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Agricultural markets have transformed drastically. The increase and urbanization of the global population, as well as the rise in income, has brought about these drastic changes. Poor rural farmers are set aside because of the change in economic policies such as foreign trade and the demand for agricultural products that are of export quality. Small-time farmers cannot compete with the big-time farmers in terms of the consistency in producing high-quality products.
The agricultural marketing environment is constantly bombarded with factors that result in challenges, uncertainty, and opportunities. Monitoring must be done in order to reduce the risk and maximize opportunities. Consumer behavior is also rapidly changing due to globalization and technology. This directly affects the manner in which agribusinesses do their business. These highly dynamic changes also influence farming and business.
Agriculture is transforming from small farms to big farms that are aligned with the distribution value chain. Globalization has created opportunities for small-time farmers but the integration of globalization, agro-industrialization, and market production might result in the exclusion of these farmers. The way of living of consumers from developed countries, the shifting demographics, and the obsession with health and diet have resulted in the choice of food bought by these consumers as well as their changing eating patterns. Consumers are affected by issues regarding food safety as well as being alarmed by food scares. Tailored food that jives with consumers’ specifications and food companies that desire customized farm products drive the change in the agricultural market.
Engel’s Law states that “as incomes rise, the share of expenditure allocated to food tends to decline.” The budget provided to food decreases in third world countries from 65 percent to less than 10 percent in developed countries. Bennet’s Law states that “as income rises, the share of the food budget allocated to starchy staples declines relative to more expensive sources of calories.” This implies that one significant factor in the rate of patterns in food consumption is the rate of income growth.
Urbanization has resulted in a demand for high agriculture products. Studies show that urban households spend less on rice compared to rural households. People from urban areas purchase more on fish, meat, and sugar.
Developing countries have increased their opportunities in exporting agricultural products to both developed and other developing nations. This is brought about by lower tariff barriers and policies that encourage international trade. On the other hand, this also threats small time farmers to competition from high-end agricultural products.
The participation of foreign companies in the farming sector has exposed local agribusiness companies into a competitive pressure.
Addressing Problems to Connect Farmers to Markets
High crop yield is very significant in farmers. Quality output requires quality input. The need to have a good quality of seeds in order to produce high-quality agricultural commodities needs to be addressed. Climate change has resulted in severe weather patterns that resulted in droughts and flooding.
Farmers face the challenge in having weak road infrastructure. This hinders them in transporting their goods from their place to the market. The lack of storage is also a challenge with farmers. High amounts of wastages also result in a decrease in their income. The movement from one sector of the chain to another increases the cost of production. This results in a lesser amount of profit for farmers.
In the advent of globalization, farmers need to answer to the demand of the market to have high-quality agricultural commodities. Farmers have to compete with multinational companies. Their technology is not as globally competitive as that used by these industries. This lack of quality results to producing a non-export quality of products that limits their market into the locality.
Farmers have no choice but do manual grading because of the lack of grading machinery. This directly affects the product quality maintenance and the income of farmers. Quality standards are affected as there are problems in manual grading as it lacks uniformity. Moreover, small-scale farmers also do not have extensive linkages where they can sell their agricultural products.
There are many issues that surround farmers in developing countries when it comes to agricultural value chains. Thus, there is a need for government agencies as well as non-government entities to hire executive consultant companies to train people on how to solve problems in these areas.