AGRICULTURAL AND FOOD MARKETS, PRODUCTION, AND MARKETING

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AGRICULTURAL AND FOOD MARKETS, PRODUCTION, AND
MARKETING

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

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Functions in Agricultural Marketsone way to
analyze

• Selling
• Storage
• Transportation
• Processing

• Facilitating
• Standardization
• Financing
• Risk bearing
• Market Intelligence

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Selling to

• Processors
• For final products (e.g., flour)
• For manufacturing of ingredients
• Intermediaries
• Wholesalers
• Retailers
• Customers
• Consumers
• Institutions

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Storage

• Storage
• Seasonal
• Timing of production vs. cost of storage
• Feasibility of timing market (turkeys vs. wheat)
• Queuing

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Transportation

• Cost vs. speed
• Perishability
• Value of freshness to customers
• Ability to predict demand
• Need for bulk reduction (see processing)

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Processing

• Treatment of product (e.g., wheat to flour)
• Reduction of bulk (oranges to concentratenot
  orange juice yet)
• Creation of labor saving food products (e.g.,
  frozen pizza)

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Facilitating

• Farmers agents
• Matching demand and supply
• Other information searche.g., demand forecast
• Negotiations
• Logistics handling

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Standardization

• Agricultural grades and labeling
• Food branding

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Financing

• Long term lending
• Farm mortgages
• Equipment loans
• Short term lending
• Advances against harvests
• Financing of store and processor inventory
• Futures contracts

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Risk Bearing

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

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Market Intelligence

• Market research
• Forecasting
• Demand
• For existing products
• Spread of new products
• Supply

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Institutions

• Marketing middle people
• Merchant
• Retailer
• Wholesaler
• Agent
• Brokers
• Commission
• Speculative
• Processors/manufacturers
• Facilitative organizations

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Behavioral Systems

• Input-output
• Different parties provide goods and services
  moving toward final products
• Communications
• Matching supply and demand
• Adaptation to outside changese.g.,
• Consumer tastes
• World supply

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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

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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
  efficiencyintermediate functions may add value
• Types of efficiency
• Operational
• Pricing

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Agricultural Production and Marketing

• Structure of U.S. agriculture
• Dominated by small, family farms

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Agricultural Production and Marketing

• Structure of U.S. agriculture
• Dominated by small, family farms
• Product characteristics
• Raw material
• Bulkiness and perishability
• Quality variation
• Production characteristics
• Total product
• Annual variability
• Seasonality

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Agricultural Production and Marketing

• Product characteristics
• Raw material

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Agricultural Production and Marketing

• Product characteristics
• Quality variation

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Agricultural Production and Marketing

• Product characteristics
• Bulkiness and perishability

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Production characteristics

• Total product
• Increase due to productivity

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Production characteristics

• Total product
• Increase due to productivity
• Annual variability
• Seasonality
• Geographic concentration
• Varying production costs
• Farm supply industry (derived demand)

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Production characteristics

• Annual variability

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Production characteristics

• Seasonality

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Production characteristics

• Geographic concentration

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Production characteristics

• Varying production costs

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Production characteristics

• Farm supply industry (derived demand)

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Marketing Problems

• Lack of control over
• Own output
• Market supply

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Marketing Problems

• Lag in results of adjustment efforts

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Marketing Problems

• Decision of whether to engage in marketing
  efforts
• Free rider problem

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Marketing Problems

• Superior bargaining power of large buyers

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Marketing Problems

• Cost squeeze

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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