Agricultural Economics V (Agricultural Marketing and Organizations) - Agriculture Form 4 Notes

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Introduction

  • Agricultural marketing is an economic activity which involves the distribution of farm produce from the farm to the consumer.

Market and Marketing

  • Market is an institution for the exchange of goods and services or a place where selling and buying of goods takes place.
  • Marketing refers to the flow of goods and services from the producer to the consumers.

Marketing Functions

  • Transportation - Movement of goods from production centres to the consumption centres.
  • Buying and selling - Purchase of goods from the producer to be sold to the consumer.
  • Storage - Agricultural products are seasonal hence storage is necessary.
  • Processing-Changing of raw form into utili sable form.
  • Grading and standardisation - Sorting into uniform lots of certain qualities.
  • Assembling - Collecting the farm produce from the farm to the market centres.
  • Collecting market information – To know the prices, supply and demand of certain commodities.
  • Advertising - Making the consumers aware of the produce.
  • Bearing of risks - Such as fire risk, price fluctuation.
  • Financing or expenditure on other processe
  • Packaging or putting into small packs and labelling.
  • Packing or putting produce In containers such as bags.

Marketing Agencies and Institutions

  • Middlemen (itinerant trader) - are the people who buy from the producer and sell to other agencies.
  • Wholesalers - Buy in bulk and sell to the retailers.
  • Retailers - Buy from the wholesalers and sell in small units to the consumers.

Problems in Marketing Agricultural Produce

  • Farm produce are bulky, that is weight and volume are high but low in monetary value thus difficult to transport.
  • Most of the agricultural products are perishable for example milk, vegetables and fruits.
  • Storage problems (since they are bulky they require a lot of space).
  • Lack of proper transport system since agricultural products are in the rural areas and the market are situated in urban centres.
  • Lack of market information hence farmers are exploited by middlemen.

Price Theory

  • Price is the amount of money paid in exchange for goods or services.
  • Price theory is concerned with the determination of price of any commodity.
  • Price is determined where demand for and supply of any commodity are equal to each other.

Demand

  • It is the quantity of any commodity which is purchased at any price within a given time.
  • The law of demand states that quantity demanded changes inversely with the price.

Demand Curve

  • The curve slopes from left to right downwards.
  • This means people buy more at lower prices and vice vers

Demand Curve

demand curve agric.PNG

Factors Affecting the Demand of a Commodity

  • Population
  • Income of the consumer.
  • New inventions.
  • Taste and preference of the individual.
  • Price of the substitute commodities.
  • Price expectations.
  • Advertisement.
  • Culture and social values of the consumers.
  • Price of commodities having joint demand for example tractors and diesel.

Elasticity of Demand

  • It is the responsiveness of demand to a change in price.
  • Elasticity of demand = Percentage change in quantity demanded
                                                 Percentage change in price

Types of Elasticity of Demand

  • Elastic demand is one where the ratio is more than 1.
  • Unitary elasticity is one where the ratio is equal to 1.
  • Inelastic demand is one where the ratio is less than 1.

Supply

  • Supply is the quantity of any commodity which is offered for sale at any price at a given time.
  • The law of supply states that when price rises, quantity supplied increases and when price falls quantity supplied decreases (other factors held constant).
  • The curve rises from left to right upwards.
  • This means that people are willing to offer more for sale at higher prices.

Supply Curve

supply curve agric.PNG

Factors Affecting Supply of a Commodity

  • Number of sellers
  • Price of substitute commodities.
  • New technology.
  • Price expectation.
  • Peace and security.
  • Weather conditions.
  • Policy of the government.
  • Cost of production of the commodities.

Elasticity of Supply

  • This refers to the rate at which quantity supplied changes due to a change in price level.
    Elasticity of Supply = Percentage change in quantity supplied
                                    Percentage change in Price

Type of Elasticity of Supply

  • Elastic supply one where the ratio is more than 1.
  • Unitary elasticity of supply is one where the ratio is equal to 1.
  • In elastic supply is one where the ratio is less than 1.

- One of the problems of agricultural produce is that supply does not readily adjust to price changes.

Equilibrium Price

  • Is the price at which demand and supply are equal.
  • That means whatever is offered for sale at the market is bought.
  • In the graph below, the quantity supplied and demanded are equal at a price of Shs.300 and quantity of 80kg.
  • At this point the price is higher than shs.300 then the supply will be greater than demand and there will be surplus hence price will fall.
  • If, on the other hand, the price is less than shs.300 demand will be greater than supply hence shortage and rise in price.

equilibrium price.PNG

Agricultural Organizations

  • Agricultural organizations are agencies which, through their activities, promote agricultural development.
  • These organizations are co-operatives and statutory boards.

Co-operatives

  • A co-operative is an organisation of people with a common aim of pooling their resources to achieve their objecti

Functions of Co-operatives

- A co-operative society carries out the following functions:

  • Collecting and assembling members' produce.
  • Processing the farm produce after collecti
  • Transportation of members' produce to market poi
  • Negotiation of fair prices with the purchasing agencies for the members' produc
  • Purchase and distribution to members of farm inputs.
  • Storage of members' produce before transmission to market points.
  • Provision of credit facilities to members on easy terms.
  • Training and education of members on improved farming techniques.
  • Offering farm machinery services to their members on hire terms for farm operati
  • Co-operatives may invest in other viable ventures and the profits realised are shared among members in form of dividends or bonu

Formation and Structure of Co-operatives

- The formation of a co-operative takes the following stages:

  • Individuals with common interest collect together to form a primary co- operative society
  • At least ten (10) members qualify for registration.
  • Each primary co-operative society elect their office bearers consisting of chairman, secretary and treasu
  • Several primary co-operative societies are usually amalgamated to form a district co-operative union.
  • Tertiary co-operative unions are nation­wide organizations to which the secondary co-operative unions are affiliate
  • Examples are Kenya Planters Co-operative Union, Kenya Farmers Union, Kenya Co-operative Creameries, Co-operative Bank of Kenya, etc.
  • Apex organization This is represented in Kenya by Kenya National Federation of Co-operatives which is an affiliate of the International Co-operative Alliance.

Problems Facing Co-operatives

- Co-operatives encounter the following problems in their operations:

  • Managerial problems arising from:
    • Financial mismanagement due to poor accounting.
    • Corruption and misappropriation of co­operative resources by the personnel in the syste
    • Lack of advisory services on technical operations.
    • Inability to meet the set obligations of providing credit facilities due to malpractic
  • The nature of agricultural products and associated problems.
    • Bulkiness hence difficulties in transportation and storage.
    • Perishability of produce hence difficult to sustain quality.
  • Inadequate capital to invest in the co­operative undertakings.
  • Transport problems due to poor roads.
    • This hampers the produce getting to the market points in time.

Statutory Boards

  • A statutory board is an organization established by an Act of Parliament and charged with the running or managing of a certain industry within the government s

Marketing Boards

  • Some of the statutory boards are charged with the marketing of certain farm produce and are thus called marketing boards.
  • Examples are the Coffee Board, Pyrethrum Board, Cotton Seed and Lint Marketing Board, Tea Boards, National Cereals and Produce Board, Kenya Meat Commission, the Dairy Board of Kenya and others.
  • Their marketing functions are to look for market and better prices.

Research Organization

  • These are research centres which among other things, carry out research and trials on:
  • Development of new varieties and cultivars of crops.
  • Breeding disease and pest resistant varieties of crops and types of animals.
  • Adaptations of crop and livestock species to ecological conditions of certain areas.
  • Use of fertilizers and pesticides on crops in specific areas.
  • Development of early maturing and high yielding species.
  • Soil testing and crop analysis. Advisory services of agro-economic aspects.

Other Organizations

Kenya National Farmers' Union negotiates for:

  • Reasonable and affordable prices of farm inputs.
  • Better prices for farm produce.
  • Better credit facilities.
  • Better control of diseases and pest.

Agricultural Society of Kenya

  • Organizes agricultural shows in the country.
  • Encourages improvement of livestock through exhibitions and educating farmers
  • Organizes the running of young farmers' clubs.
  • Organizes and finances the ploughing contests during which farmers learn the modern techniques of seedbed preparation.
  • Publish "Kenya Farmers" magazines.

Young Farmers and 4-K Clubs.

- These are student organizations whose objectives are:

  • To expose the young students and encourage them to appreciate agriculture as a profession in their career.
  • To encourage the youth to develop leadership qualities through assignment of small farming projects.
  • Organizing students exchange programmes with other club members both locally and abroad.
  • To develop better farming skills through judging competitions, annual rallies and camps.

Agricultural Based Women Groups

  • These are self-help groups whose objective is to uplift the economic status of their members by carrying out agricultural related activities.

Their success depends on the following factors:

  • Commitment of their leaders.
  • Motivation of the members.
  • Sacrifice for each other.

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