Agriculture Commodity Trading - PowerPoint PPT Presentation

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Agriculture Commodity Trading

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Agriculture Commodity Trading Understanding Trade Flows The Profit Imperative Choosing the Location Transaction Cost Budget Risks Price Determination – PowerPoint PPT presentation

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Title: Agriculture Commodity Trading


1
Agriculture Commodity Trading
  • Understanding Trade Flows
  • The Profit Imperative
  • Choosing the Location
  • Transaction Cost Budget
  • Risks
  • Price Determination
  • Buying Decision Farmer or Trader ?
  • The Other End Commodity Marketing

2
Understanding Trade Flows
  • Demand and Supply
  • Producing and Consuming Months
  • Business Environment of Producing and Consuming
    Areas
  • Organizational Fit in the Environment

3
Understanding demand
  • What products the consumer buy, in what volume
    and price range
  • What characteristics must the product have
    (composition, quality, packaging)?
  • What transport and distribution system will
    deliver the product in the form, cost range, and
    time frame required?
  • What processing technology is required to meet
    these standards?

4
Understanding the supply
  • What supplies are needed to serve this market
    (volume, quality, price)?
  • What methods of procurement are required to meet
    these supply requirement?

5
External Environment Demand of commodity
  • Consumer Analysis
  • - Market Segmentation
  • - Consumer Needs
  • - Purchasing process
  • - Market research
  • Analysis of Competition
  • - Market Structure
  • - Basis of Competition
  • - Institutional Constraints

6
Internal Environment Marketing and Buying
  • Internal Environment - Marketing Plan
  • - Pricing
  • - Distribution
  • - Promotion
  • Internal Environment Buying
  • - Quantity
  • - Quality
  • - Cost
  • - Time
  • - Method
  • External Environment supply of commodity
  • l

7
External environment - supply
  • What is commodity production in the area?
  • - Area under crop (A)
  • - Yield of the crop (Y)
  • Gross production (P) AY
  • What is net availability (NP) P K
  • Where K includes
  • - on farm consumption
  • - fresh consumption
  • - competitors purchases
  • - post harvest losses

8
External environment - supply
  • If demand is more than net availability?
  • Alternative strategies?
  • - Increase the area under crop
  • - Increase the yield of the crop

9
External environment - supply
  • How to increase the area under the crop?
  • Alternative strategies
  • - substitution effect within crops
  • - possibility of expansion of arable land
  • Instruments
  • - Higher price of the crop to make the crop
    more remunerative than other crops
  • - Availability of economic resources

10
External environment - supply
  • How to increase the yield?
  • - We have to understand the reason for current
    low yield
  • - Present use of agro-chemical input
  • - Barriers to increase the use of agro-chemical
    inputs?
  • - Limited channels for distribution of inputs
  • - Lack of financing institutions
  • - Lack of knowledge

11
External environment - supply
  • What was the total production pattern?
  • - Production levels in the past?
  • - Degree of Variability?
  • - Causes of Variability?
  • What is the usage pattern of the area planted?
  • - Variation in area?
  • - Area economically arable but uncultivated?
  • - Productivity of new land?
  • - Extent and feasibility of crop shifting?

12
External environment - supply
  • What is the yield?
  • - Variability in yield?
  • - Causes?
  • - Extent of usage of agrochemicals and improved
    seed?
  • - Barriers to increased usage of inputs?
  • How profitable is the crop?
  • - Profitability relative to alternative crops?
  • - Cost structure relative to alternative crops?
  • - Perceived risk?

13
External environment - supply
  • Is there competition in trading among similar
    companies?
  • - Number of competitors?
  • - Size of their needs?
  • - Their procurement methods?
  • What are the probable crop losses?
  • - From rodents, insects, handling, storage?
  • - Measures to reduce losses?
  • - Adequacy of on and off-farm services and
    storage facilities?

14
External environment - supply
  • How does handling and transport affect quality?
  • - Personnel adequately trained?
  • - Availability and quality of transport?
  • - Quality loss due to delayed transport?
  • How does storage affect quality?
  • - Type of facilities available and required?
  • - Quality of facilities?
  • - Nutritional deterioration?

15
External environment - supply
  • What is the seasonable harvesting pattern?
  • - Period of harvest?
  • - Effect of seed on timing?
  • - Effect of planting on timing?
  • - Costs and benefits of changing the
    harvesting pattern?
  • What facilities are required by the seasonal
    pattern?
  • - Storage capacity for peak inventory?

16
External environment - supply
  • When and for how long will the supply be
    available?
  • - Agronomic testing period?
  • - Planting to harvest period?
  • - Farmer financing during start-up period?
  • - Pattern of life-cycle yield of perennial
    crops?

17
External environment - supply
  • How do logistical services affect commodity
    costs?
  • - Existing transport charges?
  • - Contribution of transport to prices?
  • How does governmental involvement affect
    commodity costs?
  • - Price supports?
  • - Import or service subsidies?
  • Should spot prices be used?
  • - Prevailing spot prices?
  • - Variability during and across years?
  • - Competitors buying practices?

18
External environment - supply
  • What are the number, size and location of the
    operators in the structure of the existing
    system?
  • - Number of producers, transporters, and
    buyers?
  • - Implications for organization and control of
    the system?
  • - Percentage of crop handled by each?
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