Classification of Agricultural Markets

Classification of Agricultural Markets
Classification of Agricultural Markets

Classification of Agricultural Markets:

The agricultural marketing system is essential for comprehending the intricacies and identifying bottlenecks in order to provide efficient services in the transfer of farm products and inputs from farmers to consumers. A well-designed marketing strategy reduces costs and helps all members of society. Agricultural Markets can be categorised according to each of the twelve dimensions listed below.

On the basis of Location:

Markets are classified into the following categories based on their location or mode of operation:

Village Markets:

A village market is a market located in a small hamlet where large transactions take place between the village’s buyers and sellers.

Primary wholesale Markets:

These markets are located in large cities near agricultural commodity production centers. The producer-farmers themselves bring a large portion of the product to these markets for sale. Farmers and dealers are the most common participants in these markets.

Secondary wholesale Markets:

These markets are usually found around railway crossroads, district offices, or key trading centers. The main commodity transactions take place between local traders and wholesalers. Other markets account for the majority of the arrivals in these markets. Produce is handled in big quantities in these markets.

Terminal Markets:

A terminal market is one where the product is either sold to customers or processed for export, or it is assembled for export. Merchants are well-organized and employ sophisticated marketing techniques. These markets have commodity exchanges that provide opportunities for forwarding trading in certain commodities. Markets like these can be found in either metropolitan centers or seaports, such as Bombay, Madras, Calcutta, and Delhi.

Seaboard Markets:

Seaboard markets are those that are located near the seashore and are mostly used for the import and/or export of commodities. Bombay, Madras, and Calcutta are examples of these markets in India.

On the Basis of Area/Coverage:

Markets can be grouped into four categories based on the area from where buyers and sellers often come for transactions:

Local or Village Markets:

A market where purchasing and selling activities are restricted to buyers and sellers from the same village or surrounding communities. Village markets are mostly for perishable goods in small quantities, such as local milk or vegetables.

Regional Markets:

A market for a commodity that draws buyers and sellers from a wider area than local marketplaces. Food grains are mainly sold in regional markets in Bangladesh.

National Markets:

A market where buyers and sellers are based on a nationwide scale. Durable commodities such as jute and tea have national markets.

World Market:

A market where buyers and sellers come from all over the world. From a geographical standpoint, these are the most important markets. These markets exist in commodities with global demand and/or supply, such as coffee, machinery, gold, silver, and other precious metals. Many countries have been moving toward a regime of open international commerce in agricultural products such as raw cotton, sugar, rice, and wheat in recent years.

On the Basis of Time Span:

Markets can be classified into the following categories based on their time span.

Short-period Markets:

Short-period markets are those that last only a few hours. These marketplaces trade in very perishable items like seafood, fresh vegetables, and liquid milk. Commodity prices are mostly determined by the level of demand for, rather than the supply of, the commodity in these marketplaces.

Long-period Markets:

Unlike short-term markets, these markets are held for a longer period of time. Foodgrains and oilseeds are among the commodities sold in these marketplaces since they are less perishable and may be stored for a long time. The factors of supply and demand both influence prices.

Secular Markets:

These are markets that are always open. The commodities exchanged in these markets are long-lasting and can be kept for a long time. Markets for machinery and manufactured goods are two examples.

On the Basis of Volume of Transactions:

On the basis of the number of transactions made at any one time, there are two sorts of markets. These are given below:

Wholesale Markets:

Commodities are bought and sold in huge lots or in bulk on a wholesale market. The majority of transactions in these markets are between dealers.

Retail Markets:

A retail market is one where people buy and sell goods based on their needs. In these markets, transactions take happen between retailers and consumers. Retailers buy in bulk from wholesalers and sell to customers in small batches. These markets are in close proximity to the customers.

On the Basis of Nature of Transactions:

There are two types of marketplaces that are based on the types of transactions that individuals engage in:

Spot or Cash Markets:

The spot or cash market is a market where goods are traded for money immediately after the transaction.

Forward Markets:

A market in which the purchase and sale of a commodity occur at a time ‘t,’ but the exchange of the commodity occurs at a future date, i.e., time t + 1. It is possible that the commodity will not be exchanged even on the given date in the future(t+1). The difference between the purchase and sale prices is instead paid or taken.

On the Basis of Number of Commodities in which Transaction Takes place:

The quantity of commodities in which transactions are completed determines whether a market is general or specialized:

General Markets:

The general market is a market where all types of commodities are bought and sold, such as food grains, oilseeds, fiber crops, gur, and so on. These markets deal in a wide range of products.

Specialized Markets:

A specialized market is one in which transactions are limited to only one or two goods. There are distinct markets for each type of commodity. Food grain markets, vegetable markets, wool markets, and cotton markets are all examples.

On the Basis of Degree of Competition:

Each market can be categorized on a continuous scale ranging from perfectly competitive to pure monopoly or monopsony. Extreme versions are nearly unheard of. Nonetheless, knowing their qualities are beneficial. Various midpoints of this continuum have been identified in addition to these two extremes. Markets can be categorized into the following groups based on the competition:

Perfect Market:

The presence of a large number of enterprises and homogeneous and similar products are two fundamental aspects of perfect competition. Because of this, the customer has no reason to demonstrate a preference for one company over another. There is no restriction on entering or exiting the sector or market. Firms are price takers, meaning they have no say over the price they charge for their goods. Each manufacturer contributes only a small part of the industry’s total output. Finally, both buyers and producers have complete market knowledge. Everyone is aware if one company alters a product feature.

Imperfect Markets:

Imperfect markets are defined as those in which perfect competition does not exist. The following scenarios can be defined, each based on the degree of imperfection:

Monopoly Market:

A market arrangement in which there is only one vendor of a commodity is known as a monopoly. He has complete control over the commodity’s quantity and pricing. The price of a commodity in this market is often higher than in other markets. When it comes to purchasing power for irrigation, Indian farmers are in a monopoly market. A monopsony market is one in which there is just one buyer of a product.

Duopoly Market:

A duopoly market is one in which there are only two commodity sellers. They may jointly agree to charge a common price that is higher than the hypothetical market price. The duopsony market refers to a situation in which there are only two buyers of a commodity.

Oligopoly Market:

An oligopoly market is one in which there are more than two but still a few sellers of a commodity. Oligopsony market is a market with a few (more than two) buyers.

Monopolistic competition:

Monopolistic competition occurs when a large number of vendors trade in a heterogeneous and differentiated form of a commodity. Different trade markings on the product draw attention to the difference. For the same basic product, different prices are prevalent. Input markets are a good example of monopolistic competition that farmers confront. They must, for example, pick between several brands of insecticides, pump sets, fertilizers, and equipment.

On the Basis of Nature of Commodities:

Markets can be categorized into the following groups based on the sort of items traded:

Commodity Markets:

Commodity markets trade goods and raw materials such as wheat, barley, cotton, fertilizer, seed, and other agricultural products.

Capital Markets:

Capital markets, such as money markets and stock markets, are markets where bonds, shares, and securities are purchased and sold.

On the Basis of Stage of Marketing:

Markets can be divided into two categories based on their stage of marketing:

Producing Markets:

Producing markets are those that primarily assemble the commodity for subsequent sale to other markets. These markets are found in areas where goods are produced.

Consuming Markets:

Consumer markets are markets that collect produce for final distribution to the general public. These markets are typically found in areas when production is insufficient or in densely populated urban areas.

On the basis of the scope of government intervention:

Markets can be classified into one of two groups based on the level of government intervention:

Regulated Markets:

Markets in which transactions are conducted in accordance with the rules and regulations set forth by a statutory market organization representing various market segments. In such marketplaces, marketing expenditures are standardized, and practices are regulated.

Unregulated Markets:

These are the markets where there are no fixed rules or restrictions for doing business. Traders set the rules for how the company is conducted and runs the market. There are numerous flaws in these markets, ranging from unstandardized costs for marketing tasks to price determination flaws.

On the Basis of Type of Population Served:

A market can be classed as either urban or rural based on the population it serves:

Urban Market:

An urban market is a market that caters mostly to those who live in urban areas. The nature and volume of agricultural product demand generated by the urban population are referred to as the urban market for farm products.

Rural Market:

The term “rural market” usually refers to the demand generated by people living in rural areas. The form of embedded services required with a farm product differs significantly between urban and rural demands.

On the Basis of Marketing Margin Accumulation:

Markets can also be segmented based on who receives the marketing margins. There has been a significant increase in the number of producers or consumers co-operatives or other organizations that handle product marketing over the years. Though private commerce still handles the majority of farm product trade, co-operative marketing has grown in its proportion of some agricultural commodities such as milk, fertilizers, sugarcane, and sugar. Marketing margins are either negligible or divided among members of producer or consumer cooperatives when they engage in marketing activities.

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Md. Masudul Hassan
CEO & Chairman of this Portal. Md. Masudul Hassan is an Assistant Professor and Coordinator of a Reputed University in Bangladesh. Member of Agrilinks is part of the U.S. Government's Feed the Future initiative. He Performed Numerous Research Regarding Agribusiness.