2. UNIT 2
PROBLEMS OF AGRICULTURAL MARKETING
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AAE 313: Agricultural Marketing
3. Problems of Agricultural Marketing
1. Low marketable surplus of agricultural products
2. Marketing what is produced
3. Producer does not set the price
4. Lack of storage
5. Transportation problems
6. Lack of market information
7. Long chain of middlemen
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AAE 313: Agricultural Marketing
4. Problems of agricultural marketing
8. Malpractices in the market
9. Inelastic demand of agricultural products
10.Bulky nature of agricultural products
11.Lack of grading
12.Poor quality of agricultural products
13.Credit and interest rates
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AAE 313: Agricultural Marketing
5. Low marketable surplus of Agricultural goods
• Smallholder farmers hardly produce for the market and the market, depends
more on big farmers.
• The net result is that the quantity of agricultural goods available will be
inadequate in relation to the demand.
• Good markets usually need large volumes and consistency of supply
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AAE 313: Agricultural Marketing
6. Marketing what is produced
• Most businesses today fail because they market what they have produced
rather than producing what they can market.
• A competent farmer first knows the market for his product before
producing it.
• For marketing to be successful, the producer must
– ascertain the demand for the product,
– calculate the margins,
– find a sustainable market for it,
– understand the form and tastes of consumers for that product before producing it.
• However, the practice has been that most farmers in Malawi and across
Africa grow crops and raise animals for subsistence and sell the surplus.
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AAE 313: Agricultural Marketing
7. Producer does not determine the price
• In the case of consumer and industrial goods it is only the producer who
determines the basic price of the product. He is also sure of his margin.
• In contrast to this, the producer of agricultural goods does not know the
price at which his produce would be sold to the ultimate consumer.
• After production, it is a common practice for buyers of agricultural
products to set prices of agricultural output.
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AAE 313: Agricultural Marketing
8. Lack of storage
• Agricultural goods are easily perishable and production is also seasonal
while the products are demanded throughout the year.
• The farmers, who are the producers of agricultural goods, may not have
their own storage facilities.
• This is in contrast to the situation in consumer and industrial goods
marketing where the producers have their own warehouses.
• Absence of storage forces the farmers to sell their produce at the earliest
and at a very low price in the market.
• Thus, the farmers, as the producers, get a very low or even no profit.
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AAE 313: Agricultural Marketing
9. Transportation problem
• Most of the villages do not have proper roads.
• The farmers rely mainly on ox carts, bicycles and such other conventional
mode to transport their agricultural goods. This leads to delay in the produce
reaching the market.
• Where trucks are used, the cost of transportation is generally very high.
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10. Long chain of middlemen
• Agricultural goods, perhaps, have the longest chain of
middlemen.
• There are a number of intermediaries in the market like the
wholesalers, brokers, commission agents, retailers and so on.
• Price increases and only the consumer who is finally made to
bear the burden.
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AAE 313: Agricultural Marketing
11. Poor Organization and Size of Marketing
enterprise
• The farmers are scattered over a wide area without any common
organization.
• In the absence of such organization, farmers do not get anybody to
guide them and protect their interests.
• On the other hand, traders are an organized body.
• Thus, the marketing system, therefore, constitutes unorganized farming
community on one side and organized and powerful traders on the
other side.
• Under such situations, farmers will be generally exploited and do not
get remunerative prices for their produce.
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AAE 313: Agricultural Marketing
12. Poor Organization and Size of Marketing
enterprise
• The heart of marketing is the existence of enterprises able to
buy and sell, and carry the risk of finding an outlet for products
at a remunerative price.
• Broadly, these enterprises are of three categories: private,
cooperative and state.
• However, when the marketing enterprise like a state owned
marketing board is too large it gains monopoly power which
removes competition.
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AAE 313: Agricultural Marketing
13. Malpractices in the market
• The intermediaries indulge in a number of undesirable practices to make
quick money at the cost of the producer and the consumer.
• The following are some such activities:
a. Use of false weights and measurements.
b. Adulteration (adding other substances)
c. Black-marketing and hoarding and so on.
• The application of simple standards in the purchasing of grain or other
produce by an official price-stabilization agency can promote awareness
of their convenience.
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AAE 313: Agricultural Marketing
14. Lack of Market Information
• Some marketing problems can be traced to lack of information about
production.
• For instance, sellers may not be able to identify sources of supply of
commodities, while producers may curtail their production as a result of
poor sales.
• Some broiler producers for instance, keep their birds for longer periods
because they cannot get people to buy them.
• On the other hand, sellers may not know that such broiler farm exists.
• Market information is essential for market mechanism to work efficiently.
• Radio programs of agricultural markets may go a long way in improving
access to market information.
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AAE 313: Agricultural Marketing
15. Inelastic demand
• The demand for agricultural goods is not influenced by a fall or
rise in their price.
• As a result, the producer will suffer on account of fall in the
price during bumper harvest.
• Processing and storage would help to regulate supply and
reducing negative effects of inelastic demand.
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AAE 313: Agricultural Marketing
16. Lack of Grading
• Standardization enables the producer of consumer or industrial goods to get
the right price for his products.
• Agricultural goods can be graded according to their size, shape and so on.
• But in the market, little importance is given for grading the produce and as a
result the producer gets the same price for different varieties of goods
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AAE 313: Agricultural Marketing
17. Bulky nature
• The bulky nature of agricultural goods brings challenges of
transportation.
• Packing could be a solution to bulkiness of agricultural products.
• Otherwise, they cannot be taken to various market centers.
• However, this job has to be done manually for now and it involves costly
labor.
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AAE 313: Agricultural Marketing
18. Product Quality
• Many of the farmers are not aware of the need for quality seeds and
fertilizers.
• The poor quality land, seeds and fertilizers used in production result in poor
product quality.
• Marketing low quality products is a huge challenge and even when markets
are found, prices are usually low and farmers earn too low or no profit.
• Quality of output can be enhanced by improved production technology,
processing and proper storage.
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AAE 313: Agricultural Marketing
19. Credit and interest rate
• Lack of access to credit the major constraint in agricultural marketing.
• Credit is the capital for starting a business.
• Credit is also used in purchase of agricultural inputs.
• Another critical issue of that of interest rates.
• Although there are many micro-finance institutions in Malawi, Rates of
borrowing from credit institutions are very high.
• For example in most banks it is about 40%.
• This impedes business profits for sustenance.
• Farm input subsidies and government loans would reduce challenges of
need for high interest loans among farmers.
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AAE 313: Agricultural Marketing
