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chapter one of agricultural marketing

  1. Agricultural Marketing
  2. Reasons for learning food marketing system  There are a number of reasons for one to learn about the food marketing system:  First, You may be preparing for a career in food marketing, and your success will depend on the knowledge of the field.  Second, you may plan to be a food producer who will need to understand the changing nature of the marketing system which will influence your sales, price and income.  Third, you will most certainly be a food consumer whose food supply and prices will depend upon the food production and marketing system.  Finally, you will be a citizen with responsibilities to shape and regulate the food industry in ways that serve the public interest.
  3. 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.
  4. Agricultural Marketing  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.
  5. Food marketing Food marketing has many faces. The food marketing system encompasses two major type of activities. -One is concerned with *physical handling, *storing, *processing, *transfer of raw and finished goods as they move from product to consumer. The other is concerned with *the exchange and price-setting process in the market system. (figure 1-1: Flow of food from sources to destination)
  6. Marketing is complex and costly  The food and fiber sector is one of the largest in the united states has a marketing system larger than any other industry. The food marketing system makes a substantial contribution to the national economy (in US 25 million jobs and 15.6% in GNP in 1998).  Farm products are not only perishable but they vary in quality.  Production is highly seasonal and geographically concentrated in areas that are often located some distance from consumers.  Farm commodities must be collected, sorted swiftly moved to market or stored for later use.  These production and commodity characteristics give rise to basic marketing activities, such as storage, transportation, processing and the like.  Some farms produce small amounts of a great many commodities.
  7. Marketing defined  Food marketing means different things to different people (consumer, farmer, middlemen etc.)  We will define food marketing as the performance of all business activities involved in the flow of products and service from the point of initial agriculture production until they are in the hands of customers. -Several key points of this definition should be noted 1.Marketing begins with production decisions on the firm. 2.Suggests a mutual interdependence between farmers and food marketing middlemen.
  8. Marketing defined 3.The essence of marketing is management decision making. 4.The farm supply industries (feed, fertilizer, farm machinery and seed) must be considered a vital part of the food industry. 5.The food industry is shaped by and serves three key players: *food producers, *food marketing firms, and *food consumers. 6. Consumer secured the highest food value at the lowest possible price.
  9. Marketing defined 7.Farmers want the highest possible returns from the sale of their products. 8.Food marketing middlemen seek to earn the greatest profit possible. 9.One of the primary task of the food marketing system is to reconcile these sometimes conflicting demands. It is not always easy or fully appreciated task.
  10. A market may be defined  We will define a market as an arena for organizing and facilitating business activities and for answering the basic economic questions: *what to produce, *how much to produce, *how to produce, and *how to distribute the production.  A market may be defined by: 1. A location ( for example New market) 2. A product (For example the grain market) 3. A time ( For example May soybean market) 4. An institutional level ( For example the retail food market). Functions that market play in the food economy 1. exchange of product and money 2. create value 3. Contribute to efficiency 4. Efficient allocation of resources
  11. Marketing as a value added process  We will define production as the creation of utility-the process of making useful goods and services  The utilities are further classified 1. Form utility (bread from wheat and flour) 2. Place utility (railroad and trucker adds place utility) 3. Time utility (storage and freezing) 4. Possession utility (consumer in acquiring & taking the title of food) -The value adding productive processes in the food industry are illustrated in figure 1-2
  12. Marketing as a value added process The food industry is divided in to three components 1. The input sector( provides machinery, fertilizer, seeds etc) 2. The farm sector 3. The product market sector  Thus, food production can be viewed as a sequential and value adding process, having its origin in purchased and farm-supplied resources and ending with the meal on the table.
  13. Food marketing career opportunities  Largest sector, numerous jobs and career opportunities are available  Sectors: -Farming, food processing & manufacturing -Wholesaling & retailing -Eating places -Supporting activities -Farm management (farm and business services): which requires marketing, leadership and communication skills.
  14. Food marketing career opportunities  Positions include:  market analyst,  merchandiser,  advertising /communications manager,market economist,  food store manager,  food service manager,  food or commodity broker,  sales management,  purchasing agent,new product development manager,  logistics or transportation manager,  product or brand manager and  marketing researchers etc
  15. The marketing process  Two essential characteristics of the marketing process:  First,is the movements; it is series of action and events  2nd, Some form of the coordination of this series of events and activities is necessary if goods and services are to move in some orderly fashion from the hands to producers to consumers. (see figure 1-3)  Starting with Farmer. The nature and way in which this production is initially offered to the marketing system has a major influence on the organization and operation of the system.
  16. The marketing process  At the same , the dynamics of the marketing process may have a direct influence on agricultural production.(Dairy industry example: Large cooling tanks(storage) combined with bulk tank trucks (improved assembly method). So the marketing technology that encouraged the reorganization of dairy farms into larger, more specialized units.  At the other extreme of the sequence, is the consumer. Certainly consumer preferences dictate to a major extent the activities of the marketing process. Similarly. Marketing firms expend a great deal of effort in trying to influence and change consumer behavior.
  17. The marketing process  Between these two forces- the agricultural producer and consumer- is the marketing system.  This complex system is composed of business firms engaged in physical, technological and economic activities and run by managers to make necessary decisions.  Another part of the food marketing system is made up of firms and organizations whose activities contribute to the pricing of food products and to establish the various arrangements, contacts and procedures that will ensure an orderly and purposeful flow of goods and services.
  18. The marketing process Farm product Laws and Domestic and government policies global economy Customs and The food marketing system values 1. Firms, organization 2. Product flows, distribution Science and channel technology 3. Management and marketing activates 4. Pricing and exchange Competition Customer taste and preference Infrastructure Food product
  19. Alternative aspect of food marketing 1. One perspective gives the big picture of food marketing some times called Macromarketing. It looks at *how the food system is organized, *how well it performs its economic and social tasks, *how the food system is changing over time. 2. Another perspective is Micromarketing, or business management, view of marketing, in contrast, is that taken by an individual decision maker in the food industry. This could be a food producer, a business manager or a food consumer who is making choices and decision about *how, *when, *where and *what to buy or sell.