Introduction to Agri-Business

B.B.A. Semester V

B.B.A. Semester V

For educational purposes only

Charanya Arora

Topics
The Concept of Agri-Business Agri-Business Defined What Constitutes Agri-Business? Scope of Agri-Business Why study Agri-Business? A Quick View of Agri-Business in India, Today

B.B.A. Semester V

For educational purposes only

Charanya Arora

The Concept of Agri-Business

Refers to the production, processing and marketing of a farm product Multi-system coverage:
Farm suppliers, farmers, traders, processors and

retailers Institutional arrangements affecting various stages in the agri-business system, such as Government agencies, co-operatives, contractors, financial partnerships, future markets, trade associations

B.B.A. Semester V

For educational purposes only

Charanya Arora

Agri-Business Defined
Modern Agri-business as a concept: Harvard University, 1957- A Conception of Agribusiness, J. Davis, R. Goldberg Agri-business is the sum total of all operations involved in the manufacture and distribution of farm supplies, production activities on the farm, and the storage, processing and distribution of farm commodities and items made from them.
- J.D. Drilon Jr., Introduction to Agribusiness Management

B.B.A. Semester V

For educational purposes only

Charanya Arora

What Constitutes Agri-Business?

Agri-business is concerned with agriculture and allied activities: Dairy, fisheries, horticulture.. It includes all business enterprises that buy from or sell to the farmers
Productive services- feed, seed, fertiliser,

equipment, energy, machinery Agricultural commodities- all food or fibre Facilitative services- credit, insurance, marketing, storage, grading, transportation, packaging, processing, marketing and distribution

B.B.A. Semester V

For educational purposes only

Charanya Arora

Scope of Agri-Business
Resource Supply Sector Feed manufacturing and Supply Seed Production and Supply Farm Machinery Transportation Energy Finance Fertilisers Product Marketing Sector Storage and Warehousing Commodity Marketing Transportation Institutional Support Processing Sector Wholesale and Retail Food Soap Paint Textiles Tobacco Wood Paper

Food processing Fats and Oils Alcoholic beverages Textiles Wood and Paper Tobacco Spices

B.B.A. Semester V

For educational purposes only

Charanya Arora

Why Study Agri-Business?

Agri- GDP Grew Slower Than The Aggregate
Annual Average % Growth Rate at Constant Prices

10.0%
9.0%

9.0% 8.0% 7.0%

6.0% 6.7% 5.5% 4.7% 4.1% 3.2% 3.4% 2.1% 1.3% 2.3% Overall Agriculture and Allied 7.6%

6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0%

Seventh Plan Annual Plan Eighth Plan

Ninth Plan

Tenth Plan

Eleventh Plan

B.B.A. Semester V

For educational purposes only

Charanya Arora

Why Study Agri-Business?

The Average Indian who is not a farmer earns about four times more than the Indian farmer! 62% of our population is engaged in Agriculture Banking sector: 18% Net Bank Credit for agricultural advances Emerging industries like retail and food processing, and domains such as supply chain Corporate Social Responsibility initiatives
The Agri-Business sector offers great scope to create a Triple Bottom Line: Social, Economic and Environmental

B.B.A. Semester V

For educational purposes only

Charanya Arora

Forms of Agri-Business
Farm business Agro-based industries and agro-allied industries: Agro-input industries and agro-processing Agro-services: Credit, transportation, grading, warehousing, agri-extension services

Export based units

B.B.A. Semester V

For educational purposes only

Charanya Arora

Some concepts explained

Forward and Backward linkages: If production at the farm is taken as the basic area, then farm supplies, resource and extension activities and government policies and programmes are the earlier linkages called backward linkages. Linkages coming after farm production such as processing and marketing are called forward linkages.

B.B.A. Semester V

For educational purposes only

Charanya Arora

Some Concepts Explained

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
B.B.A. Semester V For educational purposes only Charanya Arora

Some Concepts..
Factors Affecting Marketable Surplus: The marketable surplus differs from region to region and with in the same region, from crop to crop. It also varies from farm to farm. On a particular farm, the quantity of marketable surplus depends on the following factors.
Size of holding Production of Commodity Price of the Commodity Size of family Requirements of seeds and feed

B.B.A. Semester V

For educational purposes only

Charanya Arora

Some concepts..
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. The marketed surplus is more than the marketable surplus when the farmer retains a smaller quantity of crop than his actual family and farm requirements. This is true especially of small and marginal farmers whose need for cash is immediate. The situation of selling more than marketable surplus is termed as distress or forced sale. Such farmers generally buy the produce from the market in a later period to meet their requirements.

B.B.A. Semester V

For educational purposes only

Charanya Arora

Some concepts..
The marketed surplus is less than the marketable surplus when the farmer retains some of the surplus produce. Large farmers generally sell less than the marketable surplus because of their better retention capacity. They retain extra produce in the hope that they would get a higher price in the later period. Some times farmers retain the produce even up to the next production season Farmer may substitute one crop for another crop either for family consumption purpose or other farm requirements because of the variation in prices. With the fall in the price of the crop relative to a competing crop, farmer may consume more of the first and less of the second crop.

The marketed surplus may be equal to the marketable surplus when the farmer neither retains more nor less than his requirement. This holds true for perishable commodities and agricultural raw materials like cotton, jute etc.
For educational purposes only Charanya Arora

B.B.A. Semester V

Agricultural Marketing
Agricultural marketing is the study of all the activities, agencies and policies involved in the procurement of 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. Agricultural marketing studies both farm produce marketing as well as input marketing.

B.B.A. Semester V

For educational purposes only

Charanya Arora

Importance of Agricultural Marketing

Optimization of resource use and output management: scales down the inefficiencies in transportation, processing and storage Increase in farm income: better prices for farm products, induce them to invest in better inputs Widening of markets: physical distribution efficiency broadens the market geographically Growth of agro- based industries: sugar, cotton, silk industries Price signals: farmers plan production in accordance with the need of the economy
B.B.A. Semester V For educational purposes only Charanya Arora

Importance of Agricultural Marketing

Adoption and spread of new technology Employment: packaging, transportation, storage, processing industries employ millions Addition to National income Better living standards: diminishes rural poverty, equitable food prices, earns foreign exchange, eliminates economic waste Creation of Utility:
Form utility: raw material into finished products

Place utility: physical distribution

Time utility: utility via storage Possession utility: ownership transfer
B.B.A. Semester V For educational purposes only Charanya Arora

Agri-Business Inputs
Agricultural Inputs

Consumable Inputs
Nutrition, food Soil Care Plant Care Seed Care Power Need Food Tools

Durable Inputs
Equipment Water Supply Sheds Transport Livestock Spares

B.B.A. Semester V

For educational purposes only

Charanya Arora

Fertilisers Demystified
Fertiliser is generally defined as "any material, organic or inorganic, natural or synthetic, which supplies one or more of the chemical elements required for the plant growth". The primary nutrients are nitrogen, phosphorus and potassium. Their concentration in a chemical fertiliser is expressed as a percentage of total nitrogen (N), available phosphate (P2O5) and soluble (K2O). The grade of a fertiliser is expressed as a set of three numbers in the order of per cent N, P2O5 and K2O. Thus ammonium sulphate is represented as 20.6-0-0 (since it does not contain phosphorus and potassium), single superphosphate as 0-16-0 (as it does not contain nitrogen and potash), muriate of potash as 0-0-60 ( as it does not contain nitrogen or phosphorus).
B.B.A. Semester V For educational purposes only Charanya Arora

Fertilisers- Indias Production and Consumption

The production of nitrogen (N) and phosphorus (P) fertilizer together has increased from mere 0.3 lakh MT in 1950-51 to about 147 lakh MT in nutrients terms in 2001-02 India the 3rd largest fertilizer producer in the world Since there are no commercially viable sources of potash (K) in the country, its entire requirement is met through imports. The overall consumption of fertilizers in nutrient terms (N, P & K) currently is about 175 lakh MT per annum Per hectare consumption of fertilizers- less than 1 Kg in 1951-52-has gone up to the level of 90.1 Kg. in 2001-02 Regional variation in fertiliser consumption: 5 states account for 50% consumption

B.B.A. Semester V

For educational purposes only

Charanya Arora

Fertilisers- Decontrol and Subsidy

Decontrol: Phosphatic and Potassic fertilisers were decontrolled in 1992, low analysis fertilisers like ammonium chloride etc were decontrolled in 1994 Consumption pattern differing after decontrol- distortion in the nutrient consumption ratio and imbalanced fertiliser use The nitrogenous fertilizers are relatively cheaper compared to P & K fertilizers after decontrol of fertilizer prices in August 1992. To ensure the balanced application of NPK fertilizers recently the Government of India increased the subsidy for P&K fertilizers Subsidies: In 2007-08, Rs. 12,900 Cr. on indigenous fertilisers and Rs. 6753 Cr. on imported fertilisers

B.B.A. Semester V

For educational purposes only

Charanya Arora

Fertilisers- Channels and Challenges

Distribution Channels

Co-operative Societies Institutional Agencies Wholesale Traders Retail Traders Company-managed outlets

Challenges:

Financial constraints Ignorance of Cost:Value System Inefficiencies: Co-operatives sometimes inhibit

farmers, middlemen hike prices Only 53% of the effect of subsidies flowing to the sector Reach Marketing fertilisers- Discuss

B.B.A. Semester V

For educational purposes only

Charanya Arora

Seeds Industry
Seed production and Supply- Increased attention after WW 2 Seed farms Registered Seed Growers Co-operative societies to store and market seeds Government quality control HYV Programme National Seeds Corporation Limited: Develops and distributes various types of seeds at national level State Governments regulate at the local level Both government departments and private players involved in the manufacture and distribution of seeds

B.B.A. Semester V

For educational purposes only

Charanya Arora

Seeds Distribution
Distribution Channels: Company Outlets, Seed Centers, Wholesaler, State Co-op./District/Taluka Society Distribution Agencies:
Agricultural Department Agro-Industries Corporation National Seeds Corporation Outlets Wholesalers, Private Traders and Retailers

Seed demand forecasting Pricing: Cost plus, mark-up National Seed Policy, 2002

B.B.A. Semester V

For educational purposes only

Charanya Arora

Approaches to Agri-based Marketing

Various approaches have been suggested and used to study marketing problems. These are functional, institutional, commodity and behavioural approaches

B.B.A. Semester V

For educational purposes only

Charanya Arora

Introduction to Agro Based Industries

Buy from agriculture, or sell to agriculture Primary Commodity, by-products and waste matter can be scientifically processed Uniqueness of agro-industries Seasonality, perishability and variability of raw material Supply and demand imbalances, inventory controls, production scheduling challenges Agro industrial products require greater speed and care in handling and storage- nutritional quality and consumable-ability need to be retained Production, scheduling and quality control needs to be flexible High reliance on procurement with respect to cost control

B.B.A. Semester V

For educational purposes only

Charanya Arora

Agro Based Industries

Technology plays a part in designing new ways to meet processing requirements of a particular material, and in meeting post harvest handling requirements Ministry of Food Processing Industries Creating a strong and effective food processing sector Ensuring increased incomes to producers in rural areas Increasing job opportunities in rural India Bringing technology and marketing to aid farmers Mobilising cost effective technology for storing, processing and marketing agricultural produce Organisational restructuring of domestic markets Furthering exports through creating adequate surpluses

B.B.A. Semester V

For educational purposes only

Charanya Arora

Agro Based Industries- Policy Areas

Policy Areas for Agro-Industries
Land available for cultivation is inelastic, and future

requirements will depend on more cropping intensity, waste management, seed quality etc. Agricultural productivity needs a boost with larger industrial inputs, regional specialisation and better farm information Reduction in wastage Exploring the market for Agro-based health products Potential to add to processed food with appropriate nutrients and increase processed value
For educational purposes only Charanya Arora

B.B.A. Semester V

Agro-Based Industries- Procurement

Raw material procurement
Quantity: Optimum quantity with assured supply

sources Quality: Strong backward linkages Scheduling: Staggering cultivation over different regions, accounting for product seasonality Cost: Processing plant location, quality control practices, technical guidance costs Procurement systems: Contract farming, Direct Farmer Interface, Co-operative network; Govt. via Institutional Agencies, Levy System, Open market

B.B.A. Semester V

For educational purposes only

Charanya Arora

Sugarcane Product Matrix

Commercial Gur Making Gur Molasses Sugar Factory Various grades of Sugar Bagasse
Fuel, Cattle Feed, Activated Carbon, Paper Board, Paper

Khandsari Units

Brown Sugar Molasses

Press Mud
Wax, Fuel, Compost Manure, Chalk, Dye Stuff

Molasses
Alcohol, Acids, Chemicals, Alcoholic drinks
B.B.A. Semester V For educational purposes only Charanya Arora

The Sugar Industry

Core product is sugar, but efficient processing have led to the development of many ancillary industries A sugar factory crushes sugarcane for approximately six months of the year, ranging from September until May Sugarcane procurement constitutes the bulk (60-70%) of the costs of a factory. The harvested cane needs to be crushed within a few hours to avoid loss of sucrose content, necessitating close coordination of harvesting and cane supply with cane crushing operations The Indian sugar industry is marked by co-existence of different ownership and management structures since the beginning of the 20th century. At one extreme there are privately owned factories in the state of Uttar Pradesh (UP) that procure sugarcane from thousands of neighboring cane growers. At the other extreme are cooperative factories owned and managed jointly by farmers, especially in the western state of Maharashtra. In between are state owned factories in both states and state managed cooperatives in UP.
B.B.A. Semester V For educational purposes only Charanya Arora

Sugar Industry Price Regulation

Prices of sugarcane are supported through systems operated by the Central and the State Governments. Based on the recommendations of the Commission for Agricultural Costs and Prices (CACP), the Central Government announces at the beginning of each season the Statutory Minimum Price (SMP) that mills are required to pay for sugarcane. In India the government purchases a fixed proportion of the sugar output of each factory at a controlled price (called the levy price), with the remainder sold in the free market. The sugar so procured is distributed to consumers through fair price shops that serve as outlets of the public distribution system. The levy price is determined on the basis of a cost plus formula, and usually lies substantially below the market price Sugar mills have to give 10% of their produce to the PDS

B.B.A. Semester V

For educational purposes only

Charanya Arora

Co-Operative Sugar Industry

203 cooperatives are a dominant component of the industry, accounting for over 56% of the total capacity of around 19 mt per annum of sugar. Of the 203 cooperatives, nearly 83 (or 41% of total cooperatives) are concentrated in Maharashtra, followed by UP with 28 mills. Of the 197 non-cooperative and/or private sugar mills, nearly 78 (or 40%) are located in UP, followed by TN, AP, and Karnataka. Account for 43% of sugar production Voluntary Business organisations formed by their own members to facilitate trade collectively Members> Co-Operative Sugar Factories> State Federation of CoOperative Sugar Factories> National Federation of Co-Operative Sugar Factories
Co-Operative Sugar Factories buy sugarcane from members for equitable prices, improve sugarcane cultivation and provide inputs, produce sugar and by-products and carry out developmental activities for members National Federation of Co-Operative Sugar Factories co-ordinate the working of member sugar factories, assist in establishing new Co-Operative Sugar Factories, provide technical consultancy, publications and liaison with the Govt. and other financing agencies

For educational purposes only Charanya Arora

B.B.A. Semester V

Sugar Industry Environment Analysis

Bargaining Power of SuppliersHigh As the Govt. allocates the area from where the sugarcane can be procured and announces the purchase price (SMP/SAP), it protects the interest of the sugar cane farmers. Threat of Substitutes Low Alternate sweeteners to refined sugar in India are gur and khandsari; Share of gur and khandsari declining Barriers to EntryMedium The Govt. used to give incentives to set up new plants by granting higher free sales quota for the first five to eight years of operations that had led to mushrooming of small units. This incentive has been withdrawn and the new sugar units are required to comply with the levy quota regulation from first year of operations.

Bargaining Power of BuyersLimited Govt. influences distribution, purchase price of levy sugar and the free sale quota releases for sugar

Inter Firm Rivalry Intense With around 400 units engaged in production of sugar, the industry is highly fragmented; Individual player does not have market share more than 3%; Share of cooperatives is relatively high

B.B.A. Semester V

For educational purposes only

Charanya Arora

Agro Services- Transportation

Role of Transport as a Service It helps in the growth of industries whose products require quick marketing e.g. vegetables, flowers, milk and fish. It increases the demand for goods through widening of market It creates place utility by bridging the gap between production and consumption centres Transport offers time utility to products. It helps in stabilizing prices by moving commodities from surplus area to deficit area. Ensures even flow of goods into the hands of consumers. It enables to consumers to enjoy the benefits of many goods not produced locally Transport intensifies competition, which, in turn, reduces prices. Prices are also reduced because of the facilities offered by transport for large-scale production

B.B.A. Semester V

For educational purposes only

Charanya Arora

Transportation
Classification: Discuss the merits and demerits of land, air and water based travel Problems in Transportation of Agricultural Commodities There are losses/damages in transportation because the use of poor packaging material, over loading of the produce, and poor handling, especially, of fruits and vegetables at the time of loading and unloading The transportation cost per 100 rupee worth of the produce is high because of perishability of the produce and its bulkiness There is lack of co-ordination between different means of transport e.g. railways and truck companies Non- availability of wagons at the time of harvest

B.B.A. Semester V

For educational purposes only

Charanya Arora

Transportation SystemsImprovements
Full utilization of the transportation facility in terms of load. This will reduce the per quintal cost of transportation Standardization of transport cost per quintal for different means Reduction in spoilage, damage, breakage and pilferage by better handling, packing and the use of proper types of wagons Removal of barrier in the transport of agricultural produce between states or regions The bulky agricultural produce can be converted into value added products near production centres so there will be reduction in cost Increased speed and capacity of the vehicles used in transportation Unification of railway gauge system, extension of roads and vehicles to every village

B.B.A. Semester V

For educational purposes only

Charanya Arora

Storage

Storage involves holding and preserving goods from the time they are produced until they are needed for consumption. Role of Storage as a Service Agricultural products are seasonally produced but are required for consumption throughout the year Some goods are produced throughout the year but their demand is only seasonal e.g. umbrella, fans, woolen clothes, agricultural inputs The quality of certain products increases by storing e.g. whisky, wine, tamarind, rice, and pickles Storage of some farm commodities is necessary for ripening e.g. banana, mango Storage protects the quality of perishable and semi-perishable products from detoriation. It helps in stabilization of price. Storage is necessary for some periods for the performance of other marketing functions.

B.B.A. Semester V

For educational purposes only

Charanya Arora

Types of Storage Structures

Underground Storage Structures: Underground storage structures are dugout structures similar to a well with sides plastered with cowdung. They may also be lined with stones or sand and cement. They may be circular or rectangular in shape. The capacity varies with the size of the structure. Advantages Underground storage structures are safer from threats from various external sources of damage, such as theft, rain or wind The underground storage space can temporarily be utilized for some other purposes with minor adjustments The underground storage structures are easier to fill up owing to the gravity factor!

B.B.A. Semester V

For educational purposes only

Charanya Arora

Types of Storage Structures

Surface storage structures Foodgrains in a ground surface structure can be stored in two ways - bag storage or bulk storage. Bag storage

Bulk or loose storage

Each bag contains a definite quantity, which can be bought, sold or dispatched without difficulty; Bags are easier to load or unload. It is easier to keep separate lots with identification marks on the bags. The bags which are identified as infested on inspection can be removed and treated easily; and The problem of the moisture on grains does not arise because the surface of the bag is exposed to the atmospheres

The exposed peripheral surface area per unit weight of grain is less. Consequently, the danger of damage from external sources is reduced; and Pest infestation is less because of almost airtight conditions in the deeper layers.
For educational purposes only Charanya Arora

B.B.A. Semester V

Agencies (Functionaries) in Agriculture Marketing

Big cultivators. Itinerant traders. Village merchants (banias) Katcha Arhatias (small commission agents) Pucca Arhatias (wholesale commission agents) Co- operative mktg. societies.

B.B.A. Semester V

For educational purposes only

Charanya Arora

Classification of Markets
On the basis of degree of competition Perfect markets Imperfect markets

On the basis of nature of commodities Commodity market

Monopoly market Duopoly Market Oligopoly market

Capital market

Produce exchange market. Manufactured goods markets. Bullion markets Money market. Foreign exchange market. Stock exchange market

On the basis of time (time span)

Very short period markets Short period markets Long period markets

On the basis of area or coverage Village markets Regional markets (District) National markets World markets

B.B.A. Semester V

For educational purposes only

Charanya Arora

Classification of Markets
On the basis of location or importance Village markets Primary wholesale markets. Secondary wholesale markets Terminal markets. Seaboard markets On the basis of number of commodities in which transactions take place General markets Specialized markets On the basis of stage of marketing Producing markets Consuming markets On the basis of extent of public intervention Regulated markets Unregulated markets

On the basis of nature of transaction Spot or cash markets Forward or future markets
On the basis of volume of transaction Wholesale markets Retail markets

B.B.A. Semester V

For educational purposes only

Charanya Arora

Defects in Agricultural Marketing

Lack of organisation Forced sales Surplous middle Multiplicity of market charges. Malpractices in markets Multiplicity of weights & measures Adulteration. Inadequate storage facilities Transportation means not well developed Absence of grading & standardization of Agricultural produce Lack of sufficient market information Lack of financial facilities at cheaper rates

B.B.A. Semester V

For educational purposes only

Charanya Arora

Selling Behaviour of Farmers

Financial condition of the farmer Nature of commodity to be marketed Marketable surplus Binding of farmer to particular middleman Development of marketing institutions Transport and infrastructure facilities availability Market information Government policies Weather conditions at the time of harvest Packing materials and destination of markets
For educational purposes only Charanya Arora

B.B.A. Semester V

Marketing Channels
Marketing channels are routes through which agricultural products move from producers to consumers. The length of the channel varies from commodity to commodity, depending on the quantity to be moved, the form of consumer demand and degree of regional specialization in production

B.B.A. Semester V

For educational purposes only

Charanya Arora

Approaches to the Study of Marketing

Various approaches have been suggested and used to study marketing problems. These are functional, institutional, commodity and behavioural approaches Functional Approach A marketing function is an act, operation or service by which the original producer and the final consumer are linked The functional approach splits down the field of marketing into a few functions This method analyses in detail the specific functions of marketing such as buying, selling, transportation, storage, standardization, grading, financing, risk taking and marketing research Advantages

Can make inter functional comparison of the marketing costs. Inter agency comparison of the cost of performing a marketing function can be made. Inter commodity comparison of cost of performing the various functions can also be made

B.B.A. Semester V

For educational purposes only

Charanya Arora

Approaches to the Study of Marketing

Disadvantages of the Functional Approach

Institutional Approach

An undue emphasis on functions of marketing does not permit one to know how these functions are applied to specific business operations The marketing functions are so numerous that it is difficult to eliminate the unnecessary from the necessary functions

Commodity Approach and Behavioural Systems approach

For educational purposes only

Study of agencies and institutions, which perform various functions in the marketing process Such Institutions can be categorised into individuals, partnership, corporation, cooperatives, or government organizations Agencies vary widely in size and ownership. They get their reward in the form of marketing margins This approach helps us to find answers to the problems of 'who does what' in the marketing process, whether the margin of the agency is commensurate with the services rendered, which government regulations are necessary so that their unlawful activities may be curbed, and how to simplify the procedural system

B.B.A. Semester V

Charanya Arora

Marketing Functions- Two Ways of Slicing the Pie

Functions of Exchange: process of passing goods into the consumer's hands is called function of exchange . Eg: Selling and buying
Functions of Concentration

Functions of Physical Supply: Transportation, storage and warehousing

Facilitating Functions: Financing, risk taking, standardization and market information

Functions of Dispersion

Goods (raw materials and WIP), and products are collected together at a central point to facilitate further action upon them. Concentration embraces functions such as assembling, storage, financing, grading, standardisation, risk taking etc. It refers to the allotment of the raw materials to the producer and the final products to the consumer in lots that are suitable for their consumption Dispersion embraces functions such as selling, advertising, and transportation

B.B.A. Semester V

For educational purposes only

Charanya Arora

Functions of Exchange: Buying

Buying is the first step in the process of marketing. Buying involves careful planning and needs setting up of policies and procedures Buying decisions
What to buy (Product)?

When and how much to buy? (Time and quantity)

From whom and where to buy? (Source) On what terms and conditions and prices? (Price)

Buying is done for consumption, further processing, or for resale Buying involves transfer of ownership
B.B.A. Semester V For educational purposes only Charanya Arora

Functions of Exchange: Assembling

Assembling is to bring goods together at a location, where the goods are required either for production or for consumption purposes Assembling involves making commodities available when and where they are wanted Assembling begins after buying ends- the goods have already been purchased Assembling can involve creating and maintaining stock of good purchased from different sources

B.B.A. Semester V

For educational purposes only

Charanya Arora

Functions of Exchange: Selling

Selling means the transfer of ownership of goods or services to a buyer in exchange of money Selling is the personal or impersonal process of assisting or persuading a prospective consumer to buy a commodity or service Forms of sales of agricultural produce in India Sale Under Cover (Hatta System) Open Auction Private Arrangement Quoting on samples Dara Sale Moghum Sale Close Tender System

B.B.A. Semester V

For educational purposes only

Charanya Arora

Functions of Exchange: Warehousing

Warehouses are scientific storage structures specially constructed for the protection of quantity and quality of stored products Warehousing is a storage done on scientific lines with a commercial or business motive & run by specialized agencies The important functions of the warehouse are
Scientific storage Financing Price Stabilization Market Intelligence
B.B.A. Semester V For educational purposes only Charanya Arora

Types of Warehouses
Based on Ownership Private Warehouses: owned by individuals or large businessmen Co-Operative Warehouses: owned & constructed by co-operative institutions to store their goods Public Warehouses: controlled by the government. Public goods are stored Bonded warehouses (at seaports or airports) Based on type of commodities stored General Warehouses: ordinary warehouses used for storage of foodgrains, fertilizers etc. Special commodity warehouses: used for the storage of specific commodities like tobacco, potato, onion etc. Refrigerated warehouses where the temperature is maintained at 30F to 50F or even less
Charanya Arora

B.B.A. Semester V

For educational purposes only

Warehousing in India
Warehousing in India National co-operative Development and Warehousing Board (1956) Central Warehousing Corporation (1957) State Warehousing Corporation Food Corporation of India Co-operative Sector Poor utilization Lack of knowledge about available facilities to the farmers. Location disadvantages. Complicated and time-consuming procedure of depositing and withdrawing the produce from the warehouses Non-availability of Nationalized banks at the villages to advance loans against warehouse receipt Small quantity of surplus produce available with most farmers and the pressing need for finance

B.B.A. Semester V

For educational purposes only

Charanya Arora

Rural Godowns
The Government of India launched a scheme for the establishment of National Grid of Rural Godowns (NGRG) in July 1979. The scheme aims at the creation of network or rural godowns in the states and union territories, primarily to take care of the storage requirements of the small and marginal farmers. The scheme was launched with the following specific objectives. Prevention of distress sale of food grains and other agricultural commodities immediately after harvest. Reduction in quantity and quality loss arising at present due to unscientific storage by farmers. Reduction in pressure on transport system in the post harvest period. Creation of employment opportunities in rural areas. Helping the fanners in getting loans against stored products. Helping in easy procurement of food grains by Food Corporation of India. The cost of construction of rural godowns is subsidized to the extent of 50 percent is to be shared equally by Central and State governments. The remaining 50 percent capital is arranged by the implementing agency such as co-operative marketing society in the form of loan from the commercial banks
For educational purposes only Charanya Arora

B.B.A. Semester V

Facilitating Functions- Financing and Risk Taking

Between production and consumption ownership of commodities shifts many times, middlemen need finance not only for the purchase of stocks but for performance of various marketing functions such as processing, storage, packaging, transport and grading. The process of arranging necessary finance for marketing is termed as "Marketing Finance Risk bearing / Taking: Risk in marketing may be defined as uncertainty in regard to cost, loss, or damage Physical Risk: This includes a loss in the quantity and quality of the product- due to fire, flood, earthquake, insects, pests, fungus, excessive moisture or temperature, careless handling unscientific storage, improper packing, looting and arson. Price Risk: Prices change not only year to year, but also during month-to-month, day-to-day or even on the same day. Institutional Risk: These include risks arising out of changes in government's budget policy, in tariffs and tax laws, in the movement restriction, statutory price controls, and the imposition of levies.

B.B.A. Semester V

For educational purposes only

Charanya Arora

Facilitating Functions-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. Advantages of processing It changes raw food into edible and palatable form By processing, the value addition to farm products is increased Processing function makes it possible for us to store perishable and semi-perishable agricultural commodities for later use It generates employment It widens the market Processing serves as adjunct to other marketing functions such as transportation, storage and merchandising

B.B.A. Semester V

For educational purposes only

Charanya Arora

Facilitating Functions- Standardization and Grading

Standardization 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: Means sorting the produce into different unique lots according to the quality specifications laid down. Grading follows standardization. It is a sub-function of standardization

B.B.A. Semester V

For educational purposes only

Charanya Arora

Advantages of Grading
Grading before sale enable farmers to get a higher price for their produce. Grading facilitates marketing Grading widens market, without inspection the sale can be effected over phone at distant places. Grading helps consumers to get standard quality products at fair price shops. Grading contributes to market competition and pricing efficiencies. Grading helps the farmer to get finance against pledging in CWC godowns to get claims settled by insurance companies and railways. improve the keeping quality of stored products by removing inferior goods from the good lot facilitates future trading in a commodity

B.B.A. Semester V

For educational purposes only

Charanya Arora

Grading in India
The Agricultural Produce (Grading and Marking} Act 1937, authorizes the Central Government to frame rules relating to the fixing of grade standards and the procedure to be adopted to grade agricultural commodities included in the schedule Grading is voluntary for trade in India Export grading has been made voluntary since 1991

B.B.A. Semester V

For educational purposes only

Charanya Arora