aLESSON 2: The Agricultural Marketing System
Market: A Unique Site
There are a lot of definition of the word “market”. It is generally used to refer a to a public place or a
building. For economics, a market is defined as an area in which the forces of demand and supply converge to
establish a single price. Most commonly market is defined as a place where buyers and sellers meet to exchange
goods or services. An example is vendor selling banana cue in the street. Another is public market where most of
the customers buy their food. It could be a sari-sari store, supermarket or a roadside stand. This definition requires
buyers and sellers to meet personally and exchange goods or services. Nowadays, buyers and sellers could still
transact without personally meeting each other and even in the absence of the actual commodity such as the case
of e-commerce, stocks exchange and commodity exchanges. This requires alteration of the definition of the market.
Hence, market nowadays is most defined as a group of sellers and buyers with facilities for trading each other. With
this new definition, we could say that for a market to exist, its three elements should be present: (1) Sellers,
(2)Buyers and (3) Facilities. Sellers are those who offer something. Buyers are those who generally take the offer
of the seller. Trading Facilities refer to any means that facilities exchange like mobile phone (telecommunications),
internet and market stalls and buildings.
The term market is also used to refer to a large geographical area wherein a given set of supply and demand
forces operate to set prices as the world sugar market, the US copra market and the Japanese abaca market.
In the Philippines and other developing countries, most of the markets are informal. This means that anyone
can enter or participate as buyer or seller at any time. Furthermore, buying and selling of goods are usually of small
amounts. There are a few markets however that are called formal – that is, trading is done only by members of the
market through the purchase of “seats”. Example is the New York Coffee and Sugar Exchange and the Chicago
Trade where soya and corn trading are prevalent.
The Agricultural Marketing System and Its Role in the Economy
The agricultural marketing system is a complex system within which various subsystems interact with each
other and with the different marketing environments. As a system, it has the following characteristics.
1. It has objectives or goals to achieve. These are normative criteria set by society.
2. In the course of setting objectives, it has components or participants that perform certain functions such as
transport, storage, processing, grading, standardization and market information and all the necessary jobs
between the decision to produce and the final consumption of the product.
3. It needs institutional arrangements which necessary in the performance of its functions.
4. It needs planning and management decisions structure which controls and coordinates the forces at work.
5. It has spatial and temporal dimensions and is most often commodity specific.
The marketing system has six components or subsystems: producer, flow, functional, channel, consumer and
environmental subsystems. Opposite each are their intermediate and ultimate goals.
The producer subsystem consists of the initiators of production who may be small farmers or corporate
farms. Goods produced in this subsystem are brought to the final consumers via channel system. The latter consists
of market participants or intermediaries who are directly responsible for making the farmers’ products available to
the user at the right place, time and form. They are considered the “actors” in the system that perform vital
functions, but sometimes they get the ire of the producers, consumers and the government. Most often, they are
branded as “necessary evil”. In addition these intermediaries and private institutions and associations which are
also involved in moving the products from the production sites to the consumption centers.
The flow subsystem on the other hand, facilitates products financial information flows. Information to be
relayed usually consists of products trends, grades and prices. An efficient and effective grading and standardization
systems must complement this flow of information. The fourth component is the functional subsystem which
consists of marketing functions or services related to the creation of place, time and form utilities that involves
assembly, concentration, dispersion and equalization activities. At the other end of the system is the consumer
subsystem which, as the name implies, refers to the final repository of products produced by farmers. These
different subsystems interact with and are interdependent of each other and within the environment they operate.
The environmental subsystem which facilitates market performance encompass four other areas or factors that
affect the working of the entire marketing system: climate/physical, socio cultural, economic/technological and
legal/ political factors.
The Role of Marketing in Economic Development
The development of the agricultural sector requires a balanced improvement in production and marketing.
It is ineffective to improve the production side and neglect the marketing side, as the farmer’s improvement is
dependent on the latter’s development. Without a market, the farmers yield would be left in the field to be rotten
and farmers will become discouraged to produce the next cropping season. From the farmer’s point of view, an
effective and efficient marketing system is one that will induce the production of those products and in quantities
which, when sold to consumers, will result in maximum returns after the deduction of minimum marketing charges
and farm productions costs. Knowledge of marketing and its problems will help farmers make important decisions
on the following aspects:
1. What to produce and how to prepare it for sale. Some fruits and vegetables are more preferred by
consumers than others. Some harvesting practices and other pre-sale services may have an effect on the
value of the products.
2. When and where to sell. Different products have different high and low periods of prices throughout the
year. Production and storage practices can be adjusted to take advantage of these. Many alternative outlets
are usually available. Knowing how to appraise the advantages and disadvantages of each will help in
selecting the one that will maximize returns.
3. How much of the marketing job should be done by the farmers themselves either as an individual or as a
member of the group. In many instances, transportation may either be hired or provided by the farmer
himself. Similarly, someone may be hired to do the selling and other marketing tasks or the farmer may
perform these tasks himself. Knowledge of marketing costs and problems will help appraising the best of
line of action.
4. What can be done to expand the markets? Many proposals and schemes for advertising and other
techniques for influencing consumers are being offered. Knowledge of the factors that influence consumers
and their behavior can help determine which of several purposes for action might be most effective.
5. Which of many different marketing arrangements are desirable? Increasingly, farmers are being offered
different methods of selling their products. An example is contract marketing arrangement.
6. How can changes necessary to correct undesirable practices be secured? New laws and various market
programs are often proposed and implemented to improve marketing system. Government intervention
may be desirable in some cases.
For middlemen and consumers, the marketing system performs the following functions:
1. Provides an outlet or intermediaries for agricultural products
2. Distribute goods and services to consumers in their desired forms and conditions and delivers them at prices
where consumers are willing and able to pay.
3. Provides employment for middlemen and producers as well.