Agricultural Marketing Trade and Prices Important Content

Agricultural Marketing Trade and Prices Important Content

Agricultural Marketing Trade and Prices

Agricultural Marketing Definition:- According to Thomsen, 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 effects of such operations on farmers, middlemen and consumers.

Market:- Meaning The word market originated from the latin word ‘marcatus’ which means merchandise or trade or a place where business is conducted.

Components of a Market:-

1. The existence of a good or commodity for transactions.
2. The existence of buyers and sellers Agricultural Marketing Trade and Prices.
3. Price at which the commodity is transacted or exchanged.
4. Business relationship or intercourse between buyers and sellers.
5. Demarcation of area such as place, region, country or the whole world.

Classification of Markets:-

1.On the Basis of Location or Place of Operation:-

1. Village Market
2. Primary Markets
3. Secondary Wholesale Markets
4. Terminal Markets
5. Seaboard Markets

2.On the Basis of Area/Coverage:-

1. Local or Village Markets
2. Regional Markets
3. National Markets
4. World or International Market

3.On the Basis of Time Span:-

1. Short period Markets
2. Periodic Markets
3. Long-period Markets
4. Secular Markets

1.Short period Markets:- The markets which are held only for a day or few
hours are called short-period markets. such as fish, fresh vegetables, and liquid milk.

2.Periodic Markets:-

• The periodic markets are congregation of buyers and sellers at specified places either in villages, semi-urban areas or some parts of urban areas on specific days and time.
• The periodic markets are held weekly, biweekly, fortnightly or monthly according to the local traditions.
• These are similar to ‘spontaneous markets’ in several developed countries.

3.Long-period Markets:- These markets are held for a longer period than the
short-period markets. like foodgrains and oilseeds.

4.Secular Markets:- These are markets of a permanent nature. The
commodities traded in these markets are durable in nature and can be stored for many years. Examples- machinery and manufactured goods.

5.On the Basis of Volumes of Transactions

1. Wholesale Markets
2. Retail Markets

1.Wholesale Markets:- A wholesale market is one in which commodities are
bought and sold in large lots or in bulk. These markets are generally located in either towns or cities.

2.Retail Markets:- A retail market is one in which commodities are bought by and sold to the consumers as per their requirements. Transactions in these markets take place between retailers and consumers

6.On the Basis of Nature of Transactions

1. Spot or Cash Markets
2. Forward Markets.

7.On the Basis of Number of Commodities in which Transaction Takes Place

1. General Markets
2. Specialized Markets

8.On the Basis of Degree of Competition

1. Perfect Markets
2. Imperfect Markets- Imperfect market also divided in 4 type market

• (i) Monopoly Market.
• (ii) Duopoly Market.
• (iii) Oligopoly Market.
• (iv) Monopolistic Competition.

1.Perfect Markets:- A perfect market is one in which the following conditions hold good:

• There is a large number of buyers and sellers.
• All the buyers and sellers in the market have perfect knowledge of demand, supply and prices.
• Prices at any one time are uniform over a geographical area.
• The prices of different forms of a product are uniform, plus or minus the cost of converting the product from one form to another.

2.Imperfect Markets:- The markets in which the conditions of perfect
competition are lacking are characterized as imperfect markets.

9.On the Basis of Nature of Commodities

1. Commodity Markets
2. Capital Markets

10.On the Basis of Stage of Marketing

1. Producing Markets
2. Consuming Markets

11.On the Basis of Extent of Public Intervention

1. Regulated Markets
2. Unregulated Markets

1.Regulated Markets:– These are those markets in which business is done in
accordance with the rules and regulations framed by the statutory market organization representing different sections involved in markets.

2.Unregulated Markets:- These are the markets in which business is
conducted without any set rules and regulations.

12.On the Basis of Type of Population Served

1. Urban Market
2. Rural Market

13.On the Basis of Market Functionaries and Accrual of Marketing Margins

1. Farmers markets
2. Cooperative markets
3. General markets.

Importance of Agricultural Marketing

• Optimization of Resource use and Output Management.
• Increase in Farm Income.
• Creation of Utility- four types of utilities of the product are created by marketing. (a) Form Utility (b) Place Utility (c) Time Utility (d) Possession Utility.

(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.

(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.

Marketing Functions and their Classification:-

1.Primary Functions:-

• Assembling or Procurement.
• Processing.
• Dispersion or Distribution.

2.Secondary Functions:-

• Packing or Packaging.
• Transportation
• Grading, Standardization and Quality Control
• Storage and Warehousing
• Determination or Discovery of Prices
• Risk Taking
• Financing
• Buying and Selling
• Demand Creation
• Dissemination of Market Information.

3.Tertiary Functions:-

• Banking
• Insurance
• Communications ( Posts & Telecommunication)
• Supply of Energy (Electricity)

Marketing Institutions:-

(a)Public Sector Institutions:-

• Directorate of Marketing and Inspection (DMI)
• Commission for Agricultural Costs and Prices (CACP)
• Food Corporation of India (FCI)
• Cotton Corporation of India (CCI)
• Jute Corporation of India (JCI)

Specialized Commodity Boards:-

• Rubber Board
• Tea Board
• Coffee Board
• Spices Board
• Coconut Board
• Oilseeds and Vegetable Oils Board
• Tobacco Board
• Cardamom Board
• Coir Board
• Silk Board
• National Horticulture Board (NHB)
• National Dairy Development Board (NDDB)

Others:-

• Central Warehousing Corporation (CWC)’
• State Warehousing Corporations (SWCs)
• State Trading Corporation (STC)
• Agricultural and Processed Food Export Development Authority (APEDA)
• Export Inspection Council
• Marine Products Export Development Authority (MPEDA)
• Silk Export Promotion Council (SEPC)
• The Cashewnuts Export Promotion Council of India (CEPCI)
• Agricultural Produce Market Committees (APMC)
• State Agricultural Marketing Boards (SAMB)
• Council of State Agricultural Marketing Boards (COSAMB)
• State Directorates of Agricultural Marketing
• Research Institutions and Agricultural Universities

(b) Cooperative Sector Institutions:-

• National Cooperative Development Corporation (NCDC)
• National Agricultural Cooperative Marketing Federation (NAFED)
• National Cooperative Tobacco Growers Federation (NTGF)
• National Consumers Cooperative Federation (NCCF)
• Tribal Cooperative Marketing Federation (TRIFED)
• Special Commodity Cooperative Marketing Organizations (Sugarcane, Cotton, Milk)
• State Cooperative Marketing Federations.
• Primary Agricultural Cooperative Marketing Societies

Meaning and Types of Producer’s Surplus

1.Marketable Surplus:-

• The marketable surplus is that quantity of the produce which can be made available to the non-farm population of the country.
• The residual left with the producer-farmer after meeting his requirements for family consumption, farm needs for seeds and feed for cattle.
• MS = P – C

Where

• MS = Marketable surplus
• P = Total production, and
• C = Total requirements

2.Marketed Surplus:- Marketed surplus is that quantity of the produce which the producer-farmer actually sells in the market, irrespective of his requirements for family consumption, farm needs and other payments

Factors Affecting Marketable Surplus:-

• Size of Holding.
• Production.
• Price of the Commodity.
• Size of Family.
• Requirement of Seed and Feed.
• Nature of Commodity.
• Consumption Habits.

Innovative Marketing Channels (Direct Marketing):-

• Apni Mandi / Kisan Mandi
• Hadaspar Vegetable Market
• Rythu Bazars
• Uzhavar Sandies
• Shetkari Bazar
• Mother Dairy Booths

Factors Affecting the Cost of Marketing:-

• Perishability of the Product (When higher the perishability, the greater the cost of marketing).
• Extent of Loss in storage and Transportation.(If the loss in the quality and quantity of produce increase the cost will be increase)
• Volume of the Product Handled. (The larger the volume of business or
  turnover of a product the cost will be decrease).
• If the supply of the product is regular throughout the year, the cost of marketing on per unit basis will be less.
• The cost of marketing is higher for the commodities requiring packaging.
• The cost of marketing of ungraded product is higher than that of the products in which grading can be easily adopted.

Reasons for Higher Marketing Costs of Agricultural Commodities

• Widely Dispersed Farms and Small Output per Farm.
• Most farm products are bulky in relation to their value.
• Difficult Grading.
• Irregular Supply
• Need for Storage and Processing
• Large Number of Middlemen.
• Risk involved.

A number of agricultural commodities are exported from India. The commodities exported from India fall broadly in three categories:-

1.Traditional Export Items:- These products are cashew nuts/shelled, castor oil, coffee, raw cotton, cotton waste, fruits, spices, sugar and molasses, tea and tobacco-unmanufactured.

2.Non-Traditional items but uncertain:- These items are raw jute, raw wool, gums, resins and lac, essential vegetable oils, and non-essential vegetable oils (excluding castor oil).

3.Non-Traditional items with good prospects:- These items are floriculture products, HPS groundnut, oil meals, meat and meat preparations, processed fruits and juices, processed vegetables, sesame and niger seeds, wheat and rice.

GATT (The General Agreement on Trade and Tariffs):-

• The General Agreement on Trade and Tariff (GATT) was a multinational treaty to liberalize world trade.
• It took effect on 1^st January, 1948 and ended when 117 member states
  signed the Uruguay Round of negotiations in Marrakesh, Morocco on 15th April, 1994.
• GATT’s administrative structure in Geneva was succeeded by the World Trade Organization (WTO) under the Uruguay Round agreement.

World Trade Organisation (WTO):-

• WTO is an international body to supervise and encourage international trade.
• The Uruguay Round of trade talks concluded in 1994 resulted in setting up of the World Trade Organisation (WTO) to take over the functioning of GATT for encouraging multilateral trade in
  goods and services.
• The WTO began functioning on 1^st January, 1995.

Agreement on Agriculture (AoA) under WTO
The provisions under AoA can be understood to consist of five broad groups:

• Market Access Commitment
• Reduction Commitment for Aggregate Measure of Support (AMS)
• Reduction Commitment for Export Subsidy
•  Sanitary and Phyto-Sanitary Measures (SPS)
• Trade Related intellectual Property Rights (TRIPS).

NAFED:-

• The National Agricultural Co-operative Marketing Federatiopn of India (NAFED) is an apex organization of marketing cooperatives in the country.
• It deals in procurement, processing, distribution, export and import of selected agricultural commodities.
• The NAFED is also the central nodal agency for undertaking price support operations for pulses and oilseeds and market intervention operations for other agricultural commodities.
• The National Agricultural Co-operative Marketing Federation (NAFED) was established in October, 1958.
• The State Level Marketing Federations and the National Co-operative Development Corporation are its members.
• The head office of NAFED is at Delhi, and its branch offices are located at Mumbai, Kolkata and Chennai.

National Cooperative Development Corporation (NCDC):- The National Cooperative Development Corporation (NCDC) was set up in March, 1963 under an Act of Parliament for promoting, guiding and supporting rural
economic activities on cooperative principles.

History Of Co-operative Marketing:-

• The history of co-operative marketing in India dates back to 1912, When the Cooperative Marketing Societies Act, 1912 was passed.
• The first Co-operative Society was formed in Hubli in 1915 to encourage cultivation of improved cotton and to sell it collectively. 
• The Royal Commission on Agriculture (1928) stressed the need for group marketing instead of individual marketing. 

Tribal Cooperative Marketing Federation (TRIFED):-

• The Tribal Cooperative Marketing Federation (TRIFED) was established in 1987 to develop the system of marketing of forest products produced by the tribals in the country.
• TRIFED arranges marketing and export of minor forest products produced by the tribals in the tribal dominated areas and protects the tribes from exploitation by the private traders because of poor demand and production in small lots.

Indian Standards Institution (ISI):-

• Standardization on an organized basis started in India with the establishment of the Indian Standards Institution.
• The Institution, popularly known as the ISI; was set up in 1947 with the active support of the industrial, scientific and technical organizations in the country.
• The institution operates under an Act of Parliament (ISI Certification Marks Act), under which manufactured items are stamped with the ISI mark of certification.
• This mark acts as a third party guarantee to the purchaser that the goods bearing the ISI mark have been produced in accordance with the provisions of the relevant Indian standards.
• The World Standards Day is celebrated annually on 14th October, for it was on this day in 1946 that the United Nations Co-ordinating Committees decided to set up the International Organization for Standardization.

Bureau of Indian Standards (BIS):-

• The Indian standards Institution (ISI ) has been renamed as the Bureau of Indian Standards (BIS) with effect from April 1, 1987. Along with the change in its name, its status and scope of activities have also been enlarged.
• The Bureau has been established by the Bureau of Indian Standards Act, 1986 and has become a statutory body.
• As such all the activities of the Bureau viz., standards formulation, product certification, quality assurance, consultancy services, quality assessment, testing and development of test methods have assumed statutory status.
• The ISI was a registered society and statutory powers were confined to it only in respect of the operation of the certification marks activity.

ECOMARK:-

• The Government of India instituted a scheme known as ECOMARK in February, 1991 for labeling environment friendly products.
• This scheme is administered by the Bureau of Indian Standards (BIS).
• The mark is a combination of BIS Standards Mark (ISI) and the Eco logo.

Mark to Identify Vegetarian/Non-Vegetarian Food Products

• The Government of India by an amendment in the Prevention of Food
  Adulteration Act, 1955 on 4th October, 2001 and 20th June, 2002 has made.
• it mandatory for the manufacturers of food products to put a label indicating whether the food has been prepared using meat and allied products or otherwise.
• Under this amendment, them packed food products bearing a mark of a dot in a square in green colour is indicator of vegetarian product and a mark is brown colour is indicator of non-vegetarian food.
• This amendment is applicable throughout the country

Mark of FPO

• The products carrying a mark of FPO in an oval with two hanging strips (making inverted – V shape) is mandatory on packed containers of fruits and vegetables processed products.
• This indicates the quality of the product and conveys that the
  production of processed fruit products has been carried out under clean and sanitary conditions.
• This mark is issued by the Ministry of Food Processing Industries of
  Government of India, New Delhi.

Warehouses:- Warehouses are scientific storage structures especially constructed for the protection of the quantity and quality of stored products

Warehousing:- Warehousing may be defined as the assumption of responsibility for the storage of goods. It may be called the protector
of national wealth.

Types of Warehouses:-

1. On the Basis of Ownership

1. Private Warehouses
2. Bonded Warehouses

2. On the Basis of Type of Commodities Stored

1. General Warehouses
2. Special Commodity Warehouses
3. Refrigerated Warehouses

(a) General Warehouses:- These are ordinary warehouses used for storage of most of foodgrains, fertilizers etc. In constructing such warehouses no commodity specific requirement is kept in view.

(b) Special Commodity Warehouses:- These are warehouses which are
specially constructed for the storage of specific commodities like cotton, tobacco, wool and petroleum products. They are constructed on the basis of the specific requirements of the commodity.

(c) Refrigerated Warehouses:-

• These are warehouses in which temperature is maintained as per requirements and are meant for such perishable commodities as vegetables, fruits, fish, eggs and meat.
• The temperature in these warehouses is maintained below 30 to 50 ^o F or even less, so that the product may not get spoiled by high atmospheric temperature.

Warehousing in India:-  The Government of India enacted the Agricultural Produce (Development and Warehousing) Corporations Act, 1956. The Act provided for:

• The establishment of a National Co-operative Development and Warehousing Board (which was set up on 1st September, 1956);
• The establishment of the Central Warehousing Corporation (which was established at Delhi on 2nd March, 1957)
• The establishment of State Warehousing Corporations in all the States in the country (which were established in various states between July 1957 and August 1958).
• In 1962, the Government of India decided to break up the Act of 1956 into two separate Acts – the National Co-operative Development Corporation Act, 1962, and the Warehousing Corporations Act, 1962.
• The Warehousing Corporations Act came into operation on 18th March, 1962.
• The Act defines the specific functions and the area of operations of Central and State Warehousing Corporations.

(a) National Co-operative Development and Warehousing Board
This board was set up on 1st September 1956 to perform the following functions:

• To advance loans and grants to State Governments for financing co-operative societies engaged in the marketing, processing or storage of agricultural produce, including contributions to the share capital of these institutions;
• To provide funds to warehousing corporations and the State Governments for financing co-operative societies for the purchase of agricultural produce on behalf of the Central Government.
• To subscribe to the share capital of the Central Warehousing Corporation and advance loans to State Warehousing Corporations and the Central Warehousing Corporation.
• To plan and promote programmes through co-operative societies for the supply of inputs for the development of agriculture; and
• To administer the National Warehousing Development Fund.
• In March 1963, the Board was converted into the National Co-operative Development Corporation (NCDC), and its functions were limited to co-operative development.

(b) Central Warehousing Corporation (CWC):- This Corporation was established as a statutory body in New Delhi on 2nd March, 1957. Under the new Act, the Central Warehousing Corporation was formally reestablished on March 18, 1963.

The functions of the Central Warehousing Corporation are:

• To acquire and build godowns and warehouses at suitable places in India.
• To run warehouses for the storage of agricultural produce, seeds, fertilizers and notified commodities for individuals, co-operatives and other institutions;
• To act as an agent of the government for the purchase, sale, storage and distribution of the above commodities;
• To arrange facilities for the transport of above commodities;
• To subscribe to the share capital of State Warehousing Corporations.
• To carry out such other functions as may be prescribed under the Act.

Food Corporation of India

• Towards the end of 1964, Parliament decided to transfer the government’s function of trading in food grains to the public sector.
• Legislation was enacted; and the Food Corporation of India (FCI) was born on January 1, 1965.

FCI’s Objectives are:

• To provide farmers remunerative prices
• To make food grains available at reasonable prices, particularly to vulnerable section of the society
• To maintain buffer stocks as measure of Food Security
• To intervene in market for price stabilization.

Commission for Agricultural Costs and Prices (CACP)

• Another method of intervention in the market mechanism has been the announcement of different administered prices viz., minimum support prices, statutory minimum prices, procurement prices and issue prices.
• These prices are announced for different agricultural crops by the Government of India on the recommendations of Commission for Agricultural Costs and Prices (CACP).
• This Commission was originally set up in January, 1965 in the name of the Agricultural Prices Commission (APC).
• The Agricultural Prices Commission was set up on the recommendations of the Foodgrains Prices Committee headed by Shri L.K.Jha with the aim of advising the Government on price policy of agricultural commodities with due regard to the interests of both producers and consumers.

Contract Farming/Contract Marketing:-(Farmer – Processor Linkages)

• Contract farming or marketing essentially is an arrangement between the farmerproducers and the agri-business firms to produce certain pre-agreed quantity and quality of the produce at a particular price and time

Following type of inputs and services are normally provided by the company to the farmers:

• Seeds of the variety they need for processing/marketing
• Guide lines to grow the crops
• Pesticides which do not result in residual toxicity
• Extension services
• Fertilizers/harmones required for the crop
• Other material if not locally available.

Agricultural Marketing Trade and Prices