Preface

The term agricultural marketing is composed of two words

-agriculture and marketing. Agriculture, in the broadest sense
means activities aimed at the use of natural resources for human
welfare, and marketing connotes a series of activities involved in
moving the goods from the point of production to the point of
consumption. Specification, the subject of agricultural marketing
includes marketing functions, agencies, channels, efficiency and
cost, price spread and market integration, producers surplus etc.
The agricultural marketing system is a link between the farm and
the non-farm sectors.

In India Agriculture was practiced formerly on a subsistence

basis; the villages were self sufficient, people exchanged their
goods, and services within the village on a barter basis. With the
development of means of transport and storage facilities,
agriculture has become commercial in character, the farmer
grows those crops that fetch a better price. Marketing of
agricultural produce is considered as an integral part of
agriculture, since an agriculturist is encouraged to make more
investment and to increase production. Thus there is an
increasing awareness that it is not enough to produce a crop or
animal product; it must be marketed as well.

Agricultural marketing involves in its simplest form the buying

and selling of agricultural produce. This definition of agricultural
marketing may be accepted in olden days, when the village
economy was more or less self-sufficient, when the marketing of
agricultural produce presented no difficulty, as the farmer sold
his produce directly to the consumer on a cash or barter basis.
But, in modem times, marketing of agricultural produce is
different from that of olden days. In modem marketing,
agricultural produce has to undergo a series of transfers or
exchanges from one hand to another before it finally reaches the
consumer.

The National Commission on Agriculture, defined agricultural

marketing as a process which starts with a decision to produce a
saleable farm commodity and it involves all aspects of market
structure of system, both functional and institutional, based on
technical and economic considerations and includes pre and post-
harvest operations, assembling, grading, storage, transportation
and distribution. The Indian council of Agricultural Research
defined involvement of three important functions, namely (a)
assembling (concentration) (b) preparation for consumption
(processing) and (c) distribution.

II. Importance and Objectives of Agriculture Marketing

The farmer has realized the importance of adopting new

techniques of production and is making efforts for more income
and higher standards of living. As a consequence, the cropping
pattern is no longer dictated by what he needs for his own
personal consumption but what is responsive to the market in
terms of prices received by him. While the trade is very
organised the farmers are not Farmer is not conversant with the
complexities of the marketing system which is becoming more and
more complicated. The cultivator is handicapped by several
disabilities as a seller. He sells his produce at an unfavorable
place, time and price.

The objectives of an efficient marketing system are:

1. to enable the primary producers to get the best possible

returns,
2. to provide facilities for lifting all produce, the farmers are
willing, to sell at an incentive price,
3. to reduce the price difference between the primary producer
and ultimate consumer, and
4. to make available all products of farm origin to consumers at
reasonable price without impairing on the quality of the produce.

III. Facilities Needed for Agricultural Marketing

In order to have best advantage in marketing of his agricultural

produce the farmer should enjoy certain basic facilities.

1. He should have proper facilities for storing his goods.

2. He should have holding capacity, in the sense, that he should be

able to wait for times when he could get better prices for his
produce and not dispose of his stocks immediately after the
harvest when the prices are very low.

3. He should have adequate and cheap transport facilities which

could enable him to take his surplus produce to the mandi rather
than dispose it of in the village itself to the village money-lender-
cum-merchant at low prices.
4. He should have clear information regarding the market
conditions as well as about the ruling prices, otherwise may be
cheated. There should be organized and regulated markets where
the farmer will not be cheated by the -dalals- and -arhatiyas-.

5. The number of intermediaries should be as small as possible, so

that the middleman's profits are reduced. This increases! the
returns to the farmers.

The importance of marketing in agriculture is very well illustrated

by saying, “that a good farmer has one eye on the plough and the
other on the market”. This is true when agriculture is mainly for
subsistence; and now, even Indian agriculture is becoming
commercialized. In these days of commercial agriculture, it will
be more fit to say, “a good farmer has only his hands on the
plough but the eyes on the market

Since agriculture constitutes a major part of theeconomy,

marketing of agricultural products also assumes considerable
importance in our context.

Marketed surplus is the amount of agricultural produce

that is brought to the market for sale after what is retained by
the producers for their own consumption. Hence it will be less
than total production. It is difficult to give a correct estimation
of marketed surplus, since it differs according to crop, place,
season and general state of the economy.

Marketing finance is also important since the small

producer will experience difficulty in waiting for payment from
the whole-sale buyer, if the time lag is too long.

Proper storage and handling facilities are important

because otherwise, the produce will perish and become
unmarketable and unusable.

Indian Farmers and Marketing Disabilities:

The present system of agricultural marketing is not well-
organized and the farmers have to depend largely on the
middlemen for the disposal of the farm’s yield who have no
hesitation in taking advantage of the farmer’s dependence upon
them.

The real evil is the tendency of these intermediaries who exploit

the ignorance and helplessness of the farmers to increase their
own profit. The malpractices in the present system of
agricultural marketing are very well known. The
Rural CreditSurvey Committee described the position as follows:

“while standards of marketing have improved, in most of the

relatively few regulated markets which have been established, a
number of malpractices still exist even in them since personnel
and enforcement are two great problems, not always sufficiently
attended to, much less solved.

Sometimes, the malpractices take fresh lease of unauthorized

life just outside the market, for the private interests are strong,
the advantages of evading strict regulation are many and the
producer is in no position to seek eventual advantage and
protection from law at the cost of the immediate disadvantage
involved in the loss of powerful customers, which are also sources
of credit and finance. Moreover, there is a very great lacuna
that no control at all is exercised over village sales, in which the
primary producer is literally, legally and in practice at the mercy
of the village trader”.
Frequently large samples are also taken by the buyers with
payment. The cultivators are not paid for them even when no sale
is affected. Generally the transactions take place on a sample
basis. Consequently, the producer does not get the full worth of
his produce. The reputation of Indian agricultural producers in
the world market is low.

The villagers have practically no contact with the outside world

not are they in touch with the trend of market process and they
mostly depend on hearsay reports received form the village bania
who is always busy in earning profits from buyers by making them
fools to the ignorant villagers.

In India, the following are some of the common defects

agricultural marketing:

1. Lack of organization,

2. Forced sales,

3. Presence of middlemen,

4. Numerous market charges,

5. Market malpractices,

6. Lack of standard weights and measures,

7. Inadequate storage,
8. No standardization of price and quality,

9. Lack of marketing finance, and

10. Want of proper market information.

Requisites of good marketing

In the first place the quality of produce should be good. Good

quality can fetch better price and confidence which can be
assumed by using best seeds, by adopting correct methods of
harvesting , by grading the product by storing it well and avoiding
malpractices like adulteration and misrepresentation etc.

The second essential of good marketing is the staying power of

the seller. Therefore, the agriculturists may have the staying
power to sell so that they may get better prices after the
harvest. The peasant should, therefore, have enough reserve to
pay land revenue and meeting other needs.

Storage, Marketing and Pricing

The storage, pricing and marketing of agricultural commodities is

as important for high profits as the process of production. This is
the reason why the government since 1951 has laid stress on the
development of physical markets, on farm and off farm storage
structures, facilities for standardization and grading, packaging
and transportation through different Five Year Plans.

Lack of proper storage facilities leads to attacks by pests and

other organisms. The damage caused through such infestations
leads to a reduction in market value depending upon the extent of
damage. In some cases the produce is declared unfit for
consumption and has to be destroyed. This leads to a huge loss
for the farmer. Sensible farmers should take pains to store their
agricultural produce carefully so as to command the most
optimum price in the market.

Most agricultural commodity markets usually function under the

regular forces of demand and supply. The government also fixes
minimum support prices or statutory prices for certain crops in
order to protect the interests of farmers and encourage them to
increase production. If the price of these commodities falls
below the support limit, the government arranges to buy these
crops on state account.

The government supports organized marketing of agricultural

products through a system of regulated markets in India. These
physical markets are meant to make sure that farmers get
reasonable profits by creating an atmosphere of fair play. This
fairness is with regard to the forces of supply and demand,
regulation of market practices and transparency in transactions.

Here is some information about local storage warehouses;

marketing networks and commodity prices that will help you get a
good value for your agricultural produce.

Crop-wise, Market-wise and Minimum Support Prices

Crop-wise and Market-wise Prices

The prices of agricultural commodities are usually determined by

market factors of demand and supply. If there are many farmers
producing the same commodity then they will fetch a lesser price
for their produce. If there is great demand from consumers for a
certain commodity then farmers can expect to get a higher price.
These prices keep changing daily. Other factors that determine
the price of the product are its quality, yield and pest free
status. Climatic conditions, international prices, cost of
production and new laws may also affect the prices of agricultural
commodities. The price at different markets may be different.
The government has fixed minimum support prices for certain
agricultural products. Farmers also have the option to sell their
produce to private dealers if they stand to get a better profit.

crop-wise and market-wise prices of different agricultural

commodities(External website that opens in a new window).

Minimum Support Prices

The main reason why the government fixes minimum support

prices or MSPs is to ensure remunerative prices to farmers to
encourage higher investment and production of agricultural
commodities. Every year MSPs for major agricultural products
are announced which are fixed after taking into account the
recommendations of the Commission for Agricultural Costs and
Prices (CACP). The CACP while recommending MSPs takes into
account factors such as cost of production, change in prices of
inputs, demand and supply, market price trends and cost of living
among other factors.

Government organises Price Support Schemes as PSS of

commodities through various public and cooperative agencies such
as Food Corporation of India (FCI)(External website that opens in
a new window), Cotton Corporation of India Ltd. (CCI)- External
website that opens in a new window, Jute Corporation of India
Ltd. (JCI)- External website that opens in a new window, National
Agricultural Cooperative Marketing Federation of India Ltd.
(NAFED)- External website that opens in a new
window and Tobacco Board(External website that opens in a new
window) for which the MSPs are fixed. For commodities not
covered under PSS, the government arranges for market
intervention on specific request from the States for a specific
quantity at a mutually agreed price. The losses, if any, are borne
by the Centre and State on a 50:50 basis.

Location of Markets

To achieve an efficient system of buying and selling of

agricultural commodities, most State Governments and Union
Territories have enacted legislations like the Agricultural
Produce Marketing Committee Act to provide for regulation of
agricultural produce markets. These regulated physical markets
have been established to ensure a reasonable amount of profits
to agriculturalists for their crops and other agricultural
products.

At the time of independence there were only around 286

regulated markets in India. Currently, there are more than 7,500
such markets in the country. Most of these regulated markets
are wholesale markets. Other than these markets there are also
around 30,000 rural periodical markets of which 15 per cent
function under the ambit of regulation. Presently, the average
reach of a single regulated market is 459 square kms. This means
that farmers have to travel a long distance with their produce to
avail this facility. The Central and State Governments are in the
process of creating more regulated markets so that the command
area of each market does not extend beyond 80 square kms.

Basic facilities such as internal roads, boundary walls, electric

lights, loading and unloading facilities and weighing equipment are
available at more than 80 per cent of the markets. Farmers' rest
houses exist in more than half of the regulated markets.
Infrastructures that the government plans to extend to all
regulated markets are auction platforms, drying yards and cold
storage units.

Problems of Agriculture Marketing

Indian system of agricultural marketing suffers from a number
of defects. As a consequence, the Indian farmer is deprived 'of a
fair price for his produce. The main defects of the agricultural
marketing system are discussed here.

1. Improper warehouses
There is an absence of proper ware housing facilities in the
villages. Therefore, the farmer is compelled to store his products
in pits, mud-vessels, "Kutcha" storehouses, etc. These
unscientific methods of storing lead to considerable wastage.
Approximately 1.5% of the produce gets rotten and becomes
unfit for human consumption. Due to this reason supply in the
village market increases substantially and the farmers are not
able to get a fair price for their produce. The setting up of
Central Warehousing Corporation and State Warehousing
Corporation has improved the situation to some extent

2. 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.

3. Inadequate transport facilities

Transport facilities are highly inadequate in India. Only a small
number of 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. This is even more
true with perishable commodities.

4. Presence of a large number of middlemen

The chain of middlemen in the agricultural marketing is so large

that the share of farmers is reduced substantially. For instance,
a study of D.D. Sidhan revealed, that farmers obtain only about
53% of the price of rice, 31% being the share of middle men (the
remaining 16% being the marketing cost). In the case of
vegetables and fruits the share was even less, 39% in the former
case and 34% in the latter. The share of middle- men in the case
of vegetables was 29.5% and in the case of fruits was 46.5%.
Some of the intermediaries in the agricultural marketing system
are -village traders, Kutcha arhatiyas, pucca arhatiyas, brokers,
wholesalers, retailers, money lenders, etc.

5. Malpractices in unregulated markets

Even now the number of unregulated markets in the country is
substantially large. Arhatiyas and brokers, taking advantage of
the ignorance, and illiteracy of the farmers, use unfair means to
cheat them. The farmers are required to pay arhat (pledging
charge) to the arhatiyas, "tulaii" (weight charge) for weighing the
produce, "palledari" to unload the bullock-carts and for doing
other miscellaneous types of allied works, "garda" for impurities
in the produce, and a number of other undefined and unspecified
charges. Another malpractice in the mandies relates to the use of
wrong weights and measures in the regulated markets. Wrong
weights continue to be used in some unregulated markets with the
object of cheating the farmers.

6. Inadequate market information

It is often not possible for the farmers to obtain information on
exact market prices in different markets. So, they accept,
whatever price the traders offer to them. With a view to tackle
this problem the government is using the radio and television
media to broadcast market prices regularly. The news papers also
keep the farmers posted with the latest changes in prices.
however the price quotations are sometimes not reliable and
sometimes have a great time-lag. The trader generally offers less
than the price quoted by the government news media.

7. Inadequate credit facilities

Indian farmer, being poor, tries to sell off the produce
immediately after the crop is harvested though prices at that
time are very low. The safeguard of the farmer from such
"forced sales" is to provide him credit so that he can wait for
better times and better prices. Since such credit facilities are
not available, the farmers are forced to take loans from money
lenders, while agreeing to pledge their produce to them at less
than market prices. The co-operative marketing societies have
generally catered to the needs of the large farmers and the small
farmers are left at the mercy of the money lenders.

Thus it is not possible to view the present agricultural marketing

in India in isolation of (and separated from) the land relations.
The regulation of markets broadcasting of prices by All India
Radio, improvements in transport system, etc., have undoubtedly
benefited the capitalist farmers, and they are now in a better
position to obtain favourable prices for their "market produce"
but the above mentioned changes have not benefited the small
and marginal farmers to any great extent.

Co-operative marketing
Though the above measures have improved the system of
agricultural marketing to some extent, a major part of the
benefits has been derived by large farmers, who have adequate
marketable surplus. However, the small and marginal farmers
continue to sell a major part of their produce to moneylenders to
meet their credit needs and these moneylenders offer them very
low prices. Therefore it is essential to form cooperatives of the
small and marginal farmers to enable them to obtain fair prices
for their produce. The advantages that co-operative marketing
can confer on the farmer are multifarious, some of which are
listed below.

1. Increases bargaining strength of the fanners

Many of the defects of the present agricultural marketing
system arise because often one ignorant and illiterate farmer (as
an individual) has to face well-organised mass of clever
intermediaries. If the farmers join hands and for a co-operative,
naturally they will be less prone to exploitation and malpractices.
Instead of marketing their produce separately, they will market
it together through one agency.

2. Direct dealing with final buyers

In cases, the co-operatives can altogether skip the
intermediaries and enter into direct relations with the final
buyers. This practice will eliminate exploiters and ensure fair
prices to both the producers and the consumers.
3. Provision of credit
The marketing co-operative societies provide credit to the
farmers to save them from the necessity of selling their produce
immediately after harvesting. This ensures better returns to the
farmers.

4. Easier and cheaper transport

Bulk transport of agricultural produce by the societies is often
easier and cheaper. Sometimes the societies have their own
means of transport. This further reduces cost and botheration of
transporting produce to the market.

5. Storage facilities
The co-operative marketing societies generally have storage
facilities. Thus the farmers can wait for better prices. Also
there is no danger to their crop yield from rains, rodents and
thefts.

6. Grading and standardization

This task can be done more easily for a co-operative agency than
for an individual farmer. For this purpose, they can seek
assistance from the government or can even evolve their own
grading arrangements.

7. Market intelligence
The co-operatives can arrange to obtain data on market prices,
demand and supply and other related information from the
markets on a regular basis and can plan their activities
accordingly.

8. Influencing marketing prices

While previously the market prices were determined by the
intermediaries and merchants and the helpless farmers were
mere spectators force to accept, whatever was offered to them,
the co-operative societies have changed the entire complexion of
the game. Wherever strong marketing co-operative are operative,
they have bargained for and have achieved, better prices for
their agricultural produce.

9. Provision of inputs and consumer goods

The co-operative marketing societies can easily arrange for bulk
purchase of agricultural inputs, like seeds, manures fertilizers
etc. and consumer goods at relatively lower price and can then
distribute them to the members.

10. Processing of agricultural produce

The co-operative societies can undertake processing activities
like crushing seeds, ginning 'and pressing of cotton, etc.

n addition to all these advantages, the co-operative marketing

system can arouse the spirit of self-confidence and collective
action in the farmers without which the programme of
agricultural development, howsoever well conceived and
implemented, holds no promise to success.