Agricultural Marketing & Agricultural Economics [Introduction]

marketing

Series of services or process of moving

the product from the point of production

to the point of consumption

market

Place where buyers and sellers meet to

exchange goods and services

Buyers

Sellers

Facilities

Elements of Marketing

Point of production

Point of first sale by the

farmers, typically at the farm or

at the farmers home

Point of consumption

Point where marketing ends

or point of last purchase or

sale.

PRODUCT SERVICES

Services added prior

to the point of

production

MARKETING SERVICES

Services added after

the point of

production

MARKETING SERVICES

processing -> transporting -> storing -> buying and selling

Difference in marketing of agricultural and manufactured goods

PERISHABILITY

SEASONALITY

BULKINESS

VARIATION IN QUALITY

IRREGULAR SUPPLY

PROCESSING

Mass markets

large markets targeted at a large group of customers, with

similar characteristics

Marketing channels

1. Contract-Buyers

2. Wholesaler

3. Commission Agent

4. Wholesaler-Retailer

5. Assembler-Wholesaler

6. Butcher-Retailer

7. Retaile

MARKET STRUCTURE

How a market is organized

based on the characteristics

that determine the

relationship among the

various buyers, and between

the various buyers and

sellers in the market.

MARKET STRUCTURES

Purely

Competitive Absolute

Monopoly / Monopolistic

Competition / Oligopoly

Monopsony

Purely competitive market

Many sellers; agricultural products and

groceries; homogenous products;

identical products; free entry and exit

ABSOLUTE MONOPOLY

Electric Cooperative; Exclusive

franchise; Single Seller; No competition

Monopolistic competition

Many sellers but varied quality, branding,

features, and marketing;

Example: Fast Food Chains, Clothing

PURE OLIGOPOLY

Few dominant sellers; identical and

homogenous products; interdependent

on price matching; Petroleum, Steel

Industry, Airlines

Differentiated oligopoly

Complete heavily on branding, product

features, advertising; Smart Phones and

Telecommunications

Monopsony

Only one major buyer on a particular

project; dictates price; They can negotiate

on the prices; Traders, Large supermarket

chain buying from small farmers, or an

Employee applying for a Job.

THE MARKETING MIX

Product

Price

Placement

Promotion

Customer Solution

Customer Cost

Convenience

Communication

Product

refers to the

product or

service the

business sells.

Price

is the

amount a

business

charges the

customers for

the product or services

Placement

links

to the channel of

distribution from

the producer to

the customer.

Promotion

refers

to the

communication

between the

business and the

customer

product life cycle

Development

Introduction

Growth

Maturity

Decline

Economics

study of allocation of scarce resources to meet the unlimited human wants

Micro-economics

studies individuals and business decisions

Macro-economics

it analyzes the decisions made by the countries and the government

Positive economics

it describes and explains various economic phenomena

Normative economics

it focuses on the value of economic fairness or what the company 'should be' or 'ought to be'

Agricultural Economics

it is the study of the allocation, distribution and utilization of the resources used, along with the commodities produces by farming

Scarcity

the condition of having to choose among alternatives

Scarce Good

situation in which the choice of one alternative use of the good requires that another should be given up

Free Good

situation in which the choice of one uses does not require that another should be given up

Opportunity cost

is the value of the best alternative forgone in making any choice

Major Factors of Production

Land

Labor

Capital

Entrepreneur

refers to a person who brings other factors of production in one place

Theory pf Cost

Fixed cost

Variable cost

Opportunity cost

Social cost

Conventional cost

Fixed Cost

a cost that do not change as production is increased or decreased

Variable Cost

a cOst that vary with output

Opportunity Cost

a cost that is equal to foregone income

Social Cost

expenses intended to protect the society and the environment

Conventional Cost

cost items in the economic analysis of the business operation

Kinds of Conventional Cost

Total Cost

marginal cost

average cost

Total Cost

fixed + variable cost

Marginal Cost

the cost of one more unit of output

Average cost

total cost divided by the level of output

Demand

an economic concept that relates to a consumer's desire to purchase goods and services and willingness to pay a specific price for them

Law of Demand

other things being equal (ceteris paribus) when a price of commodity falls, the quantity demand of that commodity increases

Supply

it is the quantity of a certain commodity that is offered for sale at certain price at a given place and time.

it represents how much the market can offer

Law of Supply

the supply of the commodity varies directly as the price of the commodity, though not proportionately

Equilibrium

it is achieve at the price demanded and supplied equal

Disequilibrium

it occurs when the quantity supplied is not equal to the quantity demanded

Elasticity

It refers to the measure of the responsiveness of quantity demanded or quality supplied to one of its determinants

Utility

it refers to the total satisfaction or benefit from consuming a good service

International Trade

trade between people or firms in different countries

Duty

a tax levied on import

Tariff

a duty or tax imposed on an import or an export.

a schedule of charges of business, especially on a public utility

Value Added Tax

an indirect tax levied at the time of exchange of goods and services from primarily production to consumption

Factors affecting the determination of the field machinery cost of operation

a. machine use

b. price levels

c. energy requirement

d. fuel and labor costs.

fixed and variable costs

Machinery costs are divided into two categories

Fixed Costs or Overhead Costs

1. Depreciation

2. Interest on Investment

3. Taxes

4. Insurance

5. Housing

Repair and

Maintenance

Variable Cost or Operating Costs

1. Fuel Costs

2. Lubrication

3. Operator's Wages

4. Repair and Maintenance

5. Replacement of parts

Depreciation

loss in value and service capacity resulting from obsolescence, natural wear,

accidental wear, accidental damage, abuse, rust, corrosion and weathering.

Methods of estimating depreciation

- straight line (most used)

-constant- percentage (declining balance)

-sum of years digit

-estimated value (trade-in value)

Constant Percentage (Declining Balance) Method

determine the rate of percentage

necessary to reduce the original value to trade-in value at the end of the estimated service life.

Sum of the years digit

s is accomplished by applying a successively smaller fraction each

year to cost less residual value. The numerator of the changing fraction is the number of remaining

years of life and the denominator is the sum of the digits

Service life or (Physical Life)

terminated when a machine cannot be repaired because of an

irreplaceable or irreparable parts.

Accounting Life

- is the predicted life of the machine based on surveyed use of existing machines

and from the design life for new machines.

Economic Life

- is defined as the length of time from purchase of a machine to that point where it

is more economical to replace with a second machine than to continue with the first.

SERVICE LIFE OF FARM MACHINERY

The total service life of a machine must be known or assumed in order to determine

depreciation.

factors which determine the useful life of a machine are

1. Obsolescence, the probability of being replaced by better machines

2. The mechanical condition of the machine

3. Whether the size of the machine fits present or future needs;

4. A possible change in farm power;

5. A change in farming practice that would tend to eliminate the need for certain mac

18% - 15%

suggested interest rate

3%

normal premium insurance rate

2%

In cost analysis, taxes and

insurance cost is __% as computed

Repair and Maintenance cost

Although the

average for tractors of all ages is 2.8%, experience has shown that, in estimating repair costs, a

figure between 3 and 4% should be allowed for all items of cost. For annual repair cost. 3.5% of

the original cost of the tractor is suggested.

hours

The actual estimation

of variable cost is usually based in __ of use.

Break Even Point

- is the annual use level at which the machine must be operated to make

the investment profitable.

Payback Period

- the estimate of the length of time required to repay the original investment.

Discounted Benefit Cost Ratio

- is the relationship of present value of gross benefits against

the present value of gross cost.