Marketing of Agricultural Produce: Overview

Agricultural marketing comprises all the activities involved in the supply of farm inputs and output – including all those operations which are related to the procurement, collecting, grading, storing, food and agro-processing, transportation, financing and selling of the agricultural produce.  In effect, marketing includes all overarching aspects of agribusiness, while it excludes the core activity of cultivation.

The agricultural marketing  system  also  relates  to economic  growth  of  the  agriculture sector  and ensuring safe and affordable food  to consumers, both of which are directly linked  to the food security of the country.

Objectives of Efficient Agri-Marketing

As per the report of the National Commission of Agriculture (1976), the objectives of an efficient agri-marketing system, are :

• To enable the farmers as primary producers to reap the best possible benefits;
• To provide facilities for lifting all the produce the farmers are willing to sell, at a price incentive;
• To reduce the price spread between the primary producer and ultimate consumer; and
• To make available all products of farm origin to consumers at reasonable price without impairing the quality of the produce.

A new addition to the objectives of agricultural marketing, is to contribute to the doubling the farmers’ income by 2022-23.

Advantages of good Marketing System

A good marketing system helps in the following ways:

• Monetising the Produce: It helps the farmers to get the due value of their produce.
• Demand Signal Platform: Marketing systems balances the demand with supply. The bridge in the form of agri-logistics, function to execute this purpose.
• Market growth: India’s agriculture is transitioning from a state of deficit towards a status of surpluses. Agri-logistics technologies have also modernised to allow farm produce to connect with demand further afield. An aware and competitive marketing system, will adjust itself to suit this transformation of Agriculture in India. Further this can open up new market avenues. The opening up of the markets to promote competition and long term growth as a desired outcome.
• Capital formation and investment in technology: Marketing leads to investment in Modern Supply Chain infrastructure and Information and Technology applications to increase the Produce or enhance the value of Produce.

Effective Marketing System and Its advantages

Marketing  effectiveness  in a  measure  of  expanding the  market  system  to  generate larger revenue  streams and  competitiveness.  Market  channel efficiency  depends  on  reduction  of marketing cost,  adoption of technology  in grading, packaging,  transportation, storage,  value addition, wholesaling, retailing and exploring economies of scale through aggregation. An effective Marketing system provides farmers their due share in the Production process and ensures timely delivery of goods and services.

The effectiveness of an agricultural marketing system varies depending on the situation of the target  regions, consumer,  product and  technologies in hand.

The various advantages of Effective Marketing System are-

• Gives demand signals to supply side –An Effective Marketing System uses Market Intelligence in order to predict the demand. An effective marketing system  will strive  to minimise the  blind push  into markets  and instead promote a pull mode from markets.
• Increase in revenue generation –  A well organised  marketing system will  increase the sum  total  of  revenue  generated  in  the agricultural  value  chain    An  effective marketing system will also aim to persuade that there is more equitable sharing of  the net revenue generated, among all the stakeholders in the value chain system.
• Help in Market expansion – The effective marketing system will always promote the expanding of the market range of the producer/supplier  and provide  a choice  of purchase  for the  Market expansion also boosts vibrancy in domestic agricultural trade.
• Unified market –  a  well   organised  domestic   marketing  system  will   integrate  by developing extensive connectivity across a network of demand centres and supply regions, creating uniformity in  the market arena.
• Increased competitiveness  –  Competitiveness also leads  to improved  resource  optimisation and  brings  about cost  efficient

Government  Policy instruments in Agricultural Marketing

India’s main policy goals remained with focus to attain food self-sufficiency, to ensure remunerative prices to farmers, and to maintain stable prices  for consumers.  To meet these goals, India continues to rely on following policy instruments:

Regulation of markets

The Agricultural Produce Market Committee (APMC) Act requires that farm produce be sold only at regulated markets through registered intermediaries. The Essential Commodities Act (ECA), allows central and state governments to place restrictions on the storage and movement of commodities deemed essential by governments. {APMC Act and recently proposed APLM Act have been discussed in this module}

Input subsidies

Concerns on food insecurity, necessitated provision of  subsidies on  fertilizer,  electricity, fuel  and  irrigation. Intensive farming and production growth were motivators for policy interventions.

Minimum support prices

Government of India (GoI) supports  producers by  announcing  minimum prices  for certain commodities considered  key to its  agriculture. The MSP are set on recommendations of the Commission for Agricultural Costs and Prices (CACP), based on cost of production and other factors. There are other associated schemes such  as  the  Price  Stabilisation  Scheme  and  Market Intervention Scheme that also come into play as minimum support systems for farmers.

Food subsidies

India has enacted the National Food Security Act 2013, to  protect and  assure low  income consumers of access to affordable food.

Various Platforms for Marketing of Agricultural Produce

Agriculture is a state subject and various states have enacted their laws based on Model APMC Act 2003 and Model Rules 2007. These make Mandis or APMCs as main platform for farmers to sell their produce. Apart from that, there are some alternative marketing platforms also that can be utilised by farmers to sell their produce. These are as follows:

Direct Marketing

In direct marketing, the farmers directly sell with the produce consumers. These operate in two basic formats:

• Farmers’ Markets, and
• Direct sourcing from farmer’s field by processors (primary consumers).

These markets have helped in mitigating the problems of fragmented supply chain.  Along with it, the quick movement of produce from farmer to consumer saves losses considerably. In these markets no market fee is charged but service charges are collected from sellers. About 488 such farmers’ markets are operating across different States in the name of Apnamandis in Punjab, Haryana,  Rythu bazaars in Andhra Pradesh and Telangana, Uzhavar Sandhai in Tamil Nadu, Shetkari Bazaars in Maharashtra and Raitha Santhe in Karnataka.

Direct marketing allows farmers to  skip  multiple  layers  in  their  transactions  and  benefits  by  skipping  of intermediary margins. Though recommended in the Model APMC  Act & Rules, very  few of States have issued such licenses for direct sourcing.

Contract farming

Contract farming can address lack of market connectivity, long chain of market intermediaries,  ignorance about the buyer demands, etc. Contract farming has  a constraint from  farmers’ perspective, in  that they are limited  in their production to the direct demand and their growth is linked to the contractor’s capacity to grow the market share.  Though  contract farming is not an entire solution for problems  in agricultural marketing, it can  very well be leveraged in certain  regions and for specific crops for increasing farmers’ income. {We have discussed this in current module}

Private wholesale markets

These have not yet developed in India and states need to liberalise the marketing regulations to promote development of private markets.

Organised retailing

Organised retailing on the lines of SAFAL (the fruit & vegetable marketing  subsidiary   of  Mother   Dairy) which   is   an   example  of indigenously organised retailing network. SAFAL operates in Delhi out of approximately 400 retail outlets, and sells about 350 tonnes of fresh produce daily in Delhi-NCR markets.

Farmer Producer Organisations (FPOs)

Organising producers into formal management practices help to take collective decisions on  cultivation to make  the best use  of market intelligence,  as well creates opportunities for producers to get involved in value adding decisions and activities such  as input  supply, credit,  pre-conditioning,  processing, marketing  and  distribution. The aggregation  of  farmer  into  FPOs  (cooperatives/SHGs/FIGs/Producer  company),  helps  their integration into the supply chain.

Cooperatives in agricultural marketing

Cooperatives are organised to aggregate farmers for establishing scale in their production and marketing activities, besides easing access to credit and other services. Notable example is in the dairy sector – AMUL.

Major Challenges to Agriculture Marketing

A report of the “Committee of State Ministers, in charge of Agriculture Marketing to Promote Reforms” was published in January, 2013. This Committee highlighted that agricultural marketing is posed challenges due to fragmented supply chain with inadequate marketing infrastructure, long intermediation and lack of accurate and timely market information/intelligence system. Various challenges to agricultural marketing are as follows:

Market Licensing barriers

The compulsory requirement   of owning a shop/godown for licensing of commission agents/traders in the regulated markets has led to the monopoly of the licensed traders and  it has proved as a barrier for new entries.

Market Infrastructure  in  Agricultural  Markets is very poor

Lack of Covered and open auction platforms, common  drying yards, Electronic weigh-bridges poses serious challenges. Cold storage units also very scarce. High  Incidence of  Market Charges:  APMCs  are authorized  to collect  market  fee ranging between  0.50  to 2.0  percent  of the  sale  value of  the produce. But  In some States, total charges are about 15 per cent which is excessive.

Less farmers’ price realisation

The share of farmer in consumer’s price  is very low particularly in perishables due to a number of intermediaries, lack of infrastructure and poor holding capacity.

Huge Number  of marketing  channels with  long  supply chain

Traditionally, the normal agricultural marketing chain in the country is fairly long with a large number of intermediaries between the producers  and the  consumers,  adding up  more  of costs without adding significant value.

High marketing cost affects small and marginal farmers

Lack of grading and standardization

Different varieties of agricultural produce are not graded properly. The practice usually prevalent is the one known as “dara” sales wherein heap of all qualities of produce are sold in one common lot thus the farmer producing better qualities is not assured of a better price. Hence there is no incentive to use better seeds and produce better varieties.

Inadequate transport facilities

Very few villages are joined by railways and pucca roads to mandies. Produce has to be carried on slow moving transport vehicles like bullock carts. Obviously such means of transport cannot be used to carry produce to far-off places and the farmer has to dump his produce in nearby markets even if the price obtained in these markets is considerably low. Situation is even worse with Perishable items.

Further, the high wastages in supply chain, long gestation period of   infrastructure  projects   and  seasonality   of  agri. Produce and lack of national integrated market are other challenges you may cite in your answers.