AAEC 3301

Agribusiness Marketing
Spring 2011
Lecture 1: An Overview of Market
and Agricultural Marketing
Market
A market is any arrangement (any one of a variety of systems,
institutions, procedures, social relations, and infrastructures)
that allows buyers and sellers to freely exchange (the
ownership of) any type of goods, services, and information.
A market may emerge spontaneously or may be constructed
deliberately by human interaction in order to enable the
exchange of ownership of goods, services, and information.
Market participants consist of all the buyers and sellers of a
good or service or information who determine its price.
The exchange of goods or services for money is a transaction.



Market
Markets vary in size, range, geographic scale, location, types
and variety of human communities, as well as the types of
goods and services traded.
Some examples include local farmers markets, shopping
centers and malls, international currency and commodity
markets, legally created markets such as for pollution permits,
and illegal markets such as the market for illicit drugs.
A market can be organized as an auction, as a private electronic
market, as a commodity wholesale market, as a shopping
center, as a complex institution such as a stock market, and as
an informal discussion between two individuals.



Marketing
Marketing is defined by the American Marketing Association
(AMA) as the activity, set of institutions, and processes for
creating, communicating, delivering, and exchanging offerings
(goods and services) that have value for customers, clients,
partners, and society at large.
Marketing is a product or service selling related overall activities.
Marketing is used to identify the customer, to satisfy the
customer, and to keep the customer.
Marketing is an integrated process of performing market research,
selling goods and services to consumers, and promoting them
through advertising.

Agricultural Marketing
Agricultural Marketing is an integrated process of moving
agricultural products from farms to consumers.
Numerous interconnected activities are involved in doing this,
such as planning production, growing and harvesting, grading,
packing, transport, storage, agro- and food processing,
distribution, and sale.
Such activities cannot take place without the exchange of
information and are often heavily dependent on the availability of
suitable finance.
Marketing systems are dynamic; they are competitive and involve
continuous change and improvement.
Agricultural Marketing
Agricultural Markets perform an enormous role in responding
to the world populations daily demand for food products.
What do you have to do to provide one hamburger, a small
serving of french fries, and a can of soda to everyone attending a
football game at TT on a Saturday afternoon?
What do you have to do to provide the same food and drink to
everyone in Texas on a Saturday afternoon?
What do you have to do if you also have to produce, process, and
prepare the food and drink?
Agricultural Marketing
Every person in the world is affected, on a daily basis, by the
way agricultural markets provide alternative quantities and
qualities of various food for consumption.
The efficiency with which all of these activities occur affects
prices that consumers pay for the food they purchase as well as
the prices that farmers receive for their products.
Less than 2% of the US population reside on farms and obtain
income directly from producing agricultural products.
A much larger fraction of the US population depends on
marketing of agricultural products as a major source of income.
18%
82%
=
100%
Farm
Value
Marketing Bill
Consumer Food
Expenditure
+
Source: USDA, 2008
US Consumer Food Expenditures, Marketing
Bill and Farm Value 1958-2008 (USDA)
0
100
200
300
400
500
600
700
800
900
5
8
6
1
6
4
6
7
7
0
7
3
7
6
7
9
8
2
8
5
8
8
9
1
9
4
9
7
0
0
0
3
0
6
Total consumer food expenditures
Marketing Bill
Farm Value
60-70 of the Fortune 500 Companies are
Agribusiness companies

Philip Morris Sara Lee General Mills
Kraft Monsanto Procter & Gamble
Kroger McDonalds Safeway
ConAgra H.J. Heinz Caterpillar
Dow Chemical Win-Dixie Walmart
Coca Cola Publix Super Mkts Kellogs
Nabisco Anheuser-Busch R. Purina
Fleming Farmland Ind. John Deere
Albertsons Pepsico Bestfoods
ADM Quaker Oats Cargill


Tyson Dole Food 4 Less
Campbell Soup Hershey Foods McDonalds
Fred Meyer Sysco Hormel
Whole Foods Costco Dole
Smithfield Foods Dean Foods Chiquita
Hersheys Sysco Pioneer
Starbucks CHS Darden
Yum Brands Brinker Land-o-Lakes
Del Monte Campbell Coors
Great Atlantic Wrigley Pilgrims Pride
60-70 of the Fortune 500 Companies are
Agribusiness companies
Employment Opportunities
In the Food Industry
14%
31%
8%
10%
8%
29%
Mgmt., Finance
Marketing, Sales
Production Agr.
Govt.,
Social Svs.
Communication,
Education
Scientists,
Engineers
Food: Americas Largest Industry
2 million farms
Each farmer feeds 96 other Americans and 20 foreigners
Consumers spent 700 billion dollars for U.S. produced
foods in 2008
Consumers spend about 10 percent of their income in food
There are 22 million food industry jobs
The food industry produces 13% of the nations products
and services

Firms
Functions
Flows
Levels
Activities
Pricing Points
Decisions
Value-Adding
Overview of the Food
Marketing System
Distinguishing Characteristics of the
Industry
Biological Lags (separate production decision from
delivery)
Perishibility
Weather/Climate dependent products
Frequency of use


Views of Ag. Marketing
The MACRO view
Macro marketing is the performance of all business activities
involved in the forward flow of goods and services from the
producer to the consumer.
The WHO and WHAT of Marketing

The MICRO View
Micro marketing is the performance of business activities
that direct the flow of goods and services to the customer
and accomplish the objective of the firm.
The HOW and WHY of Marketing

The Food Marketing Firms
14,000 Assembly Market Buyers/Sellers
20,000 Food Processing Plants
40,000 Grocery Product Wholesalers
240,000 Grocery Stores
4,000,000 Eating Places
300 Million American Consumers
Macro view: Three approaches to the study of
marketing agricultural products
1. Institutional Approach: Emphasizes the Who of marketing
Middlemen assemblers, wholesalers, brokers, retailers, order buyers,
information providers, etc.
2. Functional Approach: Emphasizes the What of marketing
Functions that are performed in agricultural marketing
exchange functions, physical functions and facilitating functions
3. Behavioral Approach: Emphasizes the interdependence and
coordination of all participants and all the functions of the
entire system combines institutional and functional approaches

The Functional Approach
Exchange Functions Buying (procurement) and selling
(merchandising)
Physical Functions Storage, processing and
transportation
Facilitating functions Financing, risk bearing,
standardization, intellectual property, market intelligence
gathering
Micro Marketing
From a micro, firm manager perspective, the customer is
the next stage in the marketing system.
What does this mean?
The firm manager will play an active role in overseeing the
firms marketing decisions that include:
Procurements and merchandising (buying and selling)
Identify consumer preference and product choice
Product design and development, processing, and packaging
Pricing
Promotion
Storage and transportation

Consumer Sovereignty
The economic doctrine that the consumer is Queen or King
in the marketplace that is driven by consumer demand is
known as Consumer Sovereignty.
This is the concept that each consumer decides
independently what to buy and that the combined
individual decisions directs all production and marketing
activities in the economy.
But consumer demand is influenced by effective
Advertising and Promotions