AGRICULTURAL AND FOOD

MARKETS, PRODUCTION, AND

MARKETING

Market functions,
institutions, and
behaviors
Food marketing
issues
Characteristics of
markets
Trends in
agricultural markets

AGRICULTURAL
PRODUCTS

FOOD

FINAL

TEXTILE

INGREDIENT

PAPER

FEEDING

ENERGY

PACKAGING

TEXT

Functions in Agricultural
Marketsone way to analyze

Selling
Storage
Transportation
Processing

Facilitating
Standardization
Financing
Risk bearing
Market
Intelligence

Selling to

Processors

Intermediaries

For final products (e.g., flour)

For manufacturing of ingredients
Wholesalers
Retailers

Customers

Consumers
Institutions

Storage

Storage

Seasonal

Timing of
production vs. cost
of storage
Feasibility of timing
market

Queuing (lining)

Transportation

Cost vs. speed

Perish (expire) ability

Value of freshness to
customers
Ability to predict
demand

Processing

Treatment of
product (e.g.,
wheat to flour)
Creation of labor
saving food
products (e.g.,
frozen pizza)

Facilitating

Farmers agents

Matching demand and supply

Other information searche.g.,
demand forecast
Negotiations

Logistics handling

Standardization

Agricultural
grades and
labeling
Food branding

Financing

Long term lending

Short term lending

Farm mortgages
(money lending with
deposit)
Equipment loans
Advances against
harvests
Financing of store and
processor inventory

Futures contracts

Risk Bearing

Futures contracts
Investments in
new food products
(most will fail)
Evaluation of
credit worthiness
of farmers and
other parties

Market Intelligence

Market research
Forecasting

Demand

For existing
products
Spread of new
products

Supply

Institutions

Marketing middle people

Merchant

Retailer
Wholesaler

Agent

Brokers
Commission
Processors/manufacturers
Facilitative organizations

Behavioral Systems

Input-output

Communications

Different parties provide goods and

services moving toward final products
Matching supply and demand

Adaptation to outside changese.g.,

Consumer tastes
World supply

Agricultural Production
and Productivity

Total production
continue to increase,
Productivity is
increasing
(output/input), we
are using almost the
same level of inputs
if not less

Food Marketing Efficiency

Getting final products to consumers

at lowest cost for given services
Lower spread between farm costs and
retail food costs does not necessarily
mean greater efficiency
intermediate functions may add value
Types of efficiency

Operational
Pricing

Agricultural Production
and Marketing

Structure of U.S.
agriculture

Dominated by small,
family farms

Agricultural Production
and Marketing

Structure of U.S. agriculture

Product characteristics

Dominated by small, family farms

Raw material
Bulkiness and perishability
Quality variation

Production characteristics

Total product
Annual variability
Seasonality

Agricultural Production
and Marketing

Product
characteristics

Raw material

Agricultural Production
and Marketing

Product
characteristics

Quality variation

Agricultural Production
and Marketing

Product
characteristics

Bulkiness (size) and

perishability

Production characteristics

Total product

Increase due to
productivity

Production characteristics

Total product

Increase due to productivity

Annual variability
Seasonality
Geographic concentration
Varying production costs
Farm supply industry (derived demand)

Production characteristics

Annual variability

Production characteristics

Seasonality

Production characteristics

Geographic
concentration

Production characteristics

Varying
production costs

Production characteristics

Farm supply
industry (derived
demand)

Marketing Problems

Lack of control over

Own output
Market supply

Marketing Problems

Lag (poor) in results

of adjustment efforts

Marketing Problems

Decision of whether
to engage in
marketing efforts

Free rider problem

Marketing Problems

Superior bargaining
power of large
buyers

Marketing Problems

Cost squeeze (grip)

Some Trends

Differentiated products
Specialty/nice products
Interdependence of
manufacturers and
suppliers
High price risk
Science and innovation
Closed information
systems

Private and proprietary

research
Resource and
environmental
conservation
Managerial and
interpersonal skills
Industrialization
Global competition
Farm incomes moving
toward incomes of
other sectors