Agricultural marketing

Lecture : 12 
Marketing cost-margins -price spreads -factors affecting the costs of marketing-
reasons for higher marketing costs of agricultural commodities- ways of reducing 
marketing costs for farm products. 
 
Marketing Costs  
The movement of products from the producers to the ultimate consumers involves 
costs, taxes, and cess which are called marketing costs. These costs vary with the 
channels through which a particular commodity passes through.
Eg: - Cost of packing, transport, weighment, lo ading, unloading, losses and spoilages. 
Marketing costs would normally include : 
i. Handling charges at local point
ii. Assembling charges
iii. Transport and storage costs 
iv. Handling by wholesale and retailer charges to customers
v. Expenses on secondary service like financing, risk taking and market intelligence
vi. Profit margins taken out by different agencies.
vii. Producer’s share in consumer’s rupee :
P
F
P
s
= ---- x 100 
P
r
 
Where, 
P
s
= Producer’s share
P
F
= Price received by the farmer
P
r
= Retail price paid by the consumer
Total cost of marketing of commodity,
C 
= C
f
+ C
m1
+ C
m2
+ . . . + C
mn
Where, C= Total cost of marketing of the commodity 
C
f =
Cost paid by the producer from the time the produce leaves till he sells it 
C
mi= 
Cost incurred by the i
th
middlemen in the process of buying and selling the 
products. 

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Market Margins
Margin refers to the difference between the price paid and received by a specific 
marketing agency, such as a single retailer, or by any type of marketing agency such as 
retailers or assemblers or by any combination of marketing agencies such as the 
marketing system as a whole.
Absolute margin is expressed in rupees. A percentage margin is the absolute 
difference in price (absolute margin) divided by the selling price.
Mark-up is the absolute margin divided by the buying price or price paid.