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by: Humberto Upton


Marketplace > Arkansas State University > Agricultural & Resource Econ > AGEC 3043 > MARKETING SPECIALTY AGRICULTURAL PRODUCTS
Humberto Upton
GPA 3.87


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Class Notes
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This 3 page Class Notes was uploaded by Humberto Upton on Friday October 2, 2015. The Class Notes belongs to AGEC 3043 at Arkansas State University taught by Staff in Fall. Since its upload, it has received 9 views. For similar materials see /class/217712/agec-3043-arkansas-state-university in Agricultural & Resource Econ at Arkansas State University.

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Date Created: 10/02/15
AGEC 3043 Week 2 Lecture Notes MANAGING AGRIMARKETING TECHNOLOGY Controlling marketing cost help keep prices down which bene ts both the consumer and the producer Consumers pay less and producers may earn a greater pro t from producing more by using ef cient marketing procedures that reduce costs Before engaging in the marketing of agricultural commodities one has to understand how to select and manage agrimarketing technology A Selecting Marketing Alternatives Every agricultural product is marketed in ways unique to its characteristics attributes and consumer demands But farmers face many risks in the production and marketing of the agricultural products To help reduce these risks many marketing alternatives have been developed 1Cash Marketing Also known as spot price it is simplest way to sell crops No previous contract is necessary but negotiations may occur to arrive at an agreed price e g livestock auction Also known as the spot price 2 Cash Contracts Involves signing a contract that speci es that a certain quantity of a product will be delivered on a certain date at a speci ed price This provides protection against fall in prices allows the farmers to know the price that will be received before harvest and assures processors and elevators of an adequate volume of raw material for their plants eg a processor of a cucumber pickles may sign contracts with several farmers in a local community to grow cucumber 3 Futures Contract Is an agreement to either make or take delivery of a commodity in the future at a speci ed price The futures price is today39s price when the futures contract is made In most contracts no actual exchange of products occurs when the contract is traded and priced The trading takes place in futures markets such CBOT Minneapolis Grain Exchange New York Cotton Exchange Kansas City Board of Trade Traders in these markets hedge or speculate a Speculation Speculation involves attempting to anticipate and pro t from futures price changes Speculators never own the actual product but only trade or speculate on price changes of the product b Hedging Hedging involves taking opposite positions in the cash market and futures market Traders who hedge are more likely to make or take delivery of a product that a speculator Therefore hedgers must at own the actual product now or in the future Hedgers are usually farmers and processors Hedging is a means of protecting against nancial loss if price decline It is thus used to protect against future changes in price B Understanding Information in AgI39i Marketing Farmers agribusiness managers and consumers must have good information in order to make intelligent agrimarketing decisions Marketing information allows consumers to plan their purchases farmers to plan their production decisions and agribusiness rms to plan their processing transportation storage and other marketing decisions To make effective decisions farmers need information on the following 1 Prices Cash and futures prices change daily and farmers have to consult newspaper marketing newsletters government publication USDA for price information 2 Weather Info on rain frost drought storms and ood has an impact on the market Government Policies Trade agreements and restrictions impact prices of agric products 3 Acres Planted Info on acres planted shows quantity that will be on the market 4 Disease and Insect Problems Sudden diseases and insects outbreak can affect prices 5 New Product Development New products that are appealing to consumers may result in increased demand 6 Consumer Issues Information on products that will be harmful or beneficial to health may affect demand Market information must be accurate relevant timely trustworthy and complete if they are to assist in effective decision making C Government in Agricultural Marketing The major role of government in agricultural marketing is to enhance the marketing process The government use regulations product wholesomeness product uniformity national security and infrastructure maintenance to improve the activities in the marketing process 1 Product Wholesomeness Consumers generally expect to buy products that promote good health fresh and free of ha1mful substances These qualities are called product wholesomeness Various government agencies are involved in ensuring product wholesomeness Federal state and local government agencies regularly inspect food processing and storage firms to ensure product wholesomeness 2 Product Uniformity This describes products that meet certain standards although they may not be identical Grading weights and measures establish product uniformity The consumer who buys 10 pounds of carrots expects to get a full 10 lbs weight Uniformity enhances the buying and selling of products Grading allows trading to occur without actually seeing or inspecting the product Labels and product information are required on all products 3 National Security The security of a nations depends upon the citizens having sufficient food and clothing for their needs Governments programs eg providing subsidies to increase production are initiated to ensure that enough food is available 4 Market Intervention When the gov t regulates agricultural marketing activities to enhance the overall welfare of the nation Agricultural leaders always seek equality of agriculture with other sectors of the economy eg fair prices This is known as PARITY Several areas of government intervention in agrimarketing are a Price and Income Support Programs These provide loans to farmers to store what they have produced The farmers can later reclaim and sell the product if the price goes up Nonrecourse loans b Purchase and Storage Programs Government purchases products in order to raise prices Government disposes of the purchases in foreign trade donations to needy families etc 0 Direct Farm Payments These provide farmers with cash to make up for low prices various land diversion programs ARP CRPwhere farmers are asked to take land out of production are examples e Marketing Orders With some agricultural products such as milk regulations are established that set minimum prices buyers must pay farmers 5 Infrastructure Maintenance Highways roads warehouses ports grading stations etc used in agrimarketing are often established and maintained with government funding These are known as social capital or infrastructure that facilitate the agricultural marketing process


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