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What is a market

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a group of buyers and sellers organized for the purpose of the exchange of goods and services (buyers + sellers) + organization = market

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Market supply chain list

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farmers - processors - wholesalers - retailers - consumers Each of those(besides consumer) is an input supplier and in-between are brokers/agents

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input supplier

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typically provide those items that are necessary to the successful operation of terms in other sectors.

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farmers

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typically grow crops or raise live animals

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broker/agent

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offer networking and transaction service that may transfer of farm products alone the marketing chain more efficient.

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processors

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transform raw agricultural products into other forms by adding desirable or removing undesirable characteristics. i.e. wheat int bread or corn into corn syrup

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wholesalers

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organize and coordinate acquisition activities among numerous individual producers and sort, store, and distribute products to the next marketing stage

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retailers

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organize and distribute finial goods to individual consumers ie grocery stores, restaurants

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consumers

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individual buyers aka you

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marketing

answer

the process of moving goods and services through the relevant marketing chain from initial producers to final consumers. it is a multidisciplinary activity that requires familiarity with business activities, economic incentives, geography, psychology, and technical knowledge.

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Value added

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marketing adds value but enhancing location, form or possession of goods or services. value is added at each stage of the marketing or supply chain as the raw potatoes are transformed and moved to become products that the consumers are willing and able to buy. seeds - potatoes - chips - flavoring - packaging - location

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marketing participation (Uniqueness)

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everyone is an agricultural consumers

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biological impacts (Uniqueness)

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production lags, perishable goods, low value per density, imprecise control of output levels

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nature of demand (Uniqueness)

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demand elasticated for food tends to be low

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market structure (Uniqueness)

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various market structure models apply (perfect or imperfect competition)

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political influence (Uniqueness)

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government subsides for agriculture are relatively high in most countries food security is part of national security

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challenging (complexity)

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ag marketing involves coordinating production, processing and distribution of thousands of products from millions of farmers to thousands of agribusiness firms to hundreds of countries to billions of people world wide

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multistage (complexity)

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it involves input suppliers, farm production, brokering, processing, storage, wholesaling, and retailing.

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adaptable (complexity)

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ag goods and service may be transferred from producers to consumer via different market mechanisms including auctions, futures markets, contracts, marketing boards, cooperatives or direct negotiation.

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global (complexity)

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hundreds of countries with vastly different social and cultural preferences about not only what foods to eat, but where and how they should be grown, processed, and distributed.

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importance of agricultural markets

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everyone in the world is affected by hoe well or poor ag markets operate. when markets are inefficient more people will get less food at higher prices and also will have fewer options

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percent of laborers in the us that are farmers

answer

2%

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percent of laborers in Africa and Asia

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more than 90%

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percent of farming in USA's GDP

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1.2%

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percent of farming in low income contours GDP

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Liberia 77% somalia 65% ethiopia 47%

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Ag economy (% of GDP)

answer

low income countries - high high income countries - low

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ag employment (% of GDP)

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low income countries - high high income countries - low

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why define ag markets

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to avoid unnecessary confusion and arguments. defend against illegitimate criticisms

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characteristics

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consumers must value(recognize) the distinctly

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time

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relevant consumers must exist during the specified time

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space

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the product must be distributed across the specified space

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well defined markets

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1) group of consumers exist during time frame 2) who distinctly value a food or derived with the specified characteristics 3) and that the distribution of the food or service natural encompasses the specified space

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defining markets characteristically

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local food, specific color of horse

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farm level (market 1)

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ie sellers: grape growers buyers: grape wholesalers output: potatoes, cattle, corn, chickens

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wholesale (market 2)

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ie sellers: grape wholesalers Buyers: grape retailers output: dried potatoes, beef, ethanol, broilers

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Retail (market 3)

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ie sellers: grape retailers buyers: individuals ourput: instant mash potatoes, ground beef, e-85 ethanol gas, boneless chicken brest

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Farm value

answer

the value of all U.S. agricultural products when they leave farms

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Marketing bill

answer

the costs to get all U.S. produced food from all the farm gates into the hands of final consumers

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Total Consumer Food Expenditures.

answer

Farm Value + Marketing Bill

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Since 1955, the U.S. farm value share has generally

answer

decreasing

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Farm Value Share

answer

the portion (or share) of total consumer food expenditures that go to farmers calculated by dividing farm value by the total consumer food expenditures and then multiplying by 100

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food services

answer

The single largest industry sector comprising all U.S. food expenditures in 2011

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Reasons that the U.S. food marketing bill has increased in recent decades are

answer

Higher disposable income, high total population, inflation

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Farm Value Percentage equation

answer

Farm Value / Consumer expenditures

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Marketing Bill

answer

Labor, Packaging, transportation, energy, profits, advertising, etc

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Wealthy Vs Poor countries' disposable income

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Americans have the lowest budget share devoted to food (10%) Low income countries such as Nigeria spend around 70%

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Per capita equation

answer

total amount / population

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Inflation

answer

general rise in price level

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Types of Prices

answer

Nominal/curent - price paid at time of event real - adjusted for inflation

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Real Value equation

answer

( nominal value / price index ) x 100

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Rescaling an index

answer

1) select period you prefer as the base period/unit 2) divide every value in the list by the value in the preferred base period/unit 3) multiply the resulting quotient by 100

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price index

answer

compare prices per capita incomes over time per capita incomes across states big mac prices across countries

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quantity index

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compare quantities bushels of wheat over time tons of coal across countries head of cattle per country

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productivity

answer

output/input

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disappearance

answer

estimate of US consumption of individual agriculture commodities ie corn, soybeans, wheat

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farm to retail price spread

answer

the market cost associated with individual food products or limited groups of food ie peas beef, pork

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marketing bill equation

answer

= total consumer expenditure - farm value

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farm to retail price spread equation

answer

= retail price - farm value equivalent

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farmers share equation

answer

farm value equivalent / retail price

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farm level equivalence

answer

conversion factors inflate to amount necessary compensation for wast, trimming, shrinkage, spoil, damages i.e. beef 2.4lb for 1lb ie carrots 1.031 for 1lb

question

farm value equivalent equation

answer

farm level price * conversion factor

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why governments intervene in ag markets

answer

1)facilitate price discovery 2)stabilize market prices 3)correct market failure

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facilitate price discovery

answer

governments gather and distribute information about market transactions to encourage greater price efficiency

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mandatory live stock reporting act

answer

greater price reporting on meat packers

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stabilize market prices

answer

ag comodity prices tend to fluctuate more than other prices and the incomes of farmers in turn fluctuate eve more. the government does this though production control and price supports

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production control

answer

moderate market supplies,

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Ag adjustment act

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limit production of major crops

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price supports

answer

policies designed to maintain minimum market prices. will give out penalties to those who do not abide

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commodity credit cooperation

answer

nonrecourse loans, low interest loans made to farmers to allow them to store their comedies onside till prices rebound.

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corrective market failure

answer

monopolies, public goods, and externalities

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monopolies

answer

single large firm dominates a given market

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public goods

answer

non-excludable, non-rival consumption ie national defense, fireworks

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externalities

answer

goods which the full social cost or benefit of the good is not reflected in the market price consumers must pay.

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tools government uses to correct market failure

answer

regulate, tax, subsidize

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commodity grading

answer

grade standard descriptions of products that allow for easy categorization of individual units

question

8 grades

answer

beef

question

three grades

answer

eggs chickens turkeys

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38 grades

answer

cotton

question

312 grades

answer

fruit vegetables

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wool grades

answer

average fiber diameter

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benefits of commodity grading

answer

allows consumers to buy unseen products lowers transaction costs moticates produces to improve quality facilitate price reduce marketing risk facilitate dispute resolution

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trends in commodity

answer

create a reputation of greater quality assurance among consumers vs rival firms to penetrate or devope niche markets to raise transaction costs and entry barriers for competitors

question

marketing orders

answer

use mandatory standards to elevate consumer expectations

ACE305 Unit 1 – Flashcards

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