Exercise - No.

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Study general terminology about market functioning:
What is Market?
A market is a place where people go to buy or sell things. When people have products to sell, they set up
a market place. ... When things are sold, people buy the product, and this "stimulates the economy" (helps people
to spend and earn money). The market needs to balance supply and demand.
Agricultural marketing is the study of all the activities, agencies and policies involved in the procurement farm
inputs by the farmer and the movement of agricultural products from the farmer to the consumers. It includes
organization of agricultural raw materials supply to processing industries, the assessment of demand for farm inputs
and raw materials.
Marketing
Marketing is the process of interesting potential customers and clients in your products and/or services. The
key word in this marketing definition is "process"; marketing involves researching, promoting, selling, and
distributing your products or services.
Market Structure:
The main aspects that determine market structures are: the number of agents in the market, both sellers and
buyers; their relative negotiation strength, in terms of ability to set prices; the degree of concentration among them;
the degree of differentiation and uniqueness of products; and the ease, or not, of entering.
Marketing Functions.
Under the approaches to study of marketing we have seen the marketing functions marketing functions can be
broadly classified as:
1. Functions of exchange which includes selling and buying.
2. Functions of physical supply, which consist of transportation, storage and warehousing.
3. Facilitating functions, which comprise of financing, risk taking, standardization and market information.
Functions of Exchange
The process of passing goods into the consumer's hands is called function of exchange. It includes buying,
assembling and selling.
Buying and Assembling
Buying is the first step in the process of marketing. Buying involves careful planning and needs setting up
of policies and procedures. The following points are considered before a particular product is bought.
What to buy (Product)?
1. When and how much to buy? (Time and quantity)
2. From whom and where to buy? (Source)
3. On what terms and conditions and prices? (Price)
Assembling starts after the goods have already been purchased. It is a function separate from buying. Buying
involves transfer of ownership of the goods where as assembling involves creating and maintaining of stock of
goods purchased from different sources. The problems encountered in assembling of agricultural products are:
1) Seasonal production
2) Difficulties in controlling quantity and quality
3) Non- availability of information about sources of supply
4) Low quantity of marketable surplus.
Selling
The function of marketing is to ensure that the right product is made available at the right place, in the right
quantity, at the right price, at the right time and under the right impressions to the consumer.
Functions of Physical Supply
Functions of physical supply/distribution includes determining warehouse locations '{establishing a material
handling system, maintaining an inventory control system, establishing procedures for processing orders) and

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selecting mode of transportation. Transportation and storage account for the major share in the total distribution
cost.
Processing
The term processing may be defined a deliberate activity which changes the form of a commodity. It converts
farm products into a more usable form.
India's food processing involves only primary processing. It accounts for 80 percent of the value. As much as
42 percent of food industry is in the organized sector and 33 percent in the small scale tiny and cottage sectors.
Storage and Warehousing
Storage is an important marketing function, which involves holding and preserving goods from the time they
are produced until they are needed for consumption. While transportation is the process of transferring goods from
one place to another, storage is a function, which helps in preserving goods in one place until they are needed at
another place. Without storing transportation is Impossible and storing is made possible by transportation.
The storage of agricultural produce/inputs is necessary for the following reasons :
1. Agricultural products are seasonally produced but are required for consumption throughout the year.
2. Some goods are produced throughout the year but their demand is only seasonal e.g. umbrella, fans,
woolen clothes, agricultural inputs.
3. The quality of certain products increases by storing e.g. whisky, wine, tamarind, rice, and pickles.
4. Storage of some farm commodities is necessary for ripening e.g. banana, mango.
5. Storage protects the quality of perishable and semi-perishable products from detoriation.
6. It helps in stabilization of price.
7. Storage is necessary for some periods for the performance of other marketing functions.
Transportation
It is a necessary function of marketing because the most of the markets are geographically separated from
the areas of production. It enhances the economic value through .creation of place utility. The important function of
transport is
1. It helps in the growth of industries whose products require quick marketing e.g. vegetables, flowers, milk
and fish.
2. It increases the demand for goods through widening of market
3. It creates place utility. As such transportation bridges the gap between production and consumption
centres.
4. By virtue of improvement in the speed of transport it offers time utility to products.
5. It helps in stabilization of prices by moving commodities from surplus area to deficit area.
6. Ensures even flow of goods Into the hands of consumers.
7. It enables to consumers to enjoy the benefits of many goods not produced locally.
Warehousing: Warehouses are scientific storage structures specially constructed for the protection of quantity and
quality of stored products. The important functions. of the ware house are : 1) Scientific storage 2) Financing 3)
Price Stabilization 4) Market Intelligence.
Standardization
It means the determination of the standards to be established for different commodities Standards are fixed
on the basis of certain characteristics such as weight, size, colour appearance, texture, moisture content, amount of
foreign matter present etc.
Grading
Sorting of the unlike lots of the produce into different lots according to the quality specifications laid down.
Grading follows standardization. It is a sub-function of standardization.
Advantages of grading
1. Grading before sale enable farmers to get a higher price for their produce.
2. Grading facilitates marketing

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Grading widens market, without inspection the sale can be effected over phone at distant places.
Market information
Market information may be broadly defined as a communication or reception of knowledge or intelligence. It
includes all the facts, figures, opinions and other information, which affect the marketing of goods and services.
Market information is useful to all the sections of the society -Farmer, Producer, Middlemen, General Economy, and
government.
Market information is of two types
1) Market intelligence
This includes information relating to such facts as the prices that prevailed in the past and market arrivals
over time. It is historical nature. An analysis of the past helps to take decision about the future.
2) Market News
This term refers to current information about prices, arrival and changes in the market conditions. The
availability of market news in time and with speed is of utmost value.
Marketable Surplus
The marketable surplus is that quantity of the produce, which can be made available to the non-farm
population of the country. The marketable surplus is the residual left with the farmers after meeting his family
consumption, farm requirements, social and religions payments. This may be expressed as MS = P -C where,
MS = Marketable Surplus P = Total Production, and
C = Total requirement of farm family
Marketed Surplus
Marketed surplus is that quantity of the produce, which the farmer actually sells in the market, irrespective
of his requirements for family consumption, farm requirements, social and religious payments. The marketed
surplus may be more, less or equal to the marketable surplus.
Price Spread
The difference between the price paid by the consumer and the price received by the producer for an
equivalent commodity is known as price spread, some times this is termed as marketing margin.
Marketing efficiency
The term marketing efficiency refers to the effectiveness or competence with which a market structure
performs its designated function.
Market integration
Integration shows the relationship of firms in a market. The extent of integration influences the market
conduct of the firms and consequently their marketing efficiency. Markets differ in the extent of integration and,
therefore, there is a variation in their degree of efficiency.
Market integration is a process which refers to the expansion of firms by consolidating additional marketing
functions and activities under a single management.
Market Structure
It refers to those organizational characteristics of a market which influence the nature of competition and
pricing and affect the conduct of business firms.
Speculation involves purchase or sale of a commodity at the present price with the object of sale or purchase at
future date at a favorable price. Speculator is concerned with profit making from price movements. He purchases
when prices are low, so he is not a normal or regular trader. The difference in the prices prevailing at two times
constitutes his profit. Speculator may lose in this process.
Hedging refers to the purchase or sale of a commodity in a futures market accompanied by a sale or purchase in
the cash market.
Benefits
i) It protects the hedger from sustaining loss and enables him to earn his normal trade profit.
ii) Hedging enables him to keep the trade margin at a lower level because there is no risk.

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