This document discusses price spread and marketing efficiency in agricultural markets. It defines price spread as the difference between the consumer price and the net price received by producers, expressed as a percentage of the consumer price. Price spread includes marketing costs to move products from production to consumption points as well as profits for intermediaries. Marketing efficiency is the ratio of market outputs to inputs and indicates how well a market achieves its objectives with minimum costs. The document outlines approaches to measure price spread and marketing efficiency, and notes that price spread is inversely related to marketing efficiency - as efficiency increases, price spread decreases.

1. PRICE SPREAD AND MARKETING
EFFICIENCY

2. PRICE SPREAD
Price spread is defined as the difference between the price paid by
consumers and the net price received by the producer for an equivalent quantity of
farm produce.
It is expressed as percentage of consumer’s price.
Price spread = (Consumer price – Net price of producer) * 100
Consumer price

3. Costs in price spread includes
(i) the cost involved in moving the product from the point of production to
the point of consumption i.e. marketing cost.
(ii) profit of the various market functionaries involved in moving the
produce from the initial point of production till it reaches the ultimate consumer.

4. ESTIMATION OF PRICE SPREAD
1)Lot method: Tracing the lot from production point to consumption point.
2)Sum of average of gross margin method:
Sum of gross margins/Total no of persons involved
3)Comparison of prices at different levels of marketing

5. MARKETING EFFICIENCY
Marketing efficiency is the degree of market performance.
Marketing efficiency is the ratio of market output to marketing input
(cost of resources).
Marketing Efficiency =
𝑂𝑢𝑡𝑝𝑢𝑡
𝐼𝑛𝑝𝑢𝑡

6. The efficiency of a market structure can be known through the following:
(i) Whether it fullfils the objectives assigned to it or expectations
from the system at minimum possible cost or maximizes the fulfillment of
objectives with given level of resources (or costs)
(ii) Whether it is responsive to impulses generated through
environmental changes and whether impulses are transmitted at all level in the
system.

7. APPROACHES TO ACCESS MARKETING EFFICIENCY
Technical or Physical or Operational efficiency: This aspect of efficiency pertains
to the cost of performing a function. Efficiency is said to have increased when cost
is reduced for performing a function for each unit of output. This is done by
reducing physical losses or through changes in the technology of the function. eg.
Storage, packing, transportation, handling and processing.
Pricing or Allocative efficiency: Pricing efficiency means that the system is able to
allocate products either over time, across space or among the traders, processors and
consumers in such a way that no other allocation would make producers and
consumers better off. This is achieved through pricing of the product at different
stages, at different places, at different times and among different users and hence
called pricing efficiency.

8. ESTIMATION OF MARKETING EFFICIENCY
1)Conventional method:
ME = (Net price received by farmers – Consumer’s price)
Marketing Cost
2)Shepherd’s formula:
ME = Consumer’s price
(MC + Marketing margin)
3)Acharya approach:
ME = Net price received by farmers
(MC + MM)

9. RELATIONSHIP BETWEEN PRICE SPREAD AND MARKETING
EFFICIENCY
Price spread α
1
𝑀𝑎𝑟𝑘𝑒𝑡 𝐸𝑓𝑓𝑖𝑐𝑖𝑒𝑛𝑐𝑦
i.e., Price spread is inversely proportional to the market efficiency.
The farmer should get price spread of more than 50% for proper function
of the market.

10. THANK YOU…