Marketing of Agricultural Produce

Marketing of agricultural produce or "agricultural marketing involves many functions like assembling of farm produce, grading, storage, processing, preparation for market , transportation to market centres, financing, risk-bearing, and distribution to ultimate consumers through various market channels. All these functions need specialised skills, and therefore they can not be handled by the producer or the ultimate consumer by themselves. Therefore, different agencies and institutions have come up to perform these functions. For the smooth conduct of market operations, these agencies must interact with the needs of each other. Any disturbance in any of the functions creates problems in the smooth flow of agricultural commodities to the consumers”.

Proper marketing of the farmer's produce ensuress fair prices for his produce. This, in turn, encourages him to produce more for the market. The wants of the urban sector are better satisfied and the process of industrialization gets a boost. As a result, the income of the farmer increases, and that results in his increased demand for industrial products. Therefore, the need for a proper marketing system for the speedy economic development of the country is a 'sinequa-non'.

Government efforts

Agricultural marketing remained unsatisfactory upto the middle of twentieth century. Farmers were poor and illiterate, markets were against the interests of farmers, and intermediaries and middlemen between the farmer and final consumer were too many and too large margin went to them. Although the government has been vigilant to improve the marketing conditions, ever since the introduction of the First Five Year Plan, the steps taken have not been entirely satisfactory, and had defects that slowed the progress and development of agricultural conditions.

 The government's main thrust during the sixth and seventh plans periods has been on:

• Further expansion of regulated markets in terms of more markets and more commodities

• Strengthening and streamlining of inspections to ensure a regulated system of open auction trading practices, etc; and

• Development of rural markets in areas where such facilities are not available

The government introduced many schemes and taken several measures to combat the challenges that had been posed by the defects of agricultural marketing in India. Some of the measures taken were:

• In the first place, the government has marketing surveys of various categories of agricultural produce, and made suggestions to remove the defects noticed during the surveys;

• Another measures taken by the government is the grading and standardisation of agricultural goods under the Agricultural Produce (Grading and Marketing) Act. The Scope of regulated markets has been widened. At present over 75 per cent of agricul grades are stamped with the seal of the agricultural marketing department - AGMARK. Rural produce falls within the coverage of regulated markets. This reduced malpractice in Mandis. Central Warehousing Corporation was set up in 1957. The states also followed suit. At the regional and national levels, additional storage capacity is being created by SWCs, CWCs, and the Food Corporation of India. Corporate interests in agribusiness are shown in following table.

Structure of agricultural marketing

1. Markets at Local Level

Where farmers (who produce in small quantity and are economically weak) can conveniently sell (to purchasers), often to middlemen. The middlemen then sell it to district or central market. These are called 'grower's markets' or 'primary markets'.

2. District Level Markets

Where huge quantities of agricultural commodities are assembled from local markets. After processing, these are transported to the central/regional markets or sold to consumer markets.

3. Central/Regional Markets

Where facilities of processing, storage and grading are available: markets . From here the produce is transported for marketing in different parts of the country These markets are professional in nature. Buyers of different states and countries visit these or abroad.

4. Sea-Board Markets

Established at seaports, where exporters purchase turm products brought from local or regional markets. They have the needed facilities of processing and packaging; arrange shipment of these products to other countries. Facilities for importing agricultural goods are also available here.

5. Wholesale Markets

Farm products are often purchased in bulk and storage, to be sold to retailers at an opportune time (at higher profits). The operating scale of these markets is smaller than that of the central markets.

6. Retail Markets

Including small distribution centers or shops in different areas of cities, towns and villages, where agricultural produce is sold to consumers who purchase in small qualities any time they need it. Generally, retail-selling prices are slightly higher than the wholesale prices, because the retailer would earn some profit for the services rendered

Environment for Agricultural Marketing

Agricultural marketing is affected by various environmental factors. These factors may broadly be classified as micro-environmental and macro-environmental factors.

The micro-environment consists of the various constituents which take up different functions of marketing. They include

1)   The buyer and his characteristics

2)   Market intermediaries

3)   Facilitating agencies

4)   Government agencies

5)   Ultimate consumers.

Macro-environmental factors are classified as

1)   economic factors

2)   socio-cultural factors

3)   politico legal factors

4)   technological factors

5)   climatic factors 

Cost of agricultural inputs, price behavior of agricultural products, economic position of producers, availability of credit facilities, export opportunities, fiscal policies etc. have considerable impact on agricultural marketing. Educational levels, marketing intelligence, producer’s perceptions regarding farming, agricultural resources etc. are some of the socio-cultural factors that influence agricultural marketing. Technological innovations, use of high yielding varieties of seeds, pesticides, agricultural inputs, water management scientific use of fertilizers etc. factors directly and indirectly influence the productions and distributions of agricultural produces. Importantly, chain of cold storage may improve the marketing of perishables like vegetables, milk, fruits, milk-products etc. Marketing information can be effectively disseminated through modern devices of communication technology. Government intervention in terms of policy, regulation, financing marketing and extension services plays a vital role in supporting agricultural programmes through various services like financing, educating, training and providing technical services to the people. Climatic factors like excessive rains, bad weather, drought, floods and other natural calamities influence agricultural marketing

Regulated agricultural markets in India

Regulated markets constitute a widely accepted system of organizing the marketing of agricultural produced. It is a form of intervention by the state. The existing system of regulated markets in India evolved in large part from pre-colonial settlement systems based on extraction of surplus from agricultural economy through the controls exercised by market intermediaries and administration. The concern of decision makers was to expand the output in a few specialized lines of primary production for export. They established Regulated Markets to provide a mechanism for transferring the agricultural surplus, for example cotton, and needed for British Industry.

In the post 1947 period the progress of regulation and market development depended on state governments. The number of markets in the country increased from 450 in 1955-56 to in 2002. Though the number of markets in the country increased, the systematic development of market has not been attempted. There seems to be no focus in the direction of market development. The 80s and 90s were recognized as the decade when agricultural markets needed most attention due to structural changes in the Indian economy (liberalization). Thus, the regulated system was sought to be expanded because it was expected to:

1)   lead to the creation of new marketing centres;

2)   eliminate the non-functional marketing margins through policing of trade

3)   make the structure more competitive;

4)  to improve agricultural productivity through improved physical infrastructure in the market yards

However, several arguments, by noted economists, have been given, both in favour of and against regulated agricultural markets. These could be debated merely for the sake of academic debate. Urs (2002) has examined several of them. It is also said that the regulated markets are largely inadequate. And, that following are simply myths, rather than reality. Some of the myths are:

1) Regulated markets are efficient and establishment of markets will enable the farmers to reap certain economic advantages;

2) Physical infrastructure (development) in the panacea to all marketing problems

3) Farmers are not rational and they do not response to the economic stimuli and particularly to the marketing institutions

4) Producers are ignorant of their own interests and of the marketing opportunities open to them and they can not be relied upon to sell their produce as advantageously as possible

5) The subsistence farmers do not have much marketable surplus and they do not participate in market transactions;

6) There are a large number of market intermediaries and because of this overcrowding the resulting situation is a competitive market (Urs, 2002).

  Whatever the reality be, an examination of the enumerated policy measures followed in India suggest that three broad areas have been outlined to cover market development. Three sets of interdependent policies and programmes followed in the country include:

1) Set of policies and programmes aimed at marketing system improvement;

2) Agricultural pricing policies aimed at influencing the level and fluctuations in prices received by the farmers and those paid by the consumers; and

3) Policies concerning regulation of foreign trade (Urs, 2002).

Features of regulated markets

Government has taken the following steps to improve the functioning of agricultural markets:

1) Price stabilization for agricultural products through fixing the statutory prices of agricultural produces and commodities.

2) Elected market committee is constituted to administer these markets. It consists of representatives from all interests like farmers, producers, commission agents, wholesalers and some government nominees.

3) All functionaries in the market have to obtain a licence from the market committee to operate.

4) Market committee fixes the charges to be collected for the services rendered by the functionaries in the markets. Arbitration committee deals with any violation of market operator.

5) Sale proceeds have to be paid to farmers- producers on the day of the sale itself.

6) No secret deals is allowed. Sales have to be conducted transparently, generally by open auction.

7) Market charges incurred in effecting sales have to be borne either by the sellers or buyers or shared between them.

8) Market intelligence has been strengthened license functionaries are required to submit complete details of all transactions taking place every day. The information regarding arrivals , sales, stocks and price of different commodities are published on notice boards every day. This information is further disseminated to hinterland villages of the market which help farmers judge the best time to go to the market.

9) Facilities like rest-houses, canteen, drinking water, cattle-shed, etc. are provided in regulated markets for the benefits of farmers and cattle.

10) Facilities for grading and standardization of the produce brought for sale by the farmer producers are provided.

11) Size of packs for various commodities are stipulated by the market committees

12) Central and state warehousing corporations are expected to establish godowns near the market for the benefit of farmers-producers.

Realistic situations

1) Regulated markets appear to be the faulty approach to the every concept of market regulation. As assumed that a regulated market is a facilitative and service oriented organization to ensure rataionalising trade practices and produces for an orderly marketing of agricultural produces but the charges related to the services rendered reveal that regulated market are not service oriented but made emphasis is on fee collection.

2) The market committee is not a representative body of various interests associated with the producers of agricultural marketing. There is heterogeneity in the composition and constitution of market committee. The numerical strength of the market committee various from 9 in Himachal Pradesh, 1020 in Madhya Pradesh. Thus, the composition of market committee is faulty one.

3) Regulated markets today have converted into full-fledged branches of marketing board. They lack functional autonomy.

4) The lack of continuity in administration affects, the smooth functioning of markets. The tenure of markets secretaries in many states reveals a gloomy picture. The average tenure has been reported to be two years against a standard period of three years.

5) In effective implementation of regulatory reforms is another services concern for policy imperative. Most of the regulated markets have not established grading units. Even the machines established so far are not in use, due to apathetic attitude of traders, mis-apprehensions among the produce-sellers about the utility of these machines, and poor maintenance an upkeep of these machines, rendering them unserviceable.

6) Most of the markets have not made arrangements to display the prices of notified commodities on notice boards. The state of market intelligence seems to be particularly disappointing in states like Bihar and U.P.

7) Various systems of sales are in vogue in regulated markets. The systems of sale prevalent at present are: (i) open auction; (ii) mutual agreement between buyer and seller; (iii) sale under cover; (iv) chit tender system; (v) forward sales etc. Hence the regulated markets can no longer afford to overlook the proper implementation of open auction system of sale.

8) In certain markets, the payments were reported to have been made three months after the actual sale. In some cases the payment is made to the sellers on the spot but in actual practice, such payments materialize much later.

Thus, regulated market needs to shift in emphasis, change in composition of market committee, giving them functional autonomy extending facilities for grading at producer's level and broadening marketing intelligence activities, etc.

Natural Rubber

Rubber is a versatile raw material used in the manufacture of a wide range of products. Natural rubber has changed the course of the industrial sector. The rubber tree also provides some byproducts like rubber wood, honey and rubber seed oil. The crop provides livelihood to about a million families. Natural rubber is eco-friendly. It is a long gestation crop that takes about seven years to come into the yielding stage. India occupies third position in production, fourth in consumption, and first in terms of productivity of natural rubber. The productivity in India is high at 1576 kg. a hectare. India's rubber is essentially consumed in the domestic market, the bulk of it being consumed by tyre manufacturers.

In India, bulk of the produce is sheet rubber. The quality of Indian block rubber is also not good. The average life of a rubber tree is 30 to 40 years. Efforts are being made to reduce the cost of tapping by improve land and labour productivity. About 90 per cent of the natural rubber is produced by small holdings with an average area of 0.5 hectare or less.

Indian rubber plantation industry was export oriented until the late 1930's. Thereafter, owing to the expansion of rubber goods manufacturing industry in the country, domestic consumption of natural rubber increased rapidly to the extent of out-skipping the production and making the country a net importer since 1947. The continued low price of rubber for the last 5 years has caused socio-economic problems in this sector. The small growers have started migrating their rubber plantations and the rate of expansion of area under rubber has also declined. As a result of the general economic slowdown in India, the growth in consumption of natural rubber in the country has decreased substantially. The infrastructure available for marketing of rubber is inadequate and needs strengthening. Rubber is vulnerable to degradation during storage because of excess humidity and therefore, the facilities for humidity controlled warehousing has to be provided. Similarly, information on trends in market, product diversification etc. is also to be generated taking into consideration the requirements of industries in various countries to ensure an efficient marketing system.

Poultry

India is the fourth largest egg producer in the world. The industry employment to over two million people and contributes Rs. 120 billion to GDP. Poultry meat can create employment for about 25000 people. The top egg producing states in India are Andhra Pradesh, Tamil Nadu, Maharashtra, Punjab and Haryana. In the case of broiler production, Andhra Pradesh, Maharshtra, Punjab, West Bengal and Karnataka are the leaders. The per capita consumption of egg increased from 18-19 in 1982 to about 38 by 2002. The desirable level of consumption is at least 180 eggs per prson per year. However, in recent years, egg production has grown by 5 to 6 per cent per annum. The annual export of hatching eggs has been fluctuating between 60 million and 85 million. It may be around 62 million pieces now. It is estimated that India can earn foreign exchange worth of Rs. 2 billion a year within the next five years from poultry export. In 1998, India exported 106 million eggs while in 2000 total export of table eggs stood Indian poultry at 185 million.

Indian poultry industry faces problems of drought low, agricultural productivity, resulting in low poultry feed, dumpling of poultry products and low prices of eggs and poultry products.

Tea

India is the largest producer and consumer of tea. The industry is currently facing difficulties because of falling prices in the world market. The export of tea has showed down while consumption of tea in the country has dropped. The major tea producing countries are India (29.82 per cent), China (22.57 per cent), Sri Lanka (10.21 per cent), Kenya (8.12 per cent), Indonesia (4.41 per cent), Turkey (4.05 per cent), and Japan (3.36 per cent). In 2002, India produced 1035 million kg. of tea and consumed 815 million kg. The market for tea is expected to grow at 3 per cent per annum till 2005. The production is expected to go up to 3.1 billion kg. by 2005. The consumption is also expected to increase by 3 per cent per annum till 2005. During 2002, India exported 294.6 million kg. worth of Rs. 25574.2 million.

         In India, tea is grown in 15 states. Among these the largest producers are Assam (50.7 per cent), West Bengal (22.1 per cent), Tamil Nadu (15.9 per cent) and Kerala (8.3 per cent). Besides the traditional small tea segment in South India, in the recent past a large number of small farmers in Assam, North Bengal and Bihar have switched over to tea. There are more than 1.10 lakh holdings accounting for 18 percent of the all India tea production. However, the cost of production is high in India compared to other competitors. Moreover, declining exports and increasing production place tremendous pressure on prices leading to continued loss in profitability, loss in foreign exchange earnings.