Characteristics of the products A raw material: The output of agriculture is largely a raw material that will be used for further processing. This processing may be limited, as in converting livestock into meat. It may be highly complex, as in converting wheat into wheat products.

Bulky and perishable products: Compared to most other products, agricultural products are both bulkier and more perishable. Bulk affects the marketing functions concerned with physical handling. Products that occupy a lot of space in relation to their value almost automatically raise unit transportation and storage costs. A truckload of drugs would be considerably more valuable than a truckload of wheat. In this sense, fruits, vegetables, grain, and meats are all quite bulky.

Perishable, too, can be measured only in relation to other products. All products ultimately deteriorate. Some agricultural products, like fresh strawberries or fresh peaches, must move into consumption very quickly or they completely lose their value. Such products as cattle or poultry continue to grow and change if storage in the form of withholding them from market is attempted. Wheat, on the other hand, can be stored for a considerable length of time without much deterioration.

Even the most storable agricultural products, however, are usually more perishable than other industrial products. Perishable products require speedy handling and often special refrigeration. Quality control often becomes a real and costly problem. From the farmer’s viewpoint, withholding from the market is extremely difficult; when the products are ready, they must move.

Quality variation: The general quality as well as the total production of agricultural commodities varies from year to year and from season to season. During some years the growing conditions are such that the crop in general of high quality. In other years, unfavorable conditions prevail and the crop is of much lower quality. Such variations in the quantity of production make it very hard to apply uniform standards for grades from year to year. If the quality of the apple crop is uniformly high, the standards for top-grade apples may be strictly adhered to.

On the other hand, if the quality of the apple crop is poor, grading standards may be relaxed somewhat to permit some apples to be marketed as top quality. Variations in the quality may also change marketing patterns. For example, during a year in which corn does not mature properly, large amounts of ‘soft’ corn are harvested. The corn will spoil if it is not used before the following years. Farmers may then buy additional feeder stock in order to utilize this corn. The marketing pattern of these feeders, however, will be different from the usual pattern because the feeding period is adjusted to the condition of the corn.

Characteristics of production Total output: The long run trend in food production is upward. The rising food supply per capita has been a mixed blessing for farmers. On the one hand, it is dramatic proof of the efficiency of agriculture and its contribution to the rising standard of living. On the other hand, this tremendous productive capacity of agriculture has frequently depressed farm prices and incomes. Maintaining an acceptable balance of rising food supplies and fair farm prices has been a difficult task for food policy.

Annual variability in production: There are years where the situation of increasing, decreasing, and stable farm output. These are caused by farmer responses to prices and other uncontrollable factors such as weather and disease. Such changes in farm output influence the food marketing process and the use of the food marketing system’s capacity. Year to year changes in farm supplies have a significant impact on the purchase prices, need for storage facilities, and plant utilization rates of food marketing firms. The desire to reduce the risks and uncertainties of fluctuating farm supplies is one of the forces creating closer contractual ties between marketing agencies and farmers.

Seasonal variability in production: In addition to the annual production variability, much of agricultural production is highly seasonal. Livestock receipts may vary substantially throughout the year. The harvest of such crops as paddy, fruits, and vegetables is crowded into a relatively short period. Egg and poultry production is larger in seasonal fest and remain stable after the period. To the extent that the product is storable, storage facilities must be furnished to hold the product until it is consumed.

This means that during part of the year, storage will be used at near capacity, at other times it will be almost empty. If the product cannot be stored it must either be processed or consumed immediately. This may result in processing plants running at capacity for some periods and well below capacity, or even shut down, for other periods. If the product must move directly into consumption, transportation and refrigeration facilities must be available immediately. These situations affect the costs of the marketing process.

Geographic concentration of production Although a variety of farm products is produced in all states, there is increasing geographic specialization of farm production. For example in Malaysia, north area tends to specialize in the production of commodities for which its resource base is best suited: paddy, fruits, etc. The marketing system, of course, must adjust to these changing geographic production patterns.

Varying costs of production: There is no single cost of production for all farmers. Farmers cost of production are affected by climate, technology, farm size, and individual managerial skills. Consequently, the cost of producing a farm commodity varies widely by regions and among farmers. Most studies have found that the average cost of farm production falls as small farms grow larger, but there is a point at which average cost do not fall further as farm size increase.

The farm supply industry: The farm supply industry provides such agricultural inputs as chemicals, seeds, machinery, feeds, capital, labor, land, and so on. These may be supplied by the farm or purchased from the industrial or farm supply sectors. The growth and importance of the farm input sector affects farmers in several ways.

It has added another market for the farmer to operate in. The farm input markets have also been responsible for much of the dramatic gain in agricultural efficiency in recent years, especially the chemical and machinery markets. To ensure the effective of the product and production structure, thus marketer need to have a proper management practices, proper timing applications of insecticides, the need of storage facilities, the availability of transportation, and credit facilities.

THE FARM MARKETING PROBLEMS The farm problem is usually associated with unstable and relatively low farm prices and incomes. A related set of farmers’ problems can be termed the farm marketing problems, which have several dimensions.

First, farmers do not have control over output of their production activities to the same degree as nonfarm firms. Agricultural output comes from many small units operated independently. The production is to a great extent dependent on weather and biological patterns of production. Farmers may wish to change their outputs and attempt to do so by planting more or fewer acres or by breeding more or fewer pigs.

However, the final output is beyond the farmer’s control, as weather, disease, and other relatively uncontrollable factors will affect yields per acre and the productivity of animals. It is not possible to quickly shut off or turn on agricultural production. This means that marketing agencies –and also consumers-in short run must adjust to farm supplies rather than farmers adjusting to agencies.

A tomato canner must estimate how much product can be sold at a price estimated nearly a year in advance. From this estimate the processor can then contract suitable acreage with producers. If estimations of the market conditions and yields turn out correctly, the canner will pack and sell as planned. But market estimates could be wrong. The weather could be unfavorable. Overestimates of yield may find the canner without enough tomatoes to meet market needs.

Aside from such short-run adjustment problems, it takes long periods to change the production of some commodities. Fruit trees are planted years in advance of their coming into production. The market situation may change during this period. The expansion of milk production is a slow process. Even significantly decreasing farm production is slow and difficult. Once an investment is made in buildings, equipment, and other fixed assets, changes are very difficult and expensive to make.

This inability to adjust quickly to changing conditions creates a high-risk element in agriculture. The market for which a long-time production plan is made may change by the time the product is finally marketed. Changes in consumer tastes may find agricultural resources being devoted to the production of something that is no longer so greatly desired. High prices resulting from shortages of production may reduce the consumer market for that product when it finally arrives in quantity.

This relative unpredictability and uncontrollability of output creates many farm marketing problems. Farmers are adopting new risk management production and marketing strategies to cope with their increasing volatile markets, such as diversification, futures market hedging, and contracting.

A related component of the farm marketing problem is the difficulty farmers’ face in improving their prices through independent or group activities. Farmers are, for the most part, price-takers- they cannot, individually, influence the price of their products through their output decisions. In order to raise prices through the control of supplies or advertising programs, farmers must act as a group. However, the large numbers of farmers and their differing economic circumstances frequently frustrate any attempts to organize and market jointly.

The free-rider problem often plagues farmers when they do attempt to organize to influence farm prices. Free riders hamper any group effort that requires each member to sacrifice for the overall welfare of the group when the group benefits go to everyone regardless of their participation. For, instance, farmers may try to raise their prices through voluntary supply-control programs, advertising efforts, or bargaining associations.

If successful, the resulting price rise benefits all farmers, whether or not they have contributed to the program. Thus, it is sometimes difficult to achieve the group participation and support necessary for success. Many of these conflicts exist in agriculture where what is in the best interests of a single farmer may differ from the interests of a farmers as a group.

For example, if prices and profits for a commodity are high, individual farmers will have an incentive to expand output. A few can do this without consequence. However, if all producers attempt to expand, market prices and profits will fall. In market analysis care must be taken in generalizing from the individual to the group.

The cost-price squeeze is another component of the farm marketing problem. The competitive conditions of agriculture tend to keep farm prices close to the costs of production. Falling farm prices would not be so critical if they were accompanied by falling farm costs, or if the farmer could adjust input costs as prices fell.

However, the increased dependence of farmers on off-farm produced supplies leaves farmers little leeway in adjusting to falling farm prices. Rising farm prices, on the other hand, attract farmers to more profitable enterprises tend to bid up the production, especially land –another way that the farmer is caught in the cost-price squeeze.

To many, the superior bargaining power of the buyers of farm products as compared with that of farmers is the most serious farm marketing problem. Food marketing firms are usually larger and because of their national and international activities, normally have better market information than the farmers from whom they buy.

In addition, through contracts and other arrangements, food marketing firms are thought to gain some control over farm decisions and farm markets. “Who will control agriculture” has been a major controversy in food marketing.

Changing food market pricing efficiency is still another element of the farm marketing problem. Perhaps at one time farmers did not need to be concerned with food marketing because competitive conditions assured all farmers a fair-or at least equal-price. However, with today’s direct negotiations, integration, and contractual arrangements, there is no longer any assurance of a high level of pricing efficiency in food markets. As a result, farmers must be more skilled in their marketing decision.

Finally, there is growing concern about the increasing gulf between the farm sector and the food marketing sector. Farmers retain a commodity orientation, whereas food marketing firms stress a merchandising orientation. Furthermore, some farmers have chosen not to participate in many of the food marketing activities that appear to have the greatest growth and profit potential.