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AGRICULTURAL AND FOOD MARKETS, PRODUCTION, AND MARKETING

AGRICULTURAL AND FOOD MARKETS, PRODUCTION, AND MARKETING. Market functions, institutions, and behaviors Food marketing issues Characteristics of markets Trends in agricultural markets. AGRICULTURAL PRODUCTS. FOOD. TEXTILE. PAPER. ENERGY. FINAL. INGREDIENT. FEEDING. PACKAGING. TEXT.

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AGRICULTURAL AND FOOD MARKETS, PRODUCTION, AND MARKETING

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  1. AGRICULTURAL AND FOOD MARKETS, PRODUCTION, AND MARKETING • Market functions, institutions, and behaviors • Food marketing issues • Characteristics of markets • Trends in agricultural markets

  2. AGRICULTURAL PRODUCTS FOOD TEXTILE PAPER ENERGY FINAL INGREDIENT FEEDING PACKAGING TEXT

  3. Selling Storage Transportation Processing Facilitating Standardization Financing Risk bearing Market Intelligence Functions in Agricultural Markets—one way to analyze

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

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

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

  7. Processing • Treatment of product (e.g., wheat to flour) • Reduction of bulk (oranges to concentrate—not orange juice yet) • Creation of labor saving food products (e.g., frozen pizza)

  8. Facilitating • Farmers’ agents • Matching demand and supply • Other information search—e.g., demand forecast • Negotiations • Logistics handling

  9. Standardization • Agricultural grades and labeling • Food branding

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

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

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

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

  14. Behavioral Systems • Input-output • Different parties provide goods and services moving toward final products • Communications • Matching supply and demand • Adaptation to outside changes—e.g., • Consumer tastes • World supply

  15. 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

  16. 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 efficiency—intermediate functions may add value • Types of efficiency • Operational • Pricing

  17. Agricultural Production and Marketing • Structure of U.S. agriculture • Dominated by small, family farms

  18. 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

  19. Agricultural Production and Marketing • Product characteristics • Raw material

  20. Agricultural Production and Marketing • Product characteristics • Quality variation

  21. Agricultural Production and Marketing • Product characteristics • Bulkiness and perishability

  22. Production characteristics • Total product • Increase due to productivity

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

  24. Production characteristics • Annual variability

  25. Production characteristics • Seasonality

  26. Production characteristics • Geographic concentration

  27. Production characteristics • Varying production costs

  28. Production characteristics • Farm supply industry (derived demand)

  29. Marketing Problems • Lack of control over • Own output • Market supply

  30. Marketing Problems • Lag in results of adjustment efforts

  31. Marketing Problems • Decision of whether to engage in marketing efforts • Free rider problem

  32. Marketing Problems • Superior bargaining power of large buyers

  33. Marketing Problems • Cost squeeze

  34. 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 Some Trends

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