginning 'and pressing of cotton, etc. n addition to all these advantages, the co-operative marketing system can arouse the spirit of self-confidence and collective action in the farmers without which the programme of agricultural development, howsoever well conceived and implemented, holds no promise to success.