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MARKETING FUNCTIONS

MARKETING FUNCTIONS. THE MOST VISIBLE AND GENERALLY THE MOST COSTLY PART OF AGRICULTURAL MARKETING ARE THE PHYSICAL FUNCTIONS. TRANSPORTATION STORAGE PROCESSING. TRANSPORTATION: MOVING PRODUCTS TO THE LOCATION WHERE THEY ARE WANTED. TRANSPORTATION AN IMPORTANT COST OF MARKETING FOOD

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MARKETING FUNCTIONS

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  1. MARKETING FUNCTIONS

  2. THE MOST VISIBLE AND GENERALLY THE MOST COSTLY PART OF AGRICULTURAL MARKETING ARE THE PHYSICAL FUNCTIONS.

  3. TRANSPORTATION STORAGE PROCESSING

  4. TRANSPORTATION: MOVING PRODUCTS TO THE LOCATION WHERE THEY ARE WANTED.

  5. TRANSPORTATION AN IMPORTANT COST OF MARKETING FOOD REGIONAL SPECIALIZATION IN FOOD PRODUCTION

  6. TRANSPORTATION AN IMPORTANT COST OF MARKETING FOOD REGIONAL SPECIALIZATION IN FOOD PRODUCTION POPULATION IS CONCENTRATED ON THE COAST

  7. TRANSPORTATION PROVIDES PLACE UTILITY

  8. Prices direct the flow of products.Price of cornHeyworth, Illinois = $5.40/buDecatur, Illinois = $5.48/buPekin, Illinois = $5.51/buNew Orleans = $5.82/bu

  9. WHAT FACTORS INFLUENCE THE DIRECTION THAT GRAIN FLOWS? PRICE AT MARKET TERMINAL COST COST OF TRANSPORT

  10. SITE PRICE = MARKET PRICE – (TERMINAL COST + ( TRANSPORT RATE * DISTANCE))

  11. COST DISTANCE

  12. TRUCK RAIL COST BARGE 1ST CLASS MAIL DISTANCE

  13. SITE PRICE = MARKET PRICE - ( (TERMINAL COST + ( TRANSPORT RATE * DISTANCE)) SITE PRICE = $4.15 - (.04 + (.005 * 50)) = $3.86

  14. SITE PRICE LINE MARKET PRICE PRICE TERMINAL COST DISTANCE

  15. MARKET A MARKET B SITE PRICE LINE BOUNDARY

  16. MARKET PRICE PRICE TERMINAL COST INCREASE IN TRANSPORT RATE SP1 SP2 DISTANCE

  17. SITE PRICE LINE CHANGE IN MARKET PRICE SP1 SP2 DISTANCE

  18. MARKET A MARKET B CHANGE IN TRANSPORT COST BOUNDARY

  19. PROCESSING CHANGES THE FORM OF THE PRODUCT.

  20. PROCESSING: CONSUMERS ARE DEMANDING MORE FORM UTILITY BE ADDED TO THEIR PRODUCTS

  21. CONSUMERS WANT CONVENIENCE AND VARIETY FOODS THAT WILL STORE FOR A LONG TIME BUT CAN BE QUICKLY PREPARED

  22. 814 | $15.49 4 - 6 oz. steaks, 1.5 lbs. $10.32/lb Kroger's -- $5.49/lb

  23. STORAGE PROVIDES TIME UTILITY: THE GOOD IS AVAILABLE WHEN CONSUMERS DEMAND IT.

  24. STORAGE: TWO TYPES - WORKING INVENTORY - SEASONAL STORAGE

  25. SEASONAL STORAGE FUTURE PRICE - CURRENT PRICE > STORAGE COST

  26. SEASONAL STORAGE FUTURE PRICE - CURRENT PRICE > STORAGE COST

  27. Two Cost of Seasonal Storage 1) Physical Cost Buildings, Maintenance 2) Opportunity Cost Wealth in grain vs. wealth in money

  28. COMMERCIAL STORAGE: COMMON COST SYSTEM FLAT FEE TO JAN 1 THEN CENTS/BU/PER MONTH THEREAFTER

  29. EXAMPLE : $ .13/BU TO JANUARY 1, THEN $ .0225/BU/MONTH

  30. EXAMPLE : $ .13/BU TO JANUARY 1, THEN $ .0225/BU/MONTH October 1 to June 30 $ .13 + ($ .0225*6) = $ .26 1/2/bu

  31. OPPORTUNITY COST • PRICE OF THE COMMODITY • COST OF MONEY • THE TIME THE COMMODITY IS STORED

  32. OPPORTUNITY COST = (PRICE * COST OF MONEY* FRACTION OF YEAR GRAIN IS STORED)

  33. EXAMPLE: PRICE OF CORN = $3.10 COST OF MONEY = .08% STORAGE FROM OCT 1 TO MARCH 1 ( 5 MONTHS)

  34. (3.10 * .08 * 5/12) = $ .10/BU

  35. Click here to refresh data Corn Futures

  36. DEMAND SUPPLY PRICE

  37. DEMAND Cost of Storage SUPPLY PRICE

  38. DEMAND Cost of Storage SUPPLY PRICE

  39. Exchange FunctionBUYING (PROCUREMENT)SELLING (MERCHANDISING)

  40. Exchange FunctionBUYING (PROCUREMENT)OPEN MARKET

  41. BUYING (PROCUREMENT)OPEN MARKETNOT VERY EFFICIENT

  42. FACILITATING FUNCTIONSSTANDARDIZATION MARKET INTELLIGENCEFINANCING RISK BEARING

  43. STANDARDIZATION

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