Agribusiness Management and Trade

Lesson-29 Agricultural Market Functionaries

29.2  MARKET FUNCTIONARIES

In the marketing of agricultural commodities, the following market functionaries/marketing agencies are involved:

1.  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. Frequent visits to markets and constant touch with market functionaries, bring home to them a fair knowledge of market practices. They have, thus, an access to market information, and are able to perform the functions of market middlemen.

2.   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. They do this at different stages in the marketing process. The middlemen in foodgrain 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. They may, moreover, suffer loss with a fall in the price of the product. Merchant middlemen are of two types:

Wholesalers: Wholesalers are those merchant middlemen who buy and sell foodgrains in large quantities. They may buy either directly from farmers or from other wholesalers. They sell foodgrains either in the same market or in other markets. They sell to retailers, other wholesalers and processors. They do not sell significant quantities to ultimate consumers. They own godowns for the storage of the produce. The wholesalers perform the following functions in marketing:

(a) They assemble the goods from various localities and areas to meet the demands of buyers;

(b) They sort out the goods in different lots according to their quality and prepare them for the market;

(c) They equalize the flow of goods by storing them in the peak arrival season and releasing them in the off-season;

(d) They regulate the flow of goods by trading with buyers and sellers in various markets;

(e) They finance the farmers so that the latter may meet their requirements of production inputs; and

(f) They assess the demand of prospective buyers and processors from time to time, and plan the movement of the goods over space and time.

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. Itinerant Traders and Village Merchants: 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. 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. They either sell the collected produce in the nearby market or retain it for sale at a later date in the village itself.

B. 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. They serve as buyers or sellers in effective bargaining. 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. He is usually granted broad powers by those who consign goods or who order the purchase. 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. All these facilities are extended to buyer-firms as well, if asked for.

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. A 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 name of “A‟ class trader. The commission agent keeps an establishment – a shop, a godown and a rest house 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. Commission agents extend the following facilities to their clients:

• They advance 40 to 50 percent of the expected value of the crop as a loan to farmers to enable them to meet their production expenses;

• They act as bankers of the farmers. They retain the sale proceeds, and pay to the farmers as and when the latter require the money;

• They offer advice to farmers for purchase of inputs and sale of products;

• They provide empty bags to enable the farmers to bring their produce to the market;

• They provide food and accommodation to the farmers and their animals when the latter come to the market for the sale of their produce;

• They provide storage facility and advance loans against the stored product up to 75 percent of its value;

• They arrange, if required by the farmer, for the transportation of the produce from the village to the market; and

• They help the farmers in times of personal difficulties.

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 – of the quantity available and the prevailing prices.

Brokers have no establishment in the market. They simply wander about in the market and   render services to clients. There is no risk to them. They do not render any other service except to bring the buyers and sellers on the same platform. In most regulated markets, brokers do not play any role because goods are sold by open auction. Their number in food grain marketing trade is decreasing. But they still pay a valuable role in the marketing of other agricultural commodities, such as gur, sugar, oil, cottonseed and chillies.

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. Some processors employ agents to buy for them in the producing areas, store the produce and process it throughout the year on continuous basis. They also engage in advertising activity to create a demand for their processed products.

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.

The important facilitative middlemen are:

Hamals or Labourers: They physically move the goods in marketplace. They do unloading from and the loading on to bullock carts or trucks. They assist in weighting the bags. They perform cleaning, sieving, and refilling jobs and stitch the bags. Hamals are the hub of the marketing wheel. Without their active co-operation, the marketing system would not function smoothly.

Weighmen: They facilitate the correct weighment of the produce. They use a pan balance when the quantity is small. Generally, the scalebeam balance is used. They get payment for their services through the commission agent. The weighbridge system of weighing also exists in big markets.

Graders: These middlemen sort out the product into different grades, based on some defined characteristics, and arrange them for sale. They facilitate the process of prices settlement between the buyer and the seller.

Transport Agency: This agency assists in the movement of the produce from one market to another. The main transport means are the railways and trucks. Bullock carts or camel carts or tractor trolleys are also used in villages for the transportation of food grains.

Communication Agency: It helps in the communication of the information about the prices prevailing, and quantity available, in the market. Sometimes, the transactions take place on the telephone. The post and telegraph, telephone, newspapers, the radio, Television, Internet and informal links are the main communication channels in agricultural marketing.

Advertising Agency: It enables prospective buyers to know the quality of the product and decide about the purchase of commodities. Newspapers, the radio, cinema slides, television and Internet are the main media for advertisements.

Auctioneers: They help in exchange function by putting the produce for auction and bidding by the buyers.