Agricultural Product-Price Situation in India


Agricultural marketing can best be defined as series of services involved in moving a product from the point of production to the point of consumption. Thus agricultural marketing is a series of inter-connected activities involving: 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. Businesses that have lower costs are more efficient and can deliver quality products are those that prosper. Those who have high costs, do not adapt to changes in market demand and provide poorer quality are often forced out of business. Marketing has to be customer oriented and has to provide the farmer, transporter, trader, processor, etc. with a profit. This requires those involved in marketing chains to understand buyer requirements, both in terms of product and business conditions.

Agricultural Product:-

The overall agricultural market is divided in Fibers, Spices, Edible oil seeds, pulses vegetables and others.

a- Fiber includes kapas, jutes ect.

b- Spices include Coriander, cardamom, Turmeric, Pepper, Chilli, Jeera etc.

c- Edible oil seeds include Palm oil, Mustard Seed (Kacchi Ghani), Coconut Oil, Soya Oil, caster Seed Oil, Mustard Seed etc.

d- Pulses include Channa, Moong, Urad, Arhar etc.

e- Vegetable includes potato, onion, and others.

Agricultural marketing: –

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,

Marketing connotes a series of activities involved in moving the goods from the point of production to the point of consumption.

Specification, the subject of agricultural marketing includes marketing functions, agencies, channels, efficiency and cost, price spread and market integration, producer’s surplus etc.

The agricultural marketing system is a link between the farm and the non-farm sectors.

Agricultural marketing involves in its simplest form the buying and selling of agricultural produce. In modem marketing, agricultural produce has to undergo a series of transfers or exchanges from one hand to another before it finally reaches the consumer.

Farmer clip_image001warehouseclip_image002 transporter clip_image003Wholesaler clip_image004Retailer  clip_image005 Consumer

Cost + profit + cost + Profit + Profit = ultimate cost to Customer

Objective of effective Marketing: –

1- To enable the primary producers to get the best possible returns,

2- To provide facilities for lifting all produce, the farmers are willing, to sell at an incentive price,

3- To reduce the price difference between the primary producer and ultimate consumer, and

4- To make available all products of farm origin to consumers at reasonable price without impairing on the quality of the produce.

Why farmers are not getting better price and taking steps for suicide: –

1- Improper warehouses: – There is an absence of proper ware housing facilities in the villages. Therefore, the farmer is compelled to store his products in pits, mud-vessels, “Kutcha” storehouses, etc. These unscientific methods of storing lead to considerable wastage. Approximately 1.5% of the produce gets rotten and becomes unfit for human consumption. Due to this reason supply in the village market increases substantially and the farmers are not able to get a fair price for their produce.

2- Lack of grading and standardization:- Different varieties of agricultural produce are not graded properly. The practice usually prevalent is the one known as “dara” sales wherein heap of all qualities of produce are sold in one common lot Thus the farmer producing better qualities is not assured of a better price. Hence there is no incentive to use better seeds and produce better varieties.

3- Inadequate transport facilities: – Only a small number of villages are joined by railways and pucca roads to mandies. Produce has to be carried on slow moving transport vehicles like bullock carts. Obviously such means of transport cannot be used to carry produce to far-off places and the farmer has to dump his produce in nearby markets even if the price obtained in these markets is considerably low. This is even truer with perishable commodities.

4- Presence of a large number of middlemen The chain of middlemen in the agricultural marketing is so large that the share of farmers is reduced substantially. Some of the intermediaries in the agricultural marketing system are -village traders, Kutcha arhatiyas, pucca arhatiyas, brokers, wholesalers, retailers, money lenders, etc.

5- Malpractices in unregulated markets Even now the number of unregulated markets in the country is substantially large. Arhatiyas and brokers, taking advantage of the ignorance, and illiteracy of the farmers, use unfair means to cheat them. The farmers are required to pay arhat (pledging charge) to the arhatiyas, “tulaii” (weight charge) for weighing the produce, “palledari” to unload the bullock-carts and for doing other miscellaneous types of allied works, “garda” for impurities in the produce, and a number of other undefined and unspecified charges. Another malpractice in the mandies relates to the use of wrong weights and measures in the regulated markets. Wrong weights continue to be used in some unregulated markets with the object of cheating the farmers.

6- Inadequate market information It is often not possible for the farmers to obtain information on exact market prices in different markets. So, they accept, whatever price the traders offer to them. With a view to tackle this problem the government is using the radio and television media to broadcast market prices regularly. The news papers also keep the farmers posted with the latest changes in prices. However the price quotations are sometimes not reliable and sometimes have a great time-lag. The trader generally offers less than the price quoted by the government news media

7- Inadequate credit facilities Indian farmer, being poor, tries to sell off the produce immediately after the crop is harvested though prices at that time are very low. The safeguard of the farmer from such “forced sales” is to provide him credit so that he can wait for better times and better prices. Since such credit facilities are not available, the farmers are forced to take loans from money lenders, while agreeing to pledge their produce to them at less than market prices.

Agricultural Marketing in India and the stages of price rise:-

The existing systems of agricultural marketing in India are as briefly described here.

1- Sale to moneylenders and traders
A considerable part of the total produce is sold by the farmers to the village traders and moneylenders. Often the money lenders act as a commission agent of the wholesale trader are charging higher rate of the produce

2- Hats and shanties
Hats are village markets often held once or twice a week, while shanties are also village markets held at longer intervals or on special occasions. The agents of the wholesale merchants, operating in different mandies also visit these markets and purchase either whole or a lot of produce from these hats and sell the produce at higher rate when either there is shortage of produce in the market or waiting for price rise.
Most of “hats” are very poorly equipped, are uncovered and lack storage, drainage, and other facilities. It is important to observe that only small and marginal farmers sell their produce in such markets. The big farmers with large surplus go to the larger wholesale markets.

3- Mandies or wholesale markets
one wholesale market often serves a number of villages and is generally located in a city. In such mandies, business is carried on by arhatiyas. The farmers sell their produce to these arhatiyas with the help of brokers, who are generally the agents of arhatiyas. Because of the malpractices of these middlemen, problems of transporting the produce from villages to mandies, the small and marginal farmers are hesitant of coming to these mandies and arhatiyas who are working in union declares the price of the produce as they decide. These arhatiyas dumping produce store these produces in warehouses and creates shortage of produce and forcing government to raise the price.
The arhatiyas of these mandies sell off the produce to the retail merchants. However, paddy, cotton and oilseeds are sold off to the mills for processing. The marketing system for sugarcane is different. The farmers sell their produce directly to the sugar mills.

4- Co-operative marketing
To improve the efficiency of the agricultural marketing and to save farmers from the exploitation and malpractices of middlemen, emphasis has been laid on the development of co-operative marketing societies. Such societies are formed by farmers to take advantage of collective bargaining.
A marketing society collects surplus from it members and sell it in the mandi collectively. This improves the bargaining power of the members and they are able to obtain a better price for the produce. In addition to the sale of produce, these societies also serve the members in a number of other ways.

Facility needed for Agricultural marketing that may reduce the price of agricultural produce–

In order to have best advantage in marketing of his agricultural produce the farmer should enjoy certain basic facilities.
1. He should have
proper facilities for storing his goods.

2. He should have holding capacity, in the sense, that he should be able to wait for times when he could get better prices for his produce and not dispose of his stocks immediately after the harvest when the prices are very low.
3. He should have adequate and cheap transport facilities which could enable him to take his surplus produce to the mandi rather than dispose it of in the village itself to the village money-lender-cum-merchant at low prices.

4. He should have clear information regarding the market conditions as well as about the ruling prices, otherwise may be cheated. There should be organized and regulated markets where the farmer will not be cheated by the -dalals- and -arhatiyas-.
5. The number of intermediaries should be as small as possible, so that the middleman’s profits are reduced. This increases! The returns to the farmers.

Characteristics of good marketing: – The following characteristics should exist in a good marketing system.

1. There should not be any government interference in free and market transactions. The method of intervention include, restrictions on food grain movements, restrictions on the quantity to be processed, or on the construction of processing plant, price supports, rationing, price ceiling, entry of persons in the trade, etc.
When these conditions are violated, the inefficiency in the market system creeps in and commodities pass into the black market. They are not then easily available at the fair prices.

2. The marketing system should operate on the basis of the independent, but systematic and orderly, decisions of the millions of the individual consumer and producers whose lives are affected by it.
3. The marketing system should be capable of developing into intricate and far-flung marketing systems in view of the rapid development of the urban industrial economy.
4. The marketing system should bring demand and supply together and should establish equilibrium between the two.
5. The marketing system should be able to generate employment by ensuring the development of processing industries and convincing the people to consume more processed foods, consistent with their tastes, habits and income levels.


A good marketing system is one, where the farmer is assured of a fair price for his produce and this can happen only when the following conditions are obtained.

  1. the number of intermediaries between the farmer and the consumer should be small
  2. the farmer has proper storing facilities so that he is not compelled to indulge in distress sales
  3. efficient transport facilities are available
  4. the malpractices of middlemen are regulated
  5. farmers are freed from the clutches of village moneylenders and
  6. Regular market information is provided to the farmer.

The two institutions: co-operative marketing societies and regulated markets, together can assure, the presence of all these conditions. Accordingly if cooperative marketing societies are developed on the lines indicated above (along with regulated markets), the Indian agricultural marketing system can be considerably improved and the ultimate consumer will get low price.



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