FARMING BUSINESS ECONOMICS AND AGRICULTURAL EXTENSION
AGRICULTURE MARKETING
A market is a place where buyer and sellers meet and exchange goods/ service.
Is a place where forces of demand and supply interest.
Agriculture marketing is the performance of all business activities that are involved in the flow of agriculture goods and services from the point of initial production until they are in the hands of the consumer.
Aim of Efficient Marketing
To deliver goods and services to the consumers at the place and time they are wanted in the form they are wanted and at a price consumers are willing to pay.
MARKET FUNCTIONS
a) Exchange function involves
i. Merchandizing: Is a process of buying and selling goods i.e. purchasing in small lots from producers and bulking up the commodity and presentation of the products/ goods in an attraction manner to the consumers and bargaining for an advantageous price.
ii. Price setting: Usually the sellers set the price at which to sell their products. Marketing conditions i.e supply and demand, pricing policies, competition are considered on setting the price.
b) Supply function involves
i. Processing i.e. changing the products from its raw from to a more easily utilizable form.
ii. Transportation of goods.
iii. Financing and insuring i.e. marketing agencies borrow the necessary capital from public and commercial institutions e.g banks for financing activities of buying and selling.
iv. Collecting and analyzing market information.
v. Grading and standardization.
vi. Storage to prevent wastage of excess products.
c) General function involves
i. Financing, organizing and book keeping. To keep financial accounts of the business, transactions, organizing marketing process, bear the cost of doing all operations in marketing process.
ii. Risk taking, marketing institutions has to insure the goods to minimize the risk.
iii. Collection, provision of marketing news and information (sales promotion) Market and product information enables consumers to make consumption decisions and producers to make production decision.
iv. Grading and description of products so as to satisfy the requirement of different consumer groups.
v. Processing.
Marketing
Channels and agencies
Normally the people who handle goods from producers to consumers i.e. middlemen some buy goods from producers and sell to other middlemen, while others sell to consumers.
PRODUCERS – Whole sale – Retailers – Consumers
Types of middlemen
i. Whole sales: They buy goods in bulk from producer and manufactures; store them for sale in large quantities.
ii. Retailers: Handle goods and sell them to look for (find) consumers.
iii. Jobbers: Buy goods from whole sales and distribute to retailers, normally they travel from one place to other
iv. Brokers: Doesn’t take title to goods just represent the buyers or sellers and brings them together or arrange transactions between them.
v. Cooperatives: Are non-profit organization set up to serve consumers and producers. They operate on the principle of “one person one vote”
vi. Commission agents: People who sell goods and services and receive a commission i.e. % of the selling price.
vii. Manufactures and authorities: These are parastatal organization established by parliamentary acts to deal with production or market of a specific crop or livestock.
CLASSIFICATION OF MARKETS
This is done on the basis of competition and price, these are six classes
1) PURE/ PERFECT COMPETITION
CHARACTERISTICS
They are many sellers and buyers of a particular product.
The sellers and buyers sell/ buy similar products.
All sellers/ buyers have equal knowledge of market condition.
No seller/ buyer can influence the market price.
The demand curve for each buyer/ seller is perfect elastic.
Each seller makes small profit because of strong competition.
The price of products is determined by the forces of supply and demand.
2) MONOPOLY COMPETITION
Monopoly may be formed due to the following reasons:
Protection by the government.
Control of source of raw materials by one firm.
In most cases, the monopolist produces low amount of output in order to keep the prices high.
CHARACTERISTICS
There is a single seller in the market i.e. monopolist.
Monopolist can rise or reduce price depending on the amount of profit and volume of sales in one year.
Produces low amount of output in order to keep prices high.
3) OLIGOPOLY COMPETITION
CHARACTERISTICS
There are several firms selling similar products.
The number of firms is so small that each firm sells a substantial share of the total output.
When one seller changes price, he affects the sale of his competitors to a price and output level after studying the prices and output level of other products
4) MONOPOLISTIC OR IMPERFECT COMPETITION
Sellers lower prices in order to sell more; also they use to attract customers (buyers) by placing labels.
5) MONOPOLY CHARACTERISTICS
There is a single buyer of a particular resource.
Supply curve of the resources is upward sloping i.e. perfectly in elastic.
Monopolist profit by restricting the quantity of resources he uses while paying a price that is lower than the prices that would prevail under conditions of pure competition.
6) BLACK MARKET
Result due to:
Scarcity of the product in question.
Price control by the government.
Rationing of the product.
CHARACTERISTICS
Involve high costs and risks; therefore the price is higher than prices on the open market.
Not all potential buyers are willing to buy on the black market.
NB: Market margins and costs are the costs of performing the marketing functions i.e. difference between what farmers get consumers prices.
CO-OPERATIVES
A cooperative is a voluntary business organization which operates on the principle of one man vote. It aims at minimizing costs and maximizing profit.
TYPES OF CO-OPERATIVES
1) Marketing or producer co-operatives.
2) Consumer co-operatives
3) Saving and credit co-operatives
4) Multi-purpose co-operatives
Function / objectives of co-operatives
To give consumers bargaining power so as to get lower prices of the goods they buy.
To give producers coming together bargaining power so as to get better prices for what they produce.
To give members bargaining power so as to get lower interest rates for the money they borrow.
Benefits farmers can get from co- operatives
Co-operative marketing reduces middlemen profit so that farmers get larger shares of the sale prices.
Improve the bargaining power of farmers for better prices.
Farmers can sell in bulk.
Co-operatives perform storage and processing facilities hence reducing wastage of farmers produce.
Bulk handling of produce facilitates better grading and packaging standards.
Useful in channeling inputs and credits to farmers.
Act as extension agents to the farmers.
Facilitate smooth marketing of the farmers produce.
Types of co-operative societies
Agricultural co-operatives- deals with crop production, purchasing, processing, market nglish-swahili/distribution” target=”_blank”>distribution.
Livestock co-operative societies.
Producer co-operatives for agricultural forestry, bee-keeping and other natural products. Formation and organization of co-operatives
According to the of the cooperative societies act 1991, the structure of co-operative shall be determined by the members.
Levels of marketing co-operatives in Tanzania
1) Primary cooperatives
2) Secondary cooperatives
3) Apex cooperatives
4) The federation of the cooperatives
1) PRIMARY CO-OPERATIVE SOCIETIES
May be formed by ten or more farmers provided its economically viable, has to be registered by the registrar
Functions
Preparation of economic plans of the society and coordination of all production activities.
Purchasing storage and nglish-swahili/distribution” target=”_blank”>distribution of agricultural inputs.
The provision opera1tion and maintenance of machinery for processing of Agricultural products.
Purchasing collection and storage of products from member’s cooperative society.
Establishing large scale farms.
2) SECONDARY CO-OPERATIVE SOCIETIES
Formed when primary co-operative societies unite the society formed is known as a co-operative union.
Functions:
To acquire, maintain and operate buildings and equipment for assembling ware house and transporting of products belonging to members.
To produce and distribute inputs and consumer goods to member primary cooperative societies.
To provide finance for the purchases of agricultural products from its member cooperative societies.
To collect, process, deliver products from primary societies for marketing.
To establish and operate and savings and services to all its members.
To establish, operate and maintain large scale farms for age products.
To provide, audit services for member societies.
3) APEX CO-OPERATIVE SOCIETY
Formed when 2 or more secondary co-operative societies unite.
Functions:
Organizing and coordinating activities of the member secondary societies.
Providing services to the member secondary societies e.g. standardizing their book keeping auditing
Publishing, printing and circulating newspapers, booklets regarding co-operative principles.
Representing member societies in collective bargaining.
Providing consultative services to member societies.
4) THE FEDERATION OF CO-OPERATIVE
Apex societies may join to form a federation of societies.
Functions:
Coordinating economic plans of the member societies then forward them to the minister (for natural plan).
Formulating, maintaining and regulating the terms and conditions of services of persons employed in the apex societies, secondary and other countries.
Encouraging educational and advisory work related to cooperatives enterprises.
Representing member societies in International conference. Structures of Agricultural marketing co-operatives
Farmers in a village are two/; May form primary cooperative society in which can buy their produce, large number of co-operative societies.
Procedures for starting a co-operative
Formed under a co-operative society ordinance.
Each co-operative makes its own by –laws under the rule of co-operative society ordinance. The rules are approved by registrar of cooperatives.
Principles of Co-operatives
1. One member on vote is democratic; each member is entitled to one vote in each decision taken by the society.
2. At general meetings, members elect a committee for the following functions:
To elect one of its members to be a chairperson.
To elect secretary.
To elect treasurer
Employ and dismiss employees of co-operative.
Oversee day to day business
3. Each co-operative society admits members without discrimination.
4. Each co-operative society aims at selling goods in pure and clear form.
5. Each co-operative society aims at selling goods at current price.
6. The surplus is distributed to members on the volume of business transactions done with the co- operatives.