Agricultural marketing

Marzuqi Salleh, UiTM Perlis

FINAL QUESTION AND ANSWER

(COLLECTION)

AGRICULTURAL MARKETING

AGRICULTURAL MARKETING CONFIDENTIAL


PREPARED BY: MARZUQI BIN MOHD SALLH

In order to maximize benefit, market news and information must meet a number of criteria. Explain four
(4) important criteria in market information. (4 marks)
• Information must be complete and comprehensive. A reasonably complete description of a food
market includes prices, price trends, production, supply movements, stocks, and demand
conditions at each level of market.
• Information also must be relevant and in usable form. Much market information goes unused
because it is not in usable, easily accessible form.
• Confidentiality. Market prices and supply reports are amassed to provide a general picture of
the market without revealing any single information.
• Market information also must be timely, in the sense of being relevant to current decisions, and
must be speedily transmitted to users.
• It is desirable to have a balance of market information at all levels of the food industry.

Describe cyclical and seasonal farm price variations. (2 marks)
• Cyclical price variations are caused by the tendency of farmers to base future production plans
on current prices and profits, rather than on future price
• Seasonal price variations are the more or less regular patterns of price change occurring within
a crop or marketing year.

The lnternational Market is deeply influenced by the market environments. Explain the four (4) common
environmental factors in lnternational Marketing (6 marks)
• Demographic is the statistical study of human population and its distribution characteristics. For
example are birth rate, age, sex, occupation, religion, family, education and other statistics.
• Natural. It consists of natural resources required by business as inputs to produce goods
demanded by customers. The forces of nature have several impacts on the overall decision of
the marketer. Example of natural environments are shortages of certain raw materials (oil, coal,
rubber, timber, etc), increased cost of energy (marketers may resort to use solar, wind and
water as sources of energy as the oil/fuel price increase dramatically), increased levels of
pollution, thus more money need to be spent to clean the environment.
• Technological is the knowledge of how to accomplish tasks and goals and often this knowledge
comes from scientific research.



• Social-cultural. The socio-cultural consists of the demographic characteristics, customs and
values of the population within which the marketing firms are operating.

Food marketing firms incur a number of costs when performing marketing functions. Elaborate on three
(3) components of these marketing costs. (3 marks)
• Labor cost
• Transportation cost
• Packaging cost
• Hire purchase machinery
• Depreciation
Marketing channels help to distribute the products and services from farm to the consumers. Lists four
(4) factors to be considered in selecting market channels (4 marks)
• Distance between the producer and the consumer. Distance between the producer and the
consumer will enhance the high cost of marketing channels. To reduce such cost the needs of
middlemen to market the products from the producer to the consumer.
• Nature of products. Most of the agricultural products are perishable in nature. To reduce such
perishable, the marketing channel must be shorten or the introduction of new packaging and
fast transportation is needed to reduce such cost and so that the consumer will get the products
at a faster time.
• Production skill. If a producer produces the products at a larger scale, this will reduce the
marketing cost of the production

Agricultural products are highly perishable and have close substitutes as compared to non agricultural
product. If this is the case, then what are the methods imposed by the government to protect the price
stability of agricultural products? (4 marks)
Price pegging

• Price pegging is the process of fixing the price of products that is agricultural products usually
primary products regardless of its demand and supply in the market. Price pegging consists of
minimum or floor prices that is above equilibrium and maximum or ceiling prices which is below
equilibrium prices.

Subsidies

• Subsidy is a price guarantee to raise the farm prices and to protect the farmer income.

a) Why are middlemen necessary in delivering of agricultural products? (5 marks)
• Middlemen provide greater efficiency in making goods available on a wide scale to target
markets.

• Middlemen reduce the number of channel transactions.



• Middlemen play an important role in matching supply with demand i.e. by making the goods
available at the right place, time and quantity.

• Many producers lack the financial resources to carry out direct marketing. If they are to
distribute the goods direct to customers, it would require them to have many shops or outlets
and sales representatives.

• Some producers lack the marketing experience and thus rely on experienced middlemen and
their management ability.

• Producers have more time to increase their investment on Research and Development in their
business and earn a greater return.

Name the types of hedging. (2
marks)
• Hedging means avoidance or reduction of the risks of loss
• Type of the hedging, the selling and buying hedging

There are various approaches in determining the price of products in the market. What are the types of
price determination based on competition? (5 marks)
• Perfect competition
• Monopoly
• Oligopoly
• Imperfect competition

Name the government agencies that regulate agricultural marketing such as vegetables and fruits, rice,
tobacco, and latex. (4 marks)
• FAMA-(Federal Agricultural Marketing Authority)
• BERNAS-Padiberas Nasional Berhad (BERNAS)
• MARDEC
• LTN-Lembaga Tembakau Negara

Explain the differences between horizontal and vertical integration. (4 marks)
Horizontal integration
• Occur when a firm gains control over firms performing similar activities at the same level in the
marketing sequence. Its potential impact on competition the anti-trust laws limit horizontal
integration in the food industry
Vertical integration
• When a firm combines activities unlike those it currently performs but that are related to them
in the sequence of marketing activities. Happens when one firm enters at two or more levels in
the marketing channel by either buying a firm or through contractual agreement

Explain briefly the following terms: (10 marks)



i) Hedging and the types of hedging,
• Hedging means avoidance or reduction of the risks of loss
• Type of the hedging, the selling and buying hedging

ii) Transferring agricultural risks
• Insurance. Insurance is an arrangement with a company which the organizations pay regular
amount of money and the insurance company agree to pay the costs
• Contract. A contract is an understanding of agreement between the producer and the future
consumer at a price determined earlier and assurance in delivering quantities of the products.
This way will help organizations in reducing the risk in marketing of the products.
• Hedging. Buying or selling of agricultural commodities in the future markets. Future market is
the purchase of products or agricultural commodities for future delivery.

Briefly explain several approaches in determining the price of product. (10 marks)

Demand

• As price increase, quantities demanded will decrease.

Non-price orientation

• The firms will maximize profit through various means such as;

i. Advertising.
ii. Sales promotion.
iii. Changes in packaging.
iv. Location of production.
v. Festive seasons.
Cost

• Average. An additional price will be added to the cost per unit on every production for the
purposes of price determination.

• Examples; Giat Sdn. Bhd. produces tomato pastes. The total costs involves is RM250.00, and the
fixed cost is RM100.00. The management forecast 250 units sold. If the management forecast a
profit 15% of the sales, what will be the selling price of the tomato paste?



Return on investment.

• Example; Awang manufacturer Sdn. Bhd. Forecast sales of 5000 bottles of juices for the periods
of six months. Fixed cost is RM5000 and variable cost is RM1.20 per bottle. Total investment is
RM15000. Return on investment is 20% of the total investment. How much will be its price?

Mark-up

• Mark-up is an addition to the total cost for production based upon percentages of the selling
price.

Producer

• Farm level where products are produced.

Processor

• People who process the agricultural goods from raw to finished or unfinished, to change the
physical appearance of the raw products.

Middlemen

• Middlemen is an organization or individuals who specializes certain marketing channels such as
storing, financing or transportation.

Retailer

• Retailer is a marketing middlemen that sells goods to consumer.

QUESTION 1
Mr. Jamal is a middleman and owns a Storage and Transportation Company at Jengka. He has bought
large quantities of palm oil from various processors and he plans to store and transport the products to
various local and international retailers. The risk is high when transporting the products and he want to
implement a systems of price discovery when dealing with his clients.
a) What are the suitable types of storage and transportation if he plans to sell to the Middle East?
• Cold / hot storage for perishable product such meat, vegetables, etc
• Open storage to store palm oil bunches and some type of vegetables, etc



• Roadways (truck, lorry, container, tanker, van, car, low-loader, etc
• Railways (train, electric train, etc)

b) What types of packaging materials if he plan to sell the products 2 kg and 20 kg palm oil in Jengka
town.(2 marks)
• Protection-to protect the product during the process of transportation, storage, display and
sales until the product is ready for use.
• Plastic-use high quality of plastic so that the product can be protected from any vision

c) What should he do if he try to increase the efficiency of storage facilities. List four methods. (5 marks)
• Labor efficiency versus mechanism. Use paddy harvester instead of human being during
harvesting time.
• Proper ventilation and insulation. The intention is to reduce odor, maintain freshness of
products, and minimize moisture.
• Improved management technique. This can be done through maintaining a proper and
improved work scheduling in the operational situation. For example, the work schedule of
manure, harvesting, and pest and disease control in the agricultural sectors.

d) What should he do if he try to reduce the product deterioration when transporting the palm oil to
Middle East? List four methods. (5 marks)
• The type of container use will prevent the product from deteriorate

• The density and bulk of products

• The degree and efficiency of loading

• Bracing methods use for certain products

• Change the physical products attribute

e) What are the possible approaches that be used to transfer the risk so that the Jamal Corporation will
not face a total loss in the process of marketing the products? (3 marks)
• Insurance
• Contract
• Hedging

Standards and grades are important during the marketing of agricultural products. List three (3)
contributions of standards and grades in the handling of agricultural products. (3 marks)
• Involves the development of uniform descriptions of commodities and products. It means that
buyers do not have to physically inspect each shipment of product before they purchase it. A



buyer can be assured that when he orders a certain quantity of a Grade A product over the
telephone, he knows exactly the physical specifications of the product he will receive.

Most firms are planning to market their agricultural products in the foreign markets. List three (3) steps
in making decision to enter into International Market. (6 marks)
• Define its international marketing objectives and policies
• Decide what volume of foreign sales it wants
• Choose in how many countries it wants to market
• Decides on the types of countries to enter

List three (3) factors that influence the supply of farm products. (3 marks)
• In the short run period there may be a change in the various factors that would induce sellers to
offer their available stock of goods at a different schedule of prices.

• In the intermediate and long-run periods, there may be a change in the costs of production of
the commodity.

• This may be caused by changes in costs of needed inputs or in the technology of the production
of the commodity itself.

• It may also be caused by changes in the costs of producing other commodities that compete for
the same resources.

• For example, a technological change that increased the feed conversion rate for poultry and
lowered their costs of production would increase the supply of poultry.

Discuss the major issues and problems of farmer's marketing which justify government intervention or
involvement in agriculture. (6 marks)
• Farm prices and income problems
• Food security
• Market and price are not able to allocate resources properly
• Conflicting outcome of farm policies
• Protecting consumers of lower income group
Firms must strive to achieve higher market efficiency. List three (3) criteria for an effective marketing
efficiency. (3 marks)
• Technology
• Organization
• Pricing

• Price discovery

• Product innovation

• Stable growth



• Market coordination

Explain the importance of marketing. (5 marks)
• Advance in technology due to development in handling the product
• Improvement in the facilities that contribute or involve in the market system such as
transportation, telecommunication, packaging etc.
• Attract more individual or firm to involve in agricultural business due to improvement in
technology that create comfortable and easier in marketing system and management
• Improvement in the work procedure in order to increase productivity and reduce waste
• Help farm to plan their production, period for pest and disease control and determinate time of
harvesting to fulfill demand in market
• Quality assurances in production to protect the consumer

What is the importance of marketing channels in the marketing of agricultural products? (5 marks)
• In buying product, intermediaries sometimes pay as items are received; other time, they accept
items on consignment and do not pay until after sales are made
• Manufacturers and service firms often take care of national (international) ads in assigning
promotion roles
• Customer services include delivery, credit, in-office and in-home purchases, training, warranties
and return privileges
• Distribution intermediaries can contribute to product planning in several ways.
• Wholesales and retailers often have strong input into pricing decision

a) Why is it that price tagging must be clearly shown on the products? (5 marks)
• Perform several functions such as identifying, describing or even promoting the product.
• Do not make confuse to the costumer
• Make costumer easy to compare the price
• Make government easy to control the price
• May not lie to the costumer

b) What are the types of packaging materials used for toxic products? (5 marks)
• Protection-to protect the product during the process of transportation, storage, display and
sales until the product is ready for use.
• Plastic-use high quality of plastic so that the toxic product can be protected
• Tens-use high quality of tens so that the toxic product can be protected

Explain any five (5) contributions of the agricultural sector towards national economy. (6 marks)
• Lack of storage facilities
• Existence of legal contract
• Need of standard of grading
• Differing methods of payments
• Need of market information



• To guarantee the contract

Why do plantation companies open new lands in Indonesia, Sabah and Sarawak? (5 marks)
International trade
• Is a way nation can specialize, increase the productivity of their resources and realize a large
total output than otherwise
International marketing
• Involve marketing goods and service outside firm’s country whether in one or several market
Global marketing
• Is an advance of international marketing when fir deal with global customer and competition-
practice by both multinational and global firm

PART A
a) Agricultural Marketing
• The marketing of agricultural products to the first handler. It includes all the activities associated
with agricultural production and with food, feed, and fiber assembly, processing, and
distribution to final consumers, including analyses of consumer’s needs, motivations, and
purchasing and consumption behavior.

b) Marketing Efficiency
• Efficiency in the food industry is the most frequently used measure of market performance.
Improved efficiency is a common goal of farmers, food marketing firms, consumers, and society.
c) Joint Venture
• Entering international market through ownership of assets in host countries. A firm may first
enter the foreign market through exporting, licensing or franchising.
d) Opponent Gain
• Bargaining power is concerned with the influence of a buyer or seller in a negotiation gained
through the ability to threaten or make opponents worse off. Most people associate bargaining
power with this form
e) Floor Pricing
• The minimum price legally set above the equilibrium price or a legally imposed price below
which market price cannot fall
a) Futures Price
• Todays price of the commodities to be delivered in the future market.
b) Cartel
• A combination of independent business organizations founds to regular production pricing and
marketing of goal by the member cartel.
e) Marketing Bill
• (the costs in the marketing sector) costs much more to market most agricultural products than it
costs farmers to produce them
a) Marketing margin



• The portion of the consumer’s food money that goes to food marketing firms. This is the
difference between what the consumer pays for food and what the farmer receives.

b) Possession utility
• Making the exchange of goods and services between the buyers and sellers

c) Monopolistic competition
• The number of firms in the market is large
• There is freedom of entry and exit in the market
• Profit maximization among firms enable them to produce at MR=MC
d) Operational efficiency
• Operational efficiency refers to the situation where the costs of marketing are reduced without
necessarily affecting the output side of the efficiency ratio. An example would be a new labor-
saving machine that reduces the cost of processing oranges into juice.
b) Marketing cost
• The cost involved in the marketing and will directly influence the profit or losses suffered by
sellers. Most marketing costs are influenced by general economic forces outside of the food
economy, especially labor, transportation, packaging, and energy costs.
e) Equalization
• The transformation of raw products to processed form. For example, the collected rubber latex
or scrap to be processed in the factory in the form of semi-processed.
a) Food Marketing
• Food marketing may be thought of as the connecting link-the bridge-between specialized food
producers and consumers.
b) Facilitating Function
• Those that make possible the smooth performance of the exchange and physical functions.
These activities are not directly involved in either the exchange of title or the physical handling
of products.
d) Sales Promotion
• Short-term incentives to encourage the purchase or sale of a product or service.
• This includes coupons, premium, sampling, contest and sweepstake, loyalty marketing program,
and point of purchase displays
e) Market Intelligence
• The job of collecting, interpreting and disseminating the large variety of data necessary to the
smooth operation of the marketing processes. Efficient marketing cannot operate in an
information vacuum.
b) Marketing utility
• Utility will refers to the value of marketing which adds to goods and services.
c) Production concept
• The production concept as a philosophy that holds consumers who will favor those products
that are available and highly affordable and therefore management should concentrate on
improving production and distribution efficiency.



d) Societal marketing concept
• That the societal marketing concept holds that the organization’s task is to determine the needs,
wants, and interest of target markets and to deliver the desired satisfaction more effectively and
efficiently than competitors in a way that preserves or enhances the consumer’s and society’s
well-being.

PARTB



QUESTION 1
International marketing is becoming more important as a means to penetrate the global market place.
What are the circumstances supporting international market development? (6 marks)
• Reduction in a foreign nation’s internal production
• Expanding demand within the foreign market
• Reduced supplies from other foreign supplies
• Shifts in price advances that favor imports from other producer
• Changes in exchange rates that favor imports from foreign exporter
• Technological advances in foreign products
• Shifting consumer preferences induced by cultural changes from outside
• Promoting of Malaysian products within the country.

QUESTION 2
Explain five (5) systems of price discovery for farm product. (5 marks)
Individual, decentralized negotiation

• In this system, each farmer bargains individually with buyers of farm products until a price is
established. “Private treaty” negotiations are quite common in agriculture. The resulting fairness
of prices depends upon the information, trading skills, and relative bargaining power of buyers
and sellers. Consequently, prices discovered in this way tend to vary widely for different
transactions

Organized, central markets shift the locus of price discovery from the farm gate to a central
marketplace.

• All buyers and sellers and their supplies and demands are represented in the central market.
Terminal markets and auctions are examples.

Formula pricing systems

• Formula pricing systems evolved in attempts to secure the benefits of central market price
discovery without physically routing all produce through central markets. Prices are adjusted,
again by formula, for transport costs and quality differences. Formula pricing can reduce
transaction and bargaining costs.

Bargained prices



• Bargained prices are common in fruits, vegetables, nuts, and milk. Bargaining implies collective
pricing on the part of farmers. The collective bargaining process used in labor is frequently cited
as the process model for farmers to follow in order to discover farm prices.

Administered pricing systems

• Administered pricing systems are those in which the government becomes a third party in the
price discovery process. Price supports, price ceilings, and supply control programs are the
techniques of administered pricing.

QUESTION 3
Marketing firms are becoming an important link between producers and consumers. What are the
objectives of marketing firms? (6 marks)
• Identification and recognition of the firm
• Expansion of business volume
• Development of adequate financing
• Identification of market demand
• Identification of market segments
• Information about market demand and supply
• Pricing for volume and profit
• Market innovation

QUESTION 4
Explain the objectives of promotion at the different stages of the product life cycle. (6 marks)
Introductory stage
• The introductory stage is the first stage of the product life cycle in which the full-scale launch of
a new product into the marketplace occurs.
Growth stage
• The second stage of the product life cycle when sales typically grow at an increasing rate, many
competitors enter the market, large companies may start acquiring small pioneering firms, and
profits are healthy.
Maturity stage
• The third stage of the product life cycle during which sales increase at a decreasing rate.
Decline stage
• The fourth stage of the product life cycle, characterized by a long-run drop in sales.

QUESTION 5
Describe three (3) main types of promotion? (3 marks)



Advertising

• Any paid form of non-personal presentation and promotion of ideas, goods or services by an
identified sponsor.

Sales promotion

• Short-term incentives to encourage the purchase or sale of a product or service. This includes
coupons, premium, sampling, contest and sweepstake, loyalty marketing program, and point of
purchase displays.

Public relations

• Building good relations with the company’s various publics by obtaining favorable publicity,
building up a good corporate image, and handling or heading off unfavorable rumors, stories,
and events.

Personal selling

• Personal presentation by the firm’s sales force for the purpose of making sales and building
customer relationships.

QUESTION 6
What are the strategies adopted by the Third National Agricultural Policy (NAP3)? (7 marks)
• Optimizing the resources uses

• Human resources development

• Enhancement of research & development, and technological diffusion

• Greater role of the private sectors

• Reformed marketing strategies

• Expanded food production

Agro-forestry approached
• Agriculture and forestry are mutually compatible and complementary for joint development.
This approached will addressed the increasing scare resources and raw material availability.
Product based approach
• Product based approach address on key products and market identified based on demand and
supply, preferences, and potential consumers.

QUESTION 1
List three (3) main problems faced by agricultural producers. (3 marks)



• Farmers do not have any control over the output of their production activities. Supply of output
is greater than demand. Need of comprehensive information about products demand in market.

• Farmers face in improving their prices through independent or group activities. Farmers are, for
the most part, price takers-they cannot, individually, influence the price of their products
through their output decisions.

• The cost-price squeeze is another component of the farm marketing problem. The competitive
conditions of agriculture tend to keep farm prices close to the cost of production. Falling farm
prices would not be so critical if they were accompanied by falling farm costs, or if the farmer
could adjust input costs as prices fell.

• The superior bargaining powers of buyers. Bargaining power such as opponent pain and
opponent gains differs at levels of the marketing channels. The buyers consider themselves as
king hence their bargaining power is more on opponent gains.

• Increasing gulf between the farmers sectors and food marketing sectors.

QUESTION 2
Name three (3) sources that contribute to the development of market power. (3 marks)
• Sizes, number, and market concentration
• Supply control
• Product diversification

• Controlling strategic resources and decisions

• Financial strength

• Unequal information

QUESTION 3
Managing risks in agricultural business is the most difficult task that farmers have to face.
Mention three (3) methods of reducing risks in marketing of agricultural products. (3 marks)
• Marketing information

• Horizontal integration

• Contract production

QUESTION 4



Middlemen play an important role in facilitating the marketing process of farmers and consumers.
Explain the role of middlemen. @ Why needed middlemen? (6 marks)
• Lack of capital by producer
• Additional product
• Business expansion
• Specialization area
• Change in market information
• Contract and change in ownership

QUESTION 5 (repeat)
Explain the objectives of promotion at the different stages of product life cycle. (6 marks)
Introductory stage
• The introductory stage is the first stage of the product life cycle in which the full-scale launch of
a new product into the marketplace occurs.
Growth stage
• The second stage of the product life cycle when sales typically grow at an increasing rate, many
competitors enter the market, large companies may start acquiring small pioneering firms, and
profits are healthy.
Maturity stage
• The third stage of the product life cycle during which sales increase at a decreasing rate.
Decline stage
• The fourth stage of the product life cycle, characterized by a long-run drop in sales.

QUESTION 6
Give three (3) factors in determining marketing channel. (3 marks)
• Distance between the producer and the consumer

• Nature of products

• Production skill

QUESTION 7
Describe four (4) marketing programs in order to enter International Market. (4 marks)
Product
Several strategies can be considers such;
i. Straight product extension. Marketing a product in a foreign market without any change.
ii. Product adaption. Adapting a product to meet local conditions or wants in foreign markets



iii. Product invention. Creating new products or services for foreign markets.

Promotion

• Companies can either adopt the same communication strategy they used in the home market or
change it for each local market.

Price

• It could set a uniform price all around the world, but this amount would be too high a price in
poor countries and not high enough in rich ones.

Distribution channels / place

• Companies must design international channels that take into account all the necessary links in
distributing the seller’s products to final buyers, including the seller’s headquarters organization,
channels among nations, and channels within nations.

QUESTION 8 (repeat)
Mention three (3) strategies of National Agriculture Policy 3 (NAP3). (3 marks)






QUESTION 9
Describe three (3) methods of price fixing in agricultural products. (3 marks)
• Perfect competition
• Monopoly
• Oligopoly
• Imperfect competition



(1 mark for one answer)

QUESTION 10
Explain three (3) characteristics of products and three (3) characteristics of production that should be
considered in the marketing of agricultural products. (6 marks)
Characteristics of the products:
A raw material
• The output of agriculture is largely a raw material that will be used for further processing.
• The product sold by the farmer soon loses its identity as a farm product becomes simply food.
Bulky and perishable products
Compared to most other products, agricultural products are both bulkier and more perishable.
Bulk affects the marketing functions concerned with physical handling.
Quality variation
• The general quality as well as the total production of agricultural commodities varies from year
to year and from season to season.

Characteristics of production:

Total output
• The long run trend in food production is upward. The rising food supply per capita has been a
mixed blessing for farmers.
Annual variability in production
• There are years where the situation of increasing, decreasing, and stable farm output. These are
caused by farmer responses to prices and other uncontrollable factors such as weather and
disease.
Seasonal variability in production
• In addition to the annual production variability, much of agricultural production is highly
seasonal. Livestock receipts may vary substantially throughout the year.
Geographic concentration of production
• Although a variety of farm products is produced in all states, there is increasing geographic
specialization of farm production.
Varying costs of production
• There is no single cost of production for all farmers. Farmers cost of production are affected by
climate, technology, farm size, and individual managerial skills.
The farm supply industry
• The farm supply industry provides such agricultural inputs as chemicals, seeds, machinery,
feeds, capital, labor, land, and so on.



(Choose any 3 points and explain)

QUESTION 1 (repeat)
Why are middlemen needed in markerting? (5 marks)
• Lack of capital by producer
• Additional product
• Business expansion
• Specialization area
• Change in market information
• Contract and change in ownership

QUESTION 2 (repeat)
List five systems of price discovery. (5 marks)
• Individual, decentralized negotiation

• Organized, central markets shift the locus of price discovery from the farm gate to a central
marketplace.

• Formula pricing systems

• Bargained prices

• Administered pricing systems

QUESTION 3 (repeat) (5 marks)
Explain the approaches used in reducing the risk in the marketing of agricultural products.
• Marketing information

• Horizontal integration

• Contract production

• Technology

• Import and export controls

(With explanation)

QUESTION 4



List and explain three objectives of the Third National Agricultural Policy. (5 marks)
• Enhance food security.
• Increase productivity and competitiveness of the agricultural sector.
• Linkages with other sectors.
• Create new sources of growth for the sector.
• Conserve and utilized natural resources on a sustainable basis.
• To achieved a balanced development between agriculture and other sectors
• To achieve a higher level of expansion and development of the food industry sectors.
• To ensure a sustainable development in agriculture

QUESTION 5 (4 marks)
Briefly describe how to overcome product and production characteristics in agriculture.
Individual management

• By managing the good practice in management such as planning, organizing, directing and
controlling resources can be use to reduce such occurrence of risk in marketing of agricultural
products.

Government involvement

• Price policies set up by the government so that the producers are unable to manipulate price
fixing.

Complete and accurate market information

• Comprehensive and accurate market information will help to reduce the risk in price stabilities.
The use of media such as internet, website, and other relevant sources of information will
reduce the risk in marketing between the producer and the

QUESTION 6
Explain three characteristics of direct selling. (3 marks)
• Known as personal selling

• First of the technical promotion

• Where by seller influence the buyer

• Can in team or individual

QUESTION 7 (repeat)



What are the purposes of promotions? (3 marks)
• To pressure the buyer to buy the product
• To promotion new product
• To inform to buyer about their product
QUESTION 2
Why is radio can be used to advertise new products in the market? (5 marks)
• Take the lower cost
• Easy to listener
• Information spread speedy
• Feedback from the listener is faster
• Clear given information

QUESTION 3 (repeat)
List and explain three strategies for achieving the National Agricultural Policy 3. (5 marks)






What is agricultural commodity? How this commodity plays an important role in Malaysian Economy
Agricultural commodities are homogeneous products. For example, palm oil of the same type and grade
whether it is produced in the different location is used to make cooking oil. Manufacturers regard price
as the main determinant of their palm oil purchases. Commodities are produced on a large number of
farms, each accounting for a small part of total output. No individual farmer can influence prices by
limiting supplies to the market. Because of these characteristics, individual producers cannot influence
market forces. Prices can be low and quite variable, depending on the level of output. Higher production
usually translates into lower price for most commodities. At such times, incomes of most farmers are
bolstered by commodity programs designed to even out the large swings in prices.
• The government plays an important role in making the legislation especially when consumer
needs and preferences are needed. Few areas have been explored for the benefits of the
manufacturer and the consumer such as by placing the date of manufactured goods, halal, price,
ingredients and geographical concern of the targeted consumer.
Market is expandable



• Product exported either locally or internationally is for the purposes of large scale
production and to gain profit maximization. The commodities traded in the market is
demanded by abroad countries.

Government control

• Governnment control is a preconditions in order to monitored the efficiency of the trading
of commodity either directly or indirectly. Government will set-up the policy, contract and
law, and regulation of trading commodities.

Commodities can be graded

• Grading of commodities will enhance the differing in prices. Once the grading is applied,
quality control can be improved. Grading will influenced any buyers to freely choose their
own products.

Involvement of traders

• Involvements of processors, speculators and middlemen or buyers will influenced the
presence of exchange commodities in the market. Whatever it is, it will abide on the
policies, principles and regulations.

QUESTION 1 (repeat)
Explain three (3) characteristics of agricultural products. (6 marks)
i. A raw material
• The output of agriculture is largely a raw material that will be used for further processing.
• The product sold by the farmer soon loses its identity as a farm product becomes simply food.
ii. Bulky and perishable products
iii. Quality variation The general quality as well as the total production of agricultural commodities
varies from year to year and from season to season.

QUESTION 2
Marketing is the process of satisfying needs and wants of consumers by bridging the gap between the
producers and consumers. Briefly explain the elements of marketing process. (6 marks)
Assembling
• Collection of agricultural products in small quantities by the marketing middlemen from
scattered and small farms.
Equalization
• Activities of transforming the perishable, voluminous and bulky agricultural products into a form
that satisfy the wants and desire of the consumers.
Distribution process



• Distribution of agricultural products from where it is produced, processed and packed to the
points where it is most wanted by the consumers.

QUESTION 3
Marketers bridged the gap between producers and consumers and lead to creation of several utilities.
List and briefly describe three (3) types of utility created by marketers. (6 marks)
Form utility

• To change the raw materials to a finished product. For example, palm oil bunch to edible cooking
oil.

Time utility

• Making the products be available during the convenient hours.

Place utility

• Making the products and services available in convenience location and place.

Possession utility

• Making the exchange of goods and services between the buyers and sellers

Information utility

• To inform the buyers that the products exist, how to use it, the price and other related
information of the products availability.


QUESTION 4
Differentiate between brokers and middlemen in distribution of agricultural products. (6 marks)
Brokers:

Brokers do not have physical control or ownership of the product. They follow the directions of buyers
and sellers and have less influence in price negotiations than commission men.

Middlemen:

Middlemen will store the product that has been collected from the processor. Short period of time for
storage is necessary and later will be sent at the retailer for further storage.




Why is international agricultural marketing important to producers and the government?
• Increase in the exports of these primary commodities and its market expansion can raise price
• The government benefited from the extension of international trade through foreign exchange
earning, corporate taxes and source of employment for rural population, impetus and catalyst
for growth and development of the whole nation
• Participation of Malaysian exporters in world market has provide incentives for farmers, small
holders and estate land schemes and estate to increase farm productivity and national output in
agriculture
• Such steps have markedly improved the production of such crops, and better handled and
marketed such products on international market

(Choose any 3 key points and explain)

QUESTION 2
Distinguish between farm sector and marketing sector. (5 marks)
Farm sector

• Where livestock, poultry, fruits, vegetables, cotton, tobacco, flax, corn, wheat, other grains, and
specialty crops are produced

Marketing sector

• Involving many marketing functions, such as transportation, processing, and storage, which are
more expensive than the production costs in the farm sector

Explain the differences between the risk taking function and market information function.
The risk taking function:

• Involves assuming the risk of loss between the time of purchase and sale.

• Various forms of insurance are available to guard against adverse changes in price as well as
physical losses arising from such things as fire, flood, theft, and spoilage.

• The efficiency of the marketing system is also greatly enhanced if there is wide dissemination of
information on prices, inventory levels, embargoes, or anything else that could influence the
buying and selling of products.



The market information function:

• Involves the development of any means to disseminate this type of information.

QUESTION 4
Explain two (2) common problems in the marketing of farms product. (5 marks)
Farmers do not have any control over the output of their production activities.
• Supply of output is greater than demand.
• This might cause major problems to the producer.
• Need of comprehensive information about products demand in market.
The cost-price squeeze is another component of the farm marketing problem.

• The competitive conditions of agriculture tend to keep farm prices close to the cost of
production.

• Falling farm prices would not be so critical if they were accompanied by falling farm costs, or if
the farmer could adjust input costs as prices fell.

The superior bargaining powers of buyers

• Bargaining power such as opponent pain and opponent gains differs at levels of the marketing
channels.

• The buyers consider themselves as king hence their bargaining power is more on opponent
gains.

QUESTION 5
Explain how the changes in demand and changes in supply affect the farm products. (5 marks)
Changes in demand:
• A change in number of buyers (providing per capita purchasing power and other factors remain
unchanged). Such changes may occur from either population growth or the extension of the
market served by the product.

• A change in the incomes or purchasing power of people. We have seen from our previous
discussion of consumers’ buying pattern that income changes may be either positively or
negatively related to demand changes, depending upon the particular product.

Change in supply;



• In the short run period there may be a change in the various factors that would induce sellers to
offer their available stock of goods at a different schedule of prices. These would include such
factors as costs of storage, the sellers’ need for cash, and the general expectations as to the
future situation, and changes in cost (land, labor, machinery, etc.)

QUESTION 6
List four (4) types of storage used in the farm and food commodity. (5 marks)
• Cold / hot storage for perishable product such meat, vegetables, etc.

• Open storage to store palm oil bunches and some type of vegetables, etc.

• Closed storage for finished products or canned foods.

• Wet storage for stuff such rubber scraps or latex received from farm before processing.

• Dry storage for rubber scraps (bales) after processing, etc.

PARTD



QUESTION 1
Briefly explain the market impacts of standardization. (10 marks)
• The standardization function is the establishment and maintenance of uniform measurements.
These may be measurements of both quality and quantity.
• This function simplifies buying and selling, because it makes the sale by sample and description
possible.
• Effective standardization is basic to an efficient pricing process. Such activities as quality control
in processing plants and inspections to maintain the standards in the marketing channel can be
considered part of this function.
QUESTION 2
Briefly explain the factors affecting the rise in food marketing cost. (10 marks)
• As a result of population growth, the physical quantity of food that is marketed has increased,
raising the total expenses of marketing food.
• The costs of most food marketing inputs, especially labor and energy, have added to the rising
cost of marketing food.

• Consumers desires for additional food marketing services, such as represented by convenience
foods, have further increased the food marketing bill.



In order to maximize benefit, market news and information must meet a number of criteria. Explain four
(4) important criteria in market information. (4 marks)
• Information must be complete and comprehensive. A reasonably complete description of a food
market includes prices, price trends, production, supply movements, stocks, and demand
conditions at each level of market.
• Information also must be relevant and in usable form. Much market information goes unused
because it is not in usable, easily accessible form.
• Confidentiality. Market prices and supply reports are amassed to provide a general picture of
the market without revealing any single information.
• Market information also must be timely, in the sense of being relevant to current decisions, and
must be speedily transmitted to users.
• It is desirable to have a balance of market information at all levels of the food industry.

Describe cyclical and seasonal farm price variations. (2 marks)
• Cyclical price variations are caused by the tendency of farmers to base future production plans
on current prices and profits, rather than on future price
• Seasonal price variations are the more or less regular patterns of price change occurring within
a crop or marketing year.

Categorize the functional approaches towards marketing of agricultural products with emphasis
on:
a) Exchange Function
• The exchange functions are those activities involved in the transfer of title to goods. They
represent the point at which the study of price determination enters into the study of
marketing.
• Both the buying and selling functions have as their primary objective the negotiation of
favorable terms of exchange.

b) Physical Function
• The physical functions are those activities that involve handling, movement, and physical change
of the actual commodity itself. They are involved in solving the problems of when, what, and
where in marketing. It includes;
i. The storage function is primarily concerned with making goods available at the
desired time.
ii. The transportation function is primarily concerned with making goods available at
the proper place.
iii. The processing function is often not included in a list of marketing functions because
it is essentially a form-changing activity.



c) Facilitating Function
• The facilitating functions are those that make possible the smooth performance of the exchange
and physical functions. These activities are not directly involved in either the exchange of title or
the physical handling of products. However, without them the modern marketing system would
not be possible.
• They might be called the grease that makes the wheels of the marketing machine go around. In
comprise of;
i. The standardization function is the establishment and maintenance of uniform
measurements.
ii. The financing function is the advancing of money to carry on the various aspects of
marketing.
iii. The risk-bearing function is the accepting of the possibility of loss in the marketing of
a product.
iv. The market intelligence function is the job of collecting, interpreting and
disseminating the large variety of data necessary to the smooth operation of the
marketing processes.


a) Discuss three (3) reasons for government intervention in the marketing of agricultural
products
• Legislation and law
• Marketing ethics
• Economy factor
• Life cycle of industry

b) One of the forms of government intervention in Agricultural Marketing is price control
through Floor Pricing and Ceiling Pricing. Explain this statement graphically.

Price (RM)
Surplus

Equilibrium
Eq

Shortage



Quantity

Price floor

• Price floor is a legalized price imposed above the equilibrium.
Price ceiling

• Price ceiling is legally set price below the equilibrium price. It is a maximum price where
sellers cannot set the price above the equilibrium.

c) Give two (2) reasons for the imposition of ceiling and floor pricing.
Price floor

• It is sometimes used to support farm prices and income of farmers.

• Price floor can cause significant resource allocation problems in the long run because it
can increase productive capacity and output in the long run.

• Price floor can be seen as buyers market because the long effects of production such as
dumping, auction, cheap sales, and deflation.

Price ceiling

• It is a maximum price where sellers cannot set the price above the equilibrium.

• It is the seller market and in the long run production may cause unfavorable to the
market and lead to black market, rationing, and inflation.

QUESTION 1
Explain briefly the methods used to price a new product in competition. (10 marks)
Below market price:
i. Price penetration.
• Selling price is cheaper so that it will penetrate in the market and for the customer attention.
• Consumer is sensitive to price change.
• Many consumers willing to purchase products if the price is low.
• Cost per unit of production will decline when total sales increase.



• There is a possibility of competition in the market.

ii. Price blockage or barrier.
• To stop the competitors from competing the market.

• Willing to tag the price below the production cost.

• The firm has a strong financial status.

• Is not willing to share technologies if the technologies are cheap and accessible.

• High risk if there is other competitor that has the overhead cost is low.

Above the market price:

i. Skimming strategy.
• Product is differentiated from other competitors
• Purpose is to maximized profits
• Maximized profit is focus on introduction stages of the product life cycle
• Focused on high income level of consumers
• Most products are quality and very exclusive

ii. Premium strategy.
• Firm’s targeted their products are of high quality

• High price

• Better quality and branded

• High image product

(1 mark with explanation)

QUESTION 1



a) Explain with examples the two (2) types of risks discussed by Kohl and Uhls. (10 marks)
Product risks
• Products to deteriorate and decay and be subjected to pest infestation and diseases are
very high, hence contributing to the lost of economic value and product price
Casualty risks
• Due to unforeseen circumstances such as accident, lost of crop as result flood, fire
especially during a long drought and dry season, high moisture stress because of
drought, outbreak of pest and diseases.
Personnel risks
• Due to accident of one of the principals in the firm that can severely affect the business.

b) Risk bearing function is the accepting of the possibility of loss in the marketing of a product.
Suggest five (5) methods of reducing the above risks that farmers can take. (10 marks)

Marketing information

• Helps guide the farmers to plan the future production schedule of their farms as to
what, where how much to produce and how to market their products

Contract production

• A contract is an understanding of agreement between the producer and the future consumer at
a price determined earlier and assurance in delivering quantities of the products.

Crop insurance

• Insurance is an arrangement with a company which the organizations pay regular amount of
money and the insurance company agree to pay the costs

Horizontal integration

Farming technique

Technology

Import and export




QUESTION 2
a) Farmers have to understand various types of markets and their characteristics such as pure
competition, monopoly, oligopoly and imperfect competition before they can determine the
price of their products. Discuss thoroughly two (2) of the above markets that they have to
consider.
(10 marks)
Characteristics Perfect Monopoly Oligopoly
competition

Consumer Many Many Many

Sellers Many One More than one

Entry Easy Difficult Difficult

Exist Easy Easy Easy

Product Homogeneous Heterogeneous Homogeneous
(substitutes) (no substitutes) (substitutes)

Price Price taker Price Depend on each
discrimination

Promotion Present Very few Present

Monopoly
• A market structure where there is a single seller, no close substitutes for the commodity it
produces and there are barriers to entry to the market
Oligopoly
• It is a type of market the control of production of product is substantially in the hand of a few
very large firms
Imperfect competition
• The imperfect market lies between perfect competition and oligopoly



b) The government intervene the market through controlling the prices of certain goods and
services by implementing floor pricing and ceiling pricing. Discuss in detail the floor and ceiling
price. Provide examples where possible. (10 marks)
Price (RM)
Surplus

Equilibrium
Eq

Shortage

Quantity

Price floor

• Price floor is a legalized price imposed above the equilibrium.
• It is sometimes used to support farm prices and income of farmers.
• Price floor can cause significant resource allocation problems in the long run because it can
increase productive capacity and output in the long run.
• Price floor can be seen as buyers market because the long effects of production such as dumping,
auction, cheap sales, and deflation.

Price ceiling

• Price ceiling is legally set price below the equilibrium price.
• It is a maximum price where sellers cannot set the price above the equilibrium. It is a maximum
price where sellers cannot set the price above the equilibrium.



• It is the seller market and in the long run production may cause unfavorable to the market and
lead to black market, rationing, and inflation.

PART C:
QUESTION 1 (repeat)
a) Define farm's marketing. (2 marks)
• Activities related to the marketing and production of agricultural products produced by an
organization or individual farmer. Such activities in the process of farm’s marketing include
packaging, selection of brands name, promotional strategies, price policies, marketing channels
and other policies.
b) Explain two (2) characteristics of agricultural production. (8 marks)
Total output
• The long run trend in food production is upward. The rising food supply per capita has been a
mixed blessing for farmers.
Annual variability in production
• There are years where the situation of increasing, decreasing, and stable farm output. These are
caused by farmer responses to prices and other uncontrollable factors such as weather and
disease.
c) Describe three (3) problem faced by agriculture. (6 marks)
• Farmers do not have any control over the output of their production activities. Supply of output
is greater than demand. Need of comprehensive information about products demand in market.

• Farmers face in improving their prices through independent or group activities. Farmers are, for
the most part, price takers-they cannot, individually, influence the price of their products
through their output decisions.

• The cost-price squeeze is another component of the farm marketing problem. The competitive
conditions of agriculture tend to keep farm prices close to the cost of production. Falling farm
prices would not be so critical if they were accompanied by falling farm costs, or if the farmer
could adjust input costs as prices fell.



• The superior bargaining powers of buyers. Bargaining power such as opponent pain and
opponent gains differs at levels of the marketing channels. The buyers consider themselves as
king hence their bargaining power is more on opponent gains.

• Changing food market pricing efficiencies. Different processors are willing to price their products
at varying price. The changing of food marketing from one food market to another food market
will allow a gap in pricing. The pricing will depend on location, customers,

• Increasing gulf between the farmers sectors and food marketing sectors.

d) Elaborate the National Agricultural Policy. (4 marks)
• In 1984, NAP introduced by Malaysian government because of recession, but agriculture still
plays an important role in the GNP growth of the country even-though it has decline in its
production due to industrialization and urbanization.

• To achieved a balanced development between agriculture and other sectors such hunting &
forestry, fishing, mining & quarrying, electricity, gas & water supply, construction, wholesale &
retail trade, hotel and restaurants, transport, communication, education, financial, public
administration, health and social work in the country.

• To enhance the economics sectors and structural integration in particular with the
manufacturing sectors.

QUESTION 2
a) Explain four (4) possible categories of storage cost that must be considered in determining
the cost of holding commodities. (8 marks)
The cost necessary to provide and maintain the physical facilities for storage
• These costs would include such items as repairs, depreciation, and insurance against lost.
The interest on the financial investment in the product while it is in storage
• Whether the money is actually borrowed or not, this a cost that should be assessed at the rate
of interest that would have to be paid if money were borrowed during the storage period.
The cost of quality deterioration and shrinkage during storage

• Many commodities either deteriorate in quality or shrink in volume-or both-while in storage. In
a few cases, some commodities, such as corn, may increase in quality while shrinking in volume.

The loss that may result from poor consumer acceptance of the stored as against the fresh product

• Packing companies maintain that frozen meat will be accepted by consumers only at a price
discount, even though its quality as measured by the grading system has not deteriorated.

The risk that the price of the product might unexpectedly decline

• Under these circumstances the product might have to be sold at less than its value at the time it
was placed in storage.



b) Elaborate four (4) methods could be considered in order to reduce/minimize the cost of
storage. (12 marks)
Increase the efficiency of storage

• There are ways to improve food storage efficiency;

i. Labor efficiency versus mechanism. Use paddy harvester instead of human being during
harvesting time.

ii. Proper ventilation and insulation. The intention is to reduce odor, maintain freshness of
products, and minimize moisture.

iii. Improved management technique. This can be done through maintaining a proper and
improved work scheduling in the operational situation. For example, the work schedule of
manure, harvesting, and pest and disease control in the agricultural sectors.

Reducing product deterioration

• Different crops need a set range of temperature control. For example vegetables need a minimum
temperature to keep it from deteriorating and to maintain the standard grade.

Proper use of insecticides and fungicides

• This is important in order to avoid the harvested crop from contamination of fungicides. Proper
spraying must be avoided at least 10 days before harvesting is done.

Proper packaging either plastics or canned

• Packaging must be appeal and presentable to the eyes of the consumer. Proper packaging will
enhance buyers to purchase the product.

Storage financing and risk bearing

• The future market can assist in managing the financing and risk-bearing operations associated with
food storage. -The end-


Agricultural marketing

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