Chapter 4

AGRICULTURAL MARKETING

Market: Meaning:

The word market comes from the latin word „marcatus_ which means merchandise or trade or
a place where business is conducted. Word „market_ has been widely and variedly used to
mean (a) A place or a building where commodities are bought and sold,
e.g., super market;
(b) Potential buyers and sellers of a product, e.g., wheat market and cotton market; some of the
definitions of market are given as follows:
1. A market is the sphere within which price determining forces operate.
2. A market is area within which the forces of demand and supply converge to establish a single
price.
3. The term market means not a particular market place in which things are bought and sold but
the whole of any region in which buyers and sellers are in such a free intercourse\ with one
another that the prices of the same goods tend to equality, easily and quickly.
4. Market means a social institution which performs activities and provides facilities for
exchanging commodities between buyers and sellers.
5. Economically interpreted, the term market refers, not to a place but to a commodity or
commodities and buyers and sellers who are in free intercourse with one another.
Components of a Market:
For a market to exist, certain conditions must be satisfied. These conditions should be both
necessary and sufficient. They may also be termed as the components of a market.
1. The existence of a good or commodity for transactions (physical existence is, however, not
necessary)
2. The existence of buyers and sellers;
3. Business relationship or intercourse between buyers and sellers; and
4. Demarcation of area such as place, region, country or the whole world. The existence of
perfect competition or a uniform price is not necessary.

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Dimensions of a Market:
There are various dimensions of any specified market. These dimensions are:
1. Location
2. Area or coverage
3. Time span
4. Volume of transactions
5. Nature of transactions
6. Number of commodities
7. Degree of competition
8. Nature of commodities
9. Stage of marketing
10. Extent of public intervention
11. Type of population served
12. Accrual of marketing margins

Market structure
Meaning:
The term structure refers to something that has organization and dimension – shape, size and
design; and which is evolved for the purpose of performing a function. A function modifies the
structure, and the nature of the existing structure limits the performance of functions. By the term
market structure we refer to the size and design of the market.
1. Market structure refers to those organizational characteristics of a market which influence
the nature of competition and pricing, and affect the conduct of business firms;
2. Market structure refers to those characteristics of the market which affect the traders_
behavior and their performances;
3. Market structure is the formal organization of the functional activity of a marketing
institution. An understanding and knowledge of the market structure is essential for identifying
the imperfections in the performance of a market.
Components of Market Structure:
The components of the market structure, which together determine the conduct and performance
of the market, are:
1. Concentration of market power:

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2. Degree of product differentiation:
3. Conditions for entry of firms in the market:
4. Flow of market information:
5. Degree of integration:
Dynamics of Market Structure – Conduct and performance:
The market structure determines the market conduct and performance. The term market
conduct refers to the patterns of behaviour of firms, especially in relation to pricing and their
practices in adapting and adjusting to the market in which they function.
Specifically, market conduct includes:
(a) Market sharing and price setting policies;
(b) Policies aimed at coercing rivals; and
(c) Policies towards setting the quality of products.
The term market performance refers to the economic results that flow from the industry as
each firm pursues its particular line of conduct. Society has to decide the criteria for satisfactory
market performance. Some of the criteria for measuring market performance and of the
efficiency of the market structure
For a satisfactory market performance, the market structure should keep pace with the following
changes:
1. Production pattern:
2. Demand pattern:
3. Costs and patterns of marketing functions:
4. Technological change in Industry:
Agricultural Marketing:
Concept and Definition:
The term agricultural marketing is composed of two words-agriculture and marketing.
Agriculture, in the broadest sense, means activities aimed at the use of natural resources for
human welfare, i.e., it includes all the primary activities of production. But, generally, it is used
to mean growing and/or raising crops and livestock.
Marketing connotes a series of activities involved in moving the goods from the point of
production to the point of consumption. It includes all the activities involved in the creation of
time, place, form and possession utility. According to Thomsen, the study of agricultural

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marketing comprises all the operations, and the agencies conducting them, involved in the
movement of farm-produced foods, raw materials and their derivatives.
Objectives:-
A study of the agricultural marketing system is necessary to an understanding of the complexities
involved and the identification of bottlenecks with a view to providing efficient services in the
transfer of farm products and inputs from producers to consumers.
Scope and Subject Matter of Agricultural Marketing:
Agricultural marketing in a broader sense is concerned with:
· The marketing of farm products produced by farmers
· The marketing of farm inputs required by farmers in the production of farm products
Subject of agricultural marketing
This includes product marketing as well as input marketing. The subject of output marketing is
as old as civilization itself. The importance of output marketing has become more conspicuous in
the recent past with the increased marketable surplus of the crops following the technological
breakthrough. The farmers produce their products for the markets. Input marketing is a
comparatively new subject. Farmers in the past used such farm sector inputs as local seeds and
farmyard manure. These inputs were available with them; the purchase of inputs for production
of crops from the market by the farmers was almost negligible. The new agricultural technology
is input-responsive. Thus, the scope of agricultural marketing must include both product
marketing and input marketing.
Specially, the subject of agricultural marketing includes marketing functions, agencies, channels,
efficiency and costs, price spread and market integration, producers surplus, government policy
and research, training and statistics on agricultural marketing.
Difference in Marketing of Agricultural and Manufactured Goods:
The marketing of agricultural commodities is different from the marketing of manufactured
commodities because of the special characteristics. The special characteristics which the
agricultural sector possesses, and which are different from those of the manufactured sector, are:
1. Perish ability of the Product:
Most farm products are perishable in nature; but the period of their perish ability varies from a
few hours to a few months.
2. Seasonality of Production:

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Farm products are produced in a particular season; they cannot be produced throughout the year.
In the harvest season, prices fall. But the supply of manufactured products can be adjusted or
made uniform throughout the year. Their prices therefore remain almost the same throughout the
year.
3. Bulkiness of Products:
The characteristic of bulkiness of most farm products makes their transportation and storage
difficult and expensive. This fact also restricts the location of production to somewhere near the
place of consumption or processing. The price spread in bulky products is higher because of the
higher costs of transportation and storage.
4. Variation in Quality of Products:
There is a large variation in the quality of agricultural products, which makes their grading and
standardization somewhat difficult. There is no such problem in manufactured goods, for they
are products of uniform quality.
5. Irregular Supply of Agricultural Products:
The supply of agricultural products is uncertain and irregular because of the dependence of
agricultural production on natural conditions. With the varying supply, the demand remaining
almost constant, the prices of agricultural products fluctuate substantially.
6. Small Size of Holdings and Scattered Production:
Farm products are produced throughout the length and breadth of the country and most of the
producers are of small size. This makes the estimation of supply difficult and creates problems in
marketing.
7. Processing:
Most of the farm products have to be processed before their consumption by the ultimate
consumers. This processing function increases the price spread of agricultural commodities.
Importance of Agricultural Marketing
Agricultural marketing plays an important role not only in stimulating production and
consumption, but in accelerating the pace of economic development. Its dynamic functions are of
primary importance in promoting economic development.
Optimization of Resource use and Output Management:
An efficient agricultural marketing system leads to the optimization of resource use and output
management. An efficient marketing system can also contribute to an increase in the marketable

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surplus by scaling down the losses arising out of inefficient processing, storage and
transportation.
Increase in Farm Income
An efficient marketing system ensures higher levels of income for the farmers by reducing the
number of middlemen or by restricting the commission on marketing services and the
malpractices adopted by them in the marketing of farm products. An efficient system guarantees
the farmers better prices for farm products and induces them to invest their surpluses in the
purchase of modern inputs so that productivity and production may increase.
Widening of Markets:
A well-knit marketing system widens the market for the products by taking them to remote
corners both within and outside the country, i.e., to areas far away from the production points.
The widening of the market helps in increasing the demand on a continuous basis, and thereby
guarantees a higher income to the producer.
Growth of Agro-based Industries:
An improved and efficient system of agricultural marketing helps in the growth of agro-based
industries and stimulates the overall development process of the economy.
Price Signals:
An efficient marketing system helps the farmers in planning their production in accordance with
the needs of the economy.
Adoption and Spread of New Technology
The marketing system helps the farmers in the adoption of new scientific and technical
knowledge. New technology requires higher investment and farmers would invest only if they
are assured of market clearance.
Employment:
The marketing system provides employment to millions of persons engaged in various activities,
such as packaging, transportation, storage and processing, etc.
Addition to National Income:
Marketing activities add value to the product thereby increasing the nation’s gross national
product and net national product.
Better Living:

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The marketing system is essential for the success of the development programmes which are
designed to uplift the population as a whole.

Creation of Utility:
Marketing ads cost to the product; but, at the same time, it adds utilities to the product. The
following four types of utilities of the product are created by marketing:
(a) Form Utility: The processing function adds form utility to the product by changing the raw
material into a finished form. With this change, the product becomes more useful than it is in the
form in which it is produced by the farmer.
(b) Place Utility: The transportation function adds place utility to products by shifting them to a
place of need from the place of plenty. Products command higher prices at the place of need than
at the place of production because of the increased utility of the product.
(c) Time Utility: The storage function adds time utility to the products by making them available
at the time when they are needed.
(d) Possession Utility: The marketing function of buying and selling helps in the transfer of
ownership from one person to another. Products are transferred through marketing to persons
having a higher utility from persons having a low utility.

Classification of Markets:
Markets may be classified on the basis of each of the twelve dimensions mentioned below.

1. On the basis of Location:

On the basis of the place of location or operation, markets are of the following types:
a) Village Markets: A market which is located in a small village, where major transactions take
place among the buyers and sellers of a village is called a village market.
b) Primary wholesale Markets: These markets are located in big towns near the centers of
production of agricultural commodities. In these markets, a major part of the produce is brought
for sale by the producer-farmers themselves.
c) Secondary wholesale Markets: These markets are located generally in district headquarters
or important trade centers or near railway junctions. The major transactions\ in commodities take
place between the village traders and wholesalers. The bulk of the arrivals in these markets is
from other markets.

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d) Terminal Markets: A terminal market is one where the produce is either finally disposed of
to the consumers or processors, or assembled for export. Merchants are well organized and use
modern methods of marketing. Commodity exchanges exist in these markets, which provide
facilities, for forward trading in specific commodities. Such markets are located either in
metropolitan cities or in sea-ports – in Bombay, Madras, Calcutta and Delhi.
e) Seaboard Markets: Markets which are located near the seashore and are meant mainly for
the import and/or export of goods are known as seaboard markets.
Examples of these markets in India are Bombay, Madras, and Calcutta.
2. On the Basis of Area/Coverage:
On the basis of the area from which buyers and sellers usually come for transactions, markets
may be classified into the following four classes:
a) Local or Village Markets: A market in which the buying and selling activities are confined
among the buyers and sellers drawn from the same village or nearby villages.
The village markets exist mostly for perishable commodities in small lots.
b) Regional Markets: A market in which buyers and sellers for a commodity are drawn from a
larger area than the local markets. Regional markets in India usually exist for food grains.
c) National Markets: A market in which buyers and sellers are at the national level.
National markets are found for durable goods like jute and tea.
d) World Market: A market in which the buyers and sellers are drawn from the whole world.
These are the biggest markets from the area point of view. These markets exist in the
commodities which have a world-wide demand and/or supply.
3. On the Basis of Time Span:
On this basis, markets are of the following types:
a) Short-period Markets: The markets which are held only for a few hours are called short-
period markets. The products dealt with in these markets are of highly perishable nature, such as
fish, fresh vegetables, and liquid milk.
b) Long-period Markets: These markets are held for a long period than the short period
markets. The commodities traded in these markets are less perishable and can be stored for some
time; these are food grains and oilseeds. The prices are governed both by the supply and demand
forces.

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c) Secular Markets: These are markets of permanent nature. The commodities traded in these
markets are durable in nature and can be stored for many years.
Examples are markets for machinery and manufactured goods.
4. On the Basis of Volume of Transactions:
There are two types of markets on the basis of volume of transactions.
a) Wholesale Markets: A wholesale market is one in which commodities are bought and sold in
large lots or in bulk. Transactions in these markets take place mainly between traders.
b) Retail Markets: A retail market is one in which commodities are bought by and sold to the
consumers as per their requirements. Transactions in these markets take place between retailers
and consumers. The retailers purchase in wholesale market and sell in small lots to the
consumers. These markets are very near to the consumers.
5. On the Basis of Nature of Transactions:
The markets which are based on the types of transactions in which people are engaged are of two
types:
a) Spot or Cash Markets: A market in which goods are exchanged for money immediately after
the sale is called the spot or cash market.
b) Forward Markets: A market in which the purchase and sale of a commodity takes place at
time „t_ but the exchange of the commodity takes place on some specified date in future i.e.,
time t + 1. Sometimes even on the specified date in the future (t+1), there may not be any
exchange of the commodity. Instead, the differences in the purchase and sale prices are paid or
taken.
6. On the Basis of Number of Commodities in which Transaction Takes place:
A market may be general or specialized on the basis of the number of commodities in which
transactions are completed:
a) General Markets: A market in which all types of commodities, such as food grains, oilseeds,
fiber crops, gur, etc., are bought and sold is known as general market.
These markets deal in a large number of commodities.
b) Specialized Markets: A market in which transactions take place only in one or two
commodities is known as a specialized market. For every group of commodities, separate
markets exist. The examples are food grain markets, vegetable markets, wool market and cotton
market.

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7. On the Basis of Degree of Competition:
Each market can be placed on a continuous scale, starting from a perfectly competitive point to a
pure monopoly or monophony situation. Extreme forms are almost non-existent. Nevertheless, it
is useful to know their characteristics. In addition to these two extremes, various midpoints of
this continuum have been identified. On the basis of competition, markets may be classified into
the following categories:
Perfect Markets: A perfect market is one in which the following conditions hold good:
a) There is a large number of buyers and sellers;
b) All the buyers and sellers in the market have perfect knowledge of demand, supply and prices;
c) Prices at any one time are uniform over a geographical area, plus or minus the cost of getting
supplies from surplus to deficit areas;
d) The prices are uniform at any one place over periods of time, plus or minus the cost of storage
from one period to another;
e) The prices of different forms of a product are uniform, plus or minus the cost of converting the
product from one form to another.
Imperfect Markets: The markets in which the conditions of perfect competition are lacking are
characterized as imperfect markets. The following situations, each based on the degree of
imperfection, may be identified:
a) Monopoly Market: Monopoly is a market situation in which there is only one seller of a
commodity. He exercises sole control over the quantity or price of the commodity. In this
market, the price of commodity is generally higher than in other markets. Indian farmers operate
in a monopoly market when purchasing electricity for irrigation. When there is only one buyer of
a product the market is termed as a monophony market.
b) Duopoly Market: A duopoly market is one which has only two sellers of a commodity.
They may mutually agree to charge a common price which is higher than the hypothetical price
in a common market. The market situation in which there are only two buyers of a commodity is
known as the duopoly market.
c) Oligopoly Market: A market in which there are more than two but still a few sellers of a
commodity is termed as an oligopoly market. A market having a few (more than two) buyers is
known as oligopoly market.

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d) Monopolistic competition: When a large number of sellers deal in heterogeneous and
differentiated form of a commodity, the situation is called monopolistic competition. The
difference is made conspicuous by different trade marks on the product. Different prices prevail
for the same basic product. Examples of monopolistic competition faced by farmers may be
drawn from the input markets. For example, they have to choose between various makes of
insecticides, pumpsets, fertilizers and equipments.
8. On the Basis of Nature of Commodities:
On the basis of the type of goods dealt in, markets may be classified into the following
categories:
a) Commodity Markets: A market which deals in goods and raw materials, such as wheat,
barley, cotton, fertilizer, seed, etc., are termed as commodity markets.
b) Capital Markets: The market in which bonds, shares and securities are bought and sold are
called capital markets; for example, money markets and share markets.
9. On the Basis of Stage of Marketing:
On the basis of the stage of marketing, markets may be classified into two categories:
a) Producing Markets: Those markets which mainly assemble the commodity for further
distribution to other markets are termed as producing markets. Such markets are located in
producing areas.
b) Consuming Markets: Markets which collect the produce for final disposal to the consuming
population are called consumer markets. Such markets are generally located in areas where
production is inadequate, or in thickly populated urban centres.
10. On the Basis of Extent of Public Intervention:
Based on the extent of public intervention, markets may be placed in any one of the following
two classes:
a) Regulated Markets: Markets in which business is done in accordance with the rules and
regulations framed by the statutory market organization representing different\ sections involved
in markets. The marketing costs in such markets are standardized and practices are regulated.
b) Unregulated Markets: These are the markets in which business is conducted without any set
rules and regulations. Traders frame the rules for the conduct of the business and run the market.
These markets suffer from many ills, ranging from unstandardised charges for marketing
functions to imperfections in the determination of prices.

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11. On the Basis of Type of Population Served:
On the basis of population served by a market, it can be classified as either urban or rural market:
a) Urban Market: A market which serves mainly the population residing in an urban area is
called an urban market. The nature and quantum of demand for agricultural products arising
from the urban population is characterized as urban market for farm products.
b) Rural Market: The word rural market usually refers to the demand originating from the rural
population. There is considerable difference in the nature of embedded services required with a
farm product between urban and rural demands.
12. On the Basis of Accrual of Marketing Margins:
Markets can also be classified on the basis of as to whom the marketing margins accrue.
Marketing Functions
Any single activity performed in carrying a product from the point of its production to\ the
ultimate consumer may be termed as a marketing function. A marketing function may have
anyone or combination of three dimensions, viz., time, space and form. The marketing functions
may be classified in various ways. Thomsen has classified the marketing functions into three
broad groups. These are:
1. Primary Functions: Assembling or procurement
Processing
Dispersion or Distribution
2. Secondary Functions: Packing or Packaging
Transportation
Grading, Standardization and Quality Control
Storage and Warehousing
Price Determination or Discovery
Risk Taking
Financing
Buying and Selling
Demand Creation
Dissemination of Market Information
3. Tertiary Functions: Banking
Insurance

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Communications – posts &
Telegraphs
Supply of Energy – Electricity

Kohls and Uhl have classified marketing functions as follows:

1. Physical Functions: Storage and Warehousing
Grading
Processing
Transportation
2. Exchange Functions: Buying
Selling
3. Facilitative Functions: Standardization of grades
Financing
Risk Taking
Dissemination of Market
Information
Huegy and Mitchell have classified marketing functions in a different way. According to them,
the classification is as follows:
1. Physical Movement Functions: Storage
Packing
Transportation
Grading
Distribution
2. Ownership Movement Functions: Determining Need
Creating Demand
Finding Buyers and Sellers
Negotiation of Price
Rendering Advice
Transferring the Title to Goods
3. Market Management Functions: Formulating Policies
Financing
Providing organization

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Supervision
Accounting
Securing Information
Packaging
Packaging is the first function performed in the marketing of agricultural commodities. It is
required for nearly all farm products at every stage of the marketing process. The type of the
container used in the packing of commodities varies with the type of the commodity as well as
with the stage of marketing. For example, gunny bags are used for cereals, pulses and oilseeds
when they are taken from the farm to the market.
Meaning of Packing and Packaging:
Packing means, the wrapping and crating of goods before they are transported.
Goods have to be packed either to preserve them or for delivery to buyers. Packaging is a part of
packing, which means placing the goods in small packages like bags, boxes, bottles or parcels for
sale to the ultimate consumers..
Advantages of Packing and Packaging:
Packaging is a very useful function in the marketing process of agricultural commodities. The
main advantages of packing and packaging are:
1. It protects the goods against breakage, spoilage, leakage or pilferage during their movement
from the production to the consumption point.
2. The packaging of some commodities involves compression, which reduces the bulk like
cotton, jute and wool.
3. It facilitates the handling of the commodity, specially such fruits as apples, mangoes, etc.,
during storage and transportation.
4. It helps in quality-identification, product differentiation, branding and advertisement of the
product, e.g., Hima peas and Amul butter.
5. Packaging helps in reducing marketing costs by reducing handling and retailing costs.
6. It helps in checking adulteration.
7. Packaging ensures cleanliness of the product.
8. Packaging with labeling facilitates the conveying of instructions to the buyers as to how to use
or preserve the commodity. The label shows the composition of the product.

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9. Packaging prolongs the storage quality of the products by providing protection from the ill
effects of weather, especially for fruits, vegetables and other perishable goods.

Transportation:
Transportation or the movement of products between places is one of the most important
marketing functions at every stage, i.e., right from the threshing floor to the point of
consumption. The main advantages of the transport function are:
1. Widening of the Market:
2. Narrowing Price Difference over Space:
3. Creation of Employment:
4. Facilitation of Specialized Farming:
5. Transformation of the Economy:
6. Mobility of the Factors of Production:

Factors affecting the cost of transportation:

Other things remaining the same, the transportation cost of a commodity depends on the
following factors:
1. Distance
2. Quantity of the Product
3. Mode of Transportation
4. Condition of Road
5. Nature of Products:
a) Perish ability (e.g., Vegetables);
b) Bulkiness (e.g., straw);
c) Fragility (e.g. tomatoes);
d) Inflammability (e.g., Petrol);
e) Requirement of a special type of facility (i.e, for livestock and milk).
6. Availability of Return Journey consignment
7. Risk Associated: Problems in Transportation of Agricultural Commodities

Problems
The important problems arising out of the transportation of agricultural commodities are:

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1. The means of transportation used are slow moving;
2. There are more losses/damages in transportation because of the use of poor packaging
material.
3. The transportation cost of the farm produce is higher than that for other goods.
4. There is lack of co-ordination between different transportation agencies, e.g., the railways and
truck companies.
Market information:
Market information is an important marketing function which ensures the smooth and efficient
operation of the marketing system. Accurate, adequate and timely availability of market
information facilitates decision about when and where to market products.
Market information creates a competitive market process and checks the growth of monopoly or
profiteering by individuals. It is the lifeblood of a market.
Meaning: Market information may be broadly defined as a communication or reception of
knowledge or intelligence. It includes all the facts, estimates, opinions and other information
which affect the marketing of goods and services.
Importance: Market information is useful for all sections of society which are concerned with
marketing. Its importance may be judged from the point of view of individual groups.
These are:
a) Farmer-Producers: Market information helps in improving the decision-making power of the
farmer. A farmer is required to decide when, where and through whom he should sell his produce
and buy his inputs. Price information helps him to take these decisions.
b) Market Middlemen: Market middlemen need market information to plan the purchase,
storage and sale of goods. On the basis of this information, they are able to know the pulse of the
market, i.e., whether the market is active or sluggish..
c) General Economy: Market information is also beneficial for the economy as a whole. In a
developed economy, there is need for a competitive market process for a commodity, which
regulates the prices of the product. The competitive process contributes to the operational
efficiency of the industry.
d) Government: Market information is essential for the government in framing its agricultural
policy relating to the regulation of markets, buffer stocking, import export and administered
prices.

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Types of Market Information:
Market information is of two types
a) Market Intelligence: This includes information relating to such facts as the prices that
prevailed in the past and market arrivals over time. These are essentially a record of what has
happened in the past. Market intelligence is therefore, of historical nature.
b) Market News: This term refers to current information about prices, arrivals and changes in
market conditions. This information helps the farmer in taking decisions about when and where
to sell his produce. The availability of market news in time and with speed is of the utmost value.
Criteria for Good Market Information:
Good market information must meet the following criteria so that it may be of maximum
advantage to the users
a) Comprehensive
b) Accuracy
c) Relevance
d) Confidentiality
e) Trustworthiness
f) Equal and Easy Accessibility
g) Timeliness:
Financing:
The financing function of marketing involves the use of capital to meet the financial
requirements of the agencies engaged in various marketing activities. No business is possible
nowadays without the financial support of other agencies because the owned funds available
with the producers and market middlemen (such as wholesalers, retailers and processors) are not
sufficient.
Factors affecting Capital Requirements of an Agricultural Marketing Firm:
The capital requirements of a marketing agency for its marketing business vary with the
following factors:
(i) Nature and Volume of Business:.
(ii) Necessity of Carrying Large Stocks:
(iii) Continuity of Business during Various Seasons
(iv) Time Required between Production and Sale

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(v) Terms of Payment for Purchase and Sale
(vi) Fluctuations in Prices
(vii) Risk-taking Capacity
(viii) General Conditions in the Economy
Market functionaries:
In the marketing of agricultural commodities, the following market functionaries/marketing
agencies are involved:
i) Producers:
Most farmers or producers, perform one or more marketing functions. They sell the surplus
either in the village or in the market. Some farmers, especially the large ones, assemble the
produce of small farmers, transport it to the nearby market, sell it there and make a profit. This
activity helps these farmers to supplement their incomes.
ii) Middlemen
Middlemen are those individuals or business concerns which specialize in performing the various
marketing functions and rendering such services as are involved in the marketing of goods. The
middlemen in food grains marketing may, therefore, be classified as follows:
(a) Merchant middlemen: Merchant middlemen are those individuals who take title to the
goods they handle. They buy and sell on their own and gain or lose, depending on the difference
in the sale and purchase prices. Merchant middlemen are of two types:
iii) Wholesalers: Wholesalers are those merchant middlemen who buy and sell food grains in
large quantities. They may buy either directly from farmers or from other wholesalers. They sell
food grains either in the same market or in other markets. They sell to retailers. The wholesalers
perform the following functions in marketing:
(a) Assemble the goods from various localities and areas to meet the demands of buyers,
(b) Sort out goods in different lots according to their quality and prepare them for market,
(c) Equalize the flow of goods by storing them in the peak arrival season and releasing in the off-
season,
(d) Regulate the flow of goods by trading with buyers and sellers in various markets,
(e) Finance farmers so that the latter may meet their requirements of production & inputs,
(f) Assess demand of prospective buyers and processors from time to time,
g) Plan the movement of the goods over space and time.

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iv) Retailers: Retailers buy goods from wholesalers and sell them to the consumers in small
quantities. They are producers_ personal representatives to consumers. Retailers are the closest
to consumers in the marketing channel.
v) Itinerant Traders Itinerant traders are petty merchants who move from village to village, and
directly purchase the produce from the cultivators. They transport it to the nearby primary or
secondary market and sell it there.
vi) Village Merchants: Village merchants have their small establishments in villages.
They purchase the produce of those farmers who have either taken finance from them or those
who are not able to go to the market. Village merchants also supply essential consumption goods
to the farmers. They act as financers of poor farmers. They often visit nearby markets and keep
in touch with the prevailing prices.
(a) Agent Middlemen:
Agent middlemen act as representatives of their clients. They do not take title to the produce and,
therefore, do not own it. They merely negotiate the purchase and/or sale.
They sell services to their principals and not the goods or commodities. They receive income in
the form of commission or brokerage. Agent middlemen are of two types
Commission Agents or Arhatias: A commission agent is a person operating in the wholesale
market who acts as the representative of either a seller or a buyer. A commission agent takes
over the physical handling of the produce, arranges for its sale, collects the price from the buyer,
deducts his expenses and commission, and remits the balance to the seller.
Commission Agents or Arhatias in unregulated markets are of two types, Kaccha arhatias
and pacca arhatias.
Kaccha arhatias: primarily act for the sellers, including farmers. They sometimes provide
advance money to farmers and intinerant traders on the condition that the produce will be
disposed of through them. Kaccha arhatias charge arhat or commission in addition to the normal
rate of interest on the money they advance.
Pacca arhatia: acts on behalf of the traders in the consuming market. The processors (rice
millers, oil millers and cotton or jute dealers) and big wholesalers in the consuming markets
employ pacca arhatias as their agents for the purchase of a specified quantity of goods within a
given price range. In regulated markets, only one category of commission agent exists under the

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name of „A_ class trader. The commission agent keeps an establishment – a shop, a godown for
his clients. He renders all facilities to his clients.
He is, therefore, preferred by the farmers to the co-operative marketing society for the purpose of
the sale of the farmer_s produce.
Brokers: Brokers render personal services to their clients in the market; but unlike the\
commission agents, they do not have physical control of the product. The main function of a
broker is to bring together buyers and sellers on the same platform for negotiations.
Their charge is called brokerage. They may claim brokerage from the buyer, the seller or both,
depending on the market situation and the service rendered. They render valuable service to the
prospective buyers and sellers, for they have complete knowledge of the market. Brokers have no
establishment in the market. In most regulated markets, brokers do not play any role because
goods are sold by open auction.
(c)Speculative Middlemen:
Those middlemen who take title to the product with a view to making a profit on it are called
speculative middlemen. They are not regular buyers or sellers of produce. They specialize in risk
– taking. They buy at low prices when arrivals are substantial and sell in the off – season when
prices are high. They do the minimum handling of goods. They make profit from short-run as
well as long-run price fluctuations. Processors carry on their business either on their own or on
custom basis.
(d)Facilitative Middlemen
Some middlemen do not buy and sell directly but assist in the marketing process.
Marketing can take place even if they are not active. But the efficiency of the system increases
when they engage in business. These middlemen receive their income in the form of fees or
service charges from those who use their services.

Market integration
Kohis and Uhl have defined “Market integration as process which refers to the expansion of
firms by consolidating additional marketing functions and activities under a single management”.
· Eg: - Setting up of milk processing plant. Establishment of wholesale facilities by retailers.
Integration shows the relationship of firms in a market.
· Integration influences market conduct of firms and consequently their marketing efficiency.

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· Markets differ in the extent of integration.

Types of market integration:

1. Horizontal integration:
When a firm gains control over other firms, performing similar marketing functions.
Some marketing agencies (say, sellers) combine to form a union with a view to reducing their
effective number and the extent of competition in the market.
· Horizontal integration is advantageous for the members who join the group.
· If farmers join hands and form cooperatives, they are able to sell their produce in bulk and
reduce their cost of marketing.
· Horizontal integration of selling firms is not in the interests of consumers or buyers.
2. Vertical integration:
Occurs when a firm performs more than one activity in the sequence of the marketing process. It
is linking together of two a more functions within a single firm or under a single ownership. Eg:
- If a firm assumes the functions of the commission agent as well as retailing.
There are two types of vertical integration
a). Forward integration :
Eg: Wholesaler assuming the function of retailing i.e. assuming another function.
b). Backward Integration:
Eg: Processer assumes function of assembling / purchasing the produce from villages.
3. Conglomeration:
A combination of agencies or activities not directly related to each other may when it operates
under a united management, be termed a conglomeration.

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