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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 • 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
Selling Storage Transportation Processing Facilitating Standardization Financing Risk bearing Market Intelligence Functions in Agricultural Markets—one way to analyze
Selling to • Processors • For final products (e.g., flour) • For manufacturing of ingredients • Intermediaries • Wholesalers • Retailers • Customers • Consumers • Institutions
Storage • Storage • Seasonal • Timing of production vs. cost of storage • Feasibility of timing market (turkeys vs. wheat) • Queuing
Transportation • Cost vs. speed • Perishability • Value of freshness to customers • Ability to predict demand • Need for bulk reduction (see processing)
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)
Facilitating • Farmers’ agents • Matching demand and supply • Other information search—e.g., demand forecast • Negotiations • Logistics handling
Standardization • Agricultural grades and labeling • Food branding
Financing • Long term lending • Farm mortgages • Equipment loans • Short term lending • Advances against harvests • Financing of store and processor inventory • Futures contracts
Risk Bearing • Futures contracts • Investments in new food products (most will fail) • Evaluation of credit worthiness of farmers and other parties
Market Intelligence • Market research • Forecasting • Demand • For existing products • Spread of new products • Supply
Institutions • Marketing middle people • Merchant • Retailer • Wholesaler • Agent • Brokers • Commission • Speculative • Processors/manufacturers • Facilitative organizations
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
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
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
Agricultural Production and Marketing • Structure of U.S. agriculture • Dominated by small, family farms
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
Agricultural Production and Marketing • Product characteristics • Raw material
Agricultural Production and Marketing • Product characteristics • Quality variation
Agricultural Production and Marketing • Product characteristics • Bulkiness and perishability
Production characteristics • Total product • Increase due to productivity
Production characteristics • Total product • Increase due to productivity • Annual variability • Seasonality • Geographic concentration • Varying production costs • Farm supply industry (derived demand)
Production characteristics • Annual variability
Production characteristics • Seasonality
Production characteristics • Geographic concentration
Production characteristics • Varying production costs
Production characteristics • Farm supply industry (derived demand)
Marketing Problems • Lack of control over • Own output • Market supply
Marketing Problems • Lag in results of adjustment efforts
Marketing Problems • Decision of whether to engage in marketing efforts • Free rider problem
Marketing Problems • Superior bargaining power of large buyers
Marketing Problems • Cost squeeze
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