LESSON 11.

MARKETING OF AGRICULTURAL PRODUCTS

Meaning of Agricultural Marketing

Agricultural marketing may be defined in terms of a chain of business activities

performed to bring farm products to their ultimate consumers. Included are such
functions as processing and distribution whereby raw product is transformed into
one desired by consumers and then moved to the point of consumer purchase. The
responsibilities for deciding how these are to be performed and for carrying out
the tasks involved are divided among many different firms. Farmers producing
agricultural produce are scattered in remote villages while consumers are in semi-
urban and urban areas. This produce has to reach consumers for its final use and
consumption. The localization distance between the farmers and the consumers
must be closed. Marketing activities are used to close this gap. There are different
agencies and functionaries through which this produce passes and reaches the
consumer. The routes through which possession and title (ownership) of these
produce pass between the farmers and the ultimate consumers are called channels
of distribution. A market channel or channel of distribution is therefore defined as
a path traced in the direct or indirect transfer of title of a product as it moves from
a producer to an ultimate consumer or industrial user. Thus, a channel of
distribution of a product is the route taken by the ownership of goods as they
move from the producer to the consumer or industrial user. Agricultural products
are called produces. Farm produce are different from regular products. They have
some features, which make marketing them much different from marketing other
products. The marketer of produces needs to have a good knowledge of these
features before he can design effective plans and programs for marketing them.
Increased demand for goods and services produced out of the farm made
specialization necessary. As the individual farmer specialized, it gave rise to the
production of marketable surpluses which could not be exchanged easily for goods
and services produced out of the farm. Trade by batter was popular in the early
days but due to its obvious disadvantages such as the necessity for double
coincidence of wants, lack of unit of measure, difficulty of holding large stocks of
commodities in storage for future exchange e.t.c, the use of money as a medium of
exchange evolved. This marked the beginning of the development of an efficient
marketing system. Thus with the development of an efficient marketing system, it
becomes possible for consumers to enjoy what they cannot produce irrespective of
the distance between them and the producers.

Basic Features of Agricultural Produce

1. Agricultural products are primary products: Agricultural produce are

directly from nature, this means that they have generally not undergone any
processing which can help to enhance their basic features and value. This explains
why they are grouped with natural resources and referred to as commodities.

2. The production of agricultural products is affected by weather or nature:

A large number of climatic and weather conditions affect the production of farm
produce. This makes production level not entirely dependent on the decision of
farmers. While a bad weather can greatly dash the hope of farmers by reducing
production level, a clement weather can greatly help to raise their production level.
Drought, desertification, floods, and pests are some of the forces of nature that
have reduced farm output in Nigeria in recent times.

2. Agricultural products are mostly seasonal in production: This is as a result

of their being dependent on the forces of weather. But the demand and
consumption or usage of the products are spread throughout the year. This
underscores the need for good storage facilities. It also explains the reasons for
price fluctuations in the prices of agricultural products between the different
seasons.

4. Most agricultural products are highly perishable: Some even lose their
freshness and begin to spoil within hours after they are harvested. This
necessitates finding buyers quickly or processing them when sales are delayed

5. It is very difficult to brand agricultural products: Before branding can be

done they would have to be processed into something else. Branding enables a
producer to differentiate his product from other producers, advertise it, and have
control over its price.

6. There is usually much geographic distance between the producers and

consumers or buyers of agriculture products: While the producers are usually
found in the rural areas, the consumers or buyers of agricultural products are found
in the urban areas. This necessitates transporting the products over long distances.
The bad nature of our roads and the consequent high cost of transportation make
the prices of agricultural products to be much higher in urban areas than in the
rural areas where they are produced.

The features of agricultural products discussed above make their marketing much
more difficult than that of manufactured or processed products. Notwithstanding
this, with the careful planning and implementation of marketing programs,
marketers can achieve good patronage for their produces. This involves taking the
right decisions with respect to the specific products to market, their prices,
promotion, and distribution.

Channels of Distribution
Production is not complete until the goods (products, services or ideas) reach the
final consumers. Marketing activities are only successful when the buyers are
reached. Marketing was preciously defined as system of business activities that
begins and ends with the consumers wants. The products or services must be
delivered and made available to the consumer at the time he needs the products, in
the right place and in the right form and condition that customers want them.
Ownership and possession of product must be transferred from the owner
(producer) to the consumer. This can be done directly or through middlemen. The
transfer process involves transportation, stores and logistics management (physical
distribution) or through agents of distribution (channels of distribution).
Physical distribution is sometimes used interchangeably with logistics, and it
consists of all activities designed to move the product, from the point of
production or distribution activities include:
 Inventory storage and warehousing
 Inventory investment and management
 Transportation
 Material handling
 Processing of order
 Packaging and despatch

It is important for an organization to manage its channels very well, as this have
serious implications for the organization and its success. This is partly because the
organization does not have direct control on the channels as it has over its own
internal operations making direct and frequent changes are not easy. Distribution
channels can be used to gain competitive advantages in the market and it involves
long-term commitment to other Organizations.

Channels of distribution involves all business organizations and individuals

through which possess and titles of goods pass between the point of production to
the producer and the consumers are independent and interdependent organizations
involved in making a product available for consumption and are referred to as
distribution channel. A channel remains valid only to the last person that
consumes the product without altering its form. The alteration of the form of the
product, necessitate the start of new channel.

Functions of Marketing Channels

Marketing channels play an important role in helping to activate key marketing
activities and objectives. These functions are important if the consumers must get
access to the product at the right time and place and to obtain utilities. According
to Oyeniyi (2009) some of these functions include:

Marketing Communication Functions Channel members are at times involved

in the collection, and dissemination of market information on virtually all
stakeholders in the market: current and potential buyers, competitors, current
operations, suppliers, and other external environmental variables that can affect
their operations. More importantly, the channels members also get involved in
importantly communication activities such as advertising, public relations, sales
promotion, personal selling and direct marketing communication.
Inventory Management Channel members as part of their functions order for and
keep stock of appropriate assortment of merchandise. Depending of the strengths
(financial and managerial) of the channel member, a few parts, or stock or a
virtually every available parts or stock of a particular product are stored. Part of
the inventory management function of the channel is to breakdown large quantity
into smaller ones, grading, assembling and product packaging.

Physical Distribution A major function of the marketing channel is to ensure

movement of goods from the point of production to the point of consumption. This
function will include efficient distribution and delivery system, coordination of all
delivery schedules to meet the needs and expectations of the consumers and to
ensure arrangement for the return of damaged or defective items.

Market Information The buying process is enhanced when necessary

information to facilitate the process is available. Market information should be
packaged to ensure efficiency of operations of the channel member and improving
customer services. Market information may form product literature, assistance
with desktop publishing, merchandizing plans, market research, product catalogue,
in-store training and tradeshow assistance.

Financial Risk Channel members are expected to carry or hold stock in inventory.
The ownership and title of this stock before they are sold involved some levels of
risk. Stock held in inventory may deteriorate, affected by evaporation, pilferage,
fire, flood and any other disaster. Other financial risk function is related to account
receivable, bad debt and return-inwards. Risk can also arise as a result of product
safety and liability arising thereafter.

Negotiation and Matching Contribution Price and terms of exchange must be

reached and agreed with the customers. Without such agreement transfer of title
and possession may be hindered. Channels members must also find, communicate
and persuade the function.

Financing Contribution Production and distribution of goods must be facilitated

through the sourcing and disbursement of funds to undertake distribution
functions.
Financial capital must be sourced to keep operation running, to finance inventories
and to ensure that the manufacturer‟s credits are settled on time. More importantly
is the recovery of credit facilities extended to customers, and payment of
outstanding bills through financial institutions to sellers, wholesalers or the
retailers.
Other Contribution Marketing channels perform some other numerous functions
to either the producers or the buyers. It is the duty of the channel members to
interpret consumers‟ wants and ensure that such wants are met with appropriate
products. The needs of the consumers should also be anticipated, this can be done
through market research functions. Products are produced ahead of demand, as
such channel members store these product, provide warehousing function and
ensure place and possession utilities by eventually making the goods available
where the consumers require them. The storage function is performed in relation
to the transportation function i.e. conveying the goods from the point of
manufacturing or warehouse to the point of consumption. These functions are
shared among channel members. This indicates that any channel member can
perform any or some of these functions. However, the performance of these
functions increases costs and hence price.

Channels of Distribution

Factors Affecting Choice of Channel of Distribution of Agricultural Produce:

There are several channels of distribution depending upon type of produce or
commodity. Each commodity group has slightly different channel. The factors are:

a. Perishable nature of produce .e.g. fruits, vegetables, flowers, milk, meat, etc.
b. Bulk and weight–cotton, fodders are bulky but light in weight.
c. Storage facilities.
d. Weak or strong marketing agency.
e. Distance between producer and consumer. Whether local market or distant
market.
f. Weather Conditions
g. State of Infrastructural facilities like roads

Types of Market Channels

The choice of any of these channels have great implication on marketing costs
such as transport, commission charges, etc. and market margins received by the
intermediaries such as trader, commission agent, wholesaler and retailer. Some of
the typical marketing channels for different product groups are given below:

Channels of Grains
a. Producer–miller-consumer (village sale)
b. Producer–miller-retailer–consumer (local sale)
c. Producer–wholesaler-miller–retailer–consumer
d. Producer–miller–cum-wholesaler-retailer-consumer
e. Producer–village merchant–miller–retailer–consumer
f. Producer–government procurement–miller–retailer–consumer

Channel of other food grains (Corn/yam)

a. Producer – consumer (village sale)
b. Producer–village merchant–consumer (local sale)
c. Producer–wholesaler-cum-commission agent retailer–consumer
d. Producer–primary wholesaler–secondary wholesaler– retailer– Consumer
e. Producer–Primary wholesaler–miller–consumer (Bakers).
f. Producer-government procurement–retailer–consumer.
g. Producer–government–miller–retailer–consumer.

Channels of cotton
a. Producer–village merchant–wholesaler or ginning factory– wholesaler in lint–
textile mill (consumer)
b. Producer–Primary wholesaler–ginning factory–secondary wholesaler–consumer
(Textile mill)
c. Producer– Trader– ginning factory– wholesaler in lint– consumer (Textile mill)
d. Producer–govt. agency–ginning factory–consumer (Textile mill).
e. Producer–Trader–ginning factory–wholesaler–retailer– consumer (non-textile
use).
Channels of Vegetables
a. Producers–consumer (village sale)
b. Producer–retailer–consumer (local sale)
c. Producer–Trader–commission agent–retailer–consumer.
d. Producer–commission agent–retailer–consumer
e. Producer–primary wholesaler–secondary wholesaler– retailer– consumer
(distant market).

Channels of Fruits
a. Producer–consumer (village sale)
b. Producer–Trader–consumer (local sale)
c. Producer–pre-harvest contractor–retailer–consumer
d. Producer–commission agent–retailer–consumer.
e. Producer–pre-harvest contractor–commission agent–retailer–consumer
f. Producer–commission agent–secondary wholesaler– retailer–consumer (distant
market).

The length and number of channel member for each channel depends on the nature
of the product, the distance between the producer and consumers, the farmer sector
practice, as well as the cultural dictates of the farming environment. The various
channels described above can also group according to agents depending on the
choice of the producer and industry practice of each country. Finally this decides
the price to be paid by the consumer and share of it received by the farmer
producer. That channel is considered as good or efficient which makes the produce
available to the consumer at the cheapest price also ensures the highest share to the
producer.