mktg 442 markets, production, and marketing lars perner, instructor 1 agricultural and food markets,...
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MKTG 442 MARKETS, PRODUCTION, AND MARKETING Lars Perner, Instructor 1
AGRICULTURAL AND FOOD MARKETS, PRODUCTION, AND MARKETING
Market functions, institutions, and behaviors
Food marketing issues
Characteristics of markets
Trends in agricultural markets
MKTG 442 MARKETS, PRODUCTION, AND MARKETING Lars Perner, Instructor 2
AGRICULTURALPRODUCTS
FOOD ENERGYPAPERTEXTILE
FINAL FEEDINGINGREDIENT PACKAGING TEXT
MKTG 442 MARKETS, PRODUCTION, AND MARKETING Lars Perner, Instructor 3
Functions in Agricultural Markets—one way to analyze
Selling Storage Transportation Processing
Facilitating Standardization Financing Risk bearing Market Intelligence
MKTG 442 MARKETS, PRODUCTION, AND MARKETING Lars Perner, Instructor 4
Selling to
ProcessorsFor final products (e.g., flour)For manufacturing of ingredients
IntermediariesWholesalersRetailers
CustomersConsumers Institutions
MKTG 442 MARKETS, PRODUCTION, AND MARKETING Lars Perner, Instructor 5
Storage
Storage Seasonal
Timing of production vs. cost of storage
Feasibility of timing market (turkeys vs. wheat)
Queuing
MKTG 442 MARKETS, PRODUCTION, AND MARKETING Lars Perner, Instructor 6
Transportation
Cost vs. speed Perishability
Value of freshness to customers
Ability to predict demand
Need for bulk reduction (see processing)
MKTG 442 MARKETS, PRODUCTION, AND MARKETING Lars Perner, Instructor 7
Processing
Treatment of product (e.g., wheat to flour)
Reduction of bulk (oranges to concentrate—not orange juice yet)
Creation of labor saving food products (e.g., frozen pizza)
MKTG 442 MARKETS, PRODUCTION, AND MARKETING Lars Perner, Instructor 8
Facilitating
Farmers’ agentsMatching demand and supplyOther information search—e.g., demand
forecastNegotiations
Logistics handling
MKTG 442 MARKETS, PRODUCTION, AND MARKETING Lars Perner, Instructor 9
Standardization
Agricultural grades and labeling
Food branding
MKTG 442 MARKETS, PRODUCTION, AND MARKETING Lars Perner, Instructor 10
Financing
Long term lending Farm mortgages Equipment loans
Short term lending Advances against
harvests Financing of store
and processor inventory
Futures contracts
MKTG 442 MARKETS, PRODUCTION, AND MARKETING Lars Perner, Instructor 11
Risk Bearing
Futures contracts Investments in new
food products (most will fail)
Evaluation of credit worthiness of farmers and other parties
MKTG 442 MARKETS, PRODUCTION, AND MARKETING Lars Perner, Instructor 12
Market Intelligence
Market research Forecasting
Demand For existing
products Spread of new
products
Supply
MKTG 442 MARKETS, PRODUCTION, AND MARKETING Lars Perner, Instructor 13
Institutions
Marketing middle peopleMerchant
RetailerWholesaler
AgentBrokersCommissionSpeculativeProcessors/manufacturersFacilitative organizations
MKTG 442 MARKETS, PRODUCTION, AND MARKETING Lars Perner, Instructor 14
Behavioral Systems
Input-outputDifferent parties provide goods and services
moving toward final productsCommunications
Matching supply and demandAdaptation to outside changes—e.g.,
Consumer tastesWorld supply
MKTG 442 MARKETS, PRODUCTION, AND MARKETING Lars Perner, Instructor 15
Food Marketing Efficiency
Getting final products to consumers at lowest cost for given services
Lower spread between farm costs and retail food costs does not necessarily mean greater efficiency—intermediate functions may add value
Types of efficiencyOperationalPricing
MKTG 442 MARKETS, PRODUCTION, AND MARKETING Lars Perner, Instructor 16
Agricultural Production and Marketing
Structure of U.S. agriculture Dominated by small, family farms
Product characteristics Raw material Bulkiness and perishability Quality variation
Production characteristics Total product Annual variability Seasonality
MKTG 442 MARKETS, PRODUCTION, AND MARKETING Lars Perner, Instructor 17
Production characteristics
Total product Increase due to productivity
Annual variabilitySeasonalityGeographic concentrationVarying production costsFarm supply industry (derived demand)
MKTG 442 MARKETS, PRODUCTION, AND MARKETING Lars Perner, Instructor 18
Marketing Problems
Lack of control over Own output Market supply
Lag in results of adjustment efforts Decision of whether to engage in marketing
efforts Free rider problem
Superior bargaining power of large buyers Cost squeeze
MKTG 442 MARKETS, PRODUCTION, AND MARKETING Lars Perner, Instructor 19
Some Trends
Differentiated products Specialty/nice products Interdependence of
manufacturers and suppliers
High price risk Science and innovation Closed information
systems
Private and proprietary research
Resource and environmental conservation
Managerial and interpersonal skills
Industrialization Global competition Farm incomes moving
toward incomes of other sectors