Finance required for agricultural marketing represent funds required for moving the crops from the farm to the consumer or the manufacturer for further processing. Thus there exists close relationship between agricultural production, and consumption and industrial production. The growth of agriculture is a precondition for industrial development.
5.3.1 SPECIAL FEATURES OF AGRICULTURAL MARKETING FINANCE The agricultural marketing finance assumes importance because of certain special characteristics of farming. For instance, the farmer's credit worthiness is invariably not sound for obtaining necessary finance. They are often isolated and remote from the normal opportunities of obtaining credit. The other special features are:
a) The need for finance is recurring in nature.
b) Lack of commercial knowledge makes it difficult to anticipate production prospects.
c) Sharing or shifting of risk in production is not possible. d) Small units of production.
e) Changing climatic conditions are beyond the control of agriculturists and very often their expectations go wrong.
f) Organized marketing procedure is not adopted because of which forced sales take place in villages.
5.3.2 KINDS OF FINANCE REQUIREMENT
Some of the finance requirements in agricultural marketing are:
Farmer: Production-consumption- transport of produce to market needs finance requirements.
Middlemen: Working expenses, storage, transport needs finance requirement. Marketing Institutions: For building storage godowns, transport vehicle loan, working capital, to grant advance against pledge of produce.
Sources of Finance:
1. Indigenous Money Lenders 2. Cooperative Societies 3. Commercial Agencies
a) NABARD (refinance facility)
b) Agricultural Finance Corporation Limited c) Agricultural Refinance Corporation d) Regional Rural Banks
e) Commercial Banks. 5.4 MARKETING RISK
Risk is defined as uncertainty about cost, loss or damage. Risk is inherent in all marketing transactions. The risks associated with marketing process are of three basic types:
i) Physical Risk
This includes a loss in the quantity and quality of the product during the marketing process. It may be due to fire, flood, earthquake, rodents, insects,
pests, fungus, excessive moisture or temperature, careless handling and unscientific storage, improper packing, looting or arson. These together account for a large part of the loss of the produce at the individual as well as at the macro level. Such losses are loss to the society also and must be prevented to the extent possible.
ii) Price Risk
The prices of agricultural products fluctuate not only from year to year, but during the year from month to month, day-to-day and even on the same day. The changes in prices may be upward or downward. Price variation cannot be ruled out as the factors affecting demand for and the supply of agricultural products re changing continuously. A price fall may cause a loss to the trader or farmer who stocks the produce. Sometimes the risks are so great that it may result in a total failure of the business, and the person who owns it may become bankrupt. iii) Institutional Risk
These risks include the risk arising out of a change in Government's budget policy, in tariffs and tax laws, in the movement restrictions, statutory price controls and the imposition of levies.
5.4.1 MINIMIZATION OF RISKS
The agencies engaged in marketing activities worry about the risks associated at every stage; and they continually try to minimize the effects of these risks. A risk cannot be eliminated because it also carries profit. The risk can be minimized by adoption of some of the measures given below:
i) Reduction of Physical Loss
The physical loss of a product may be reduced by use of fireproof materials in the storage structures to prevent accidents due to fire;
1. Use of improved storage structures and giving necessary pre-storage treatment to the product to prevent losses in quality arising out of excessive moisture, temperature, attacks by insects and pests, fungus and rodents;
2. Use of better and quicker transportation methods and proper handling during transit; and
ii) Transfer of physical losses to insurance companies iii) Minimization of price risks
1. Fixation of minimum and maximum prices for commodities by the government and allowing movement of prices only within the defined range.
2. Making arrangements for the dissemination of accurate and scientific price information to all sections of society over space and time.
3. Operation of speculation and hedging: The prices associated with commodities for which the facility of forward trading is available may be transferred to professional speculation through the operation of hedging. Marketing Information Centre: Market intelligence plays a vital role in marketing of agricultural produce. If information on commodity prices and demand in various markets etc. are made available, the farmers could plan in advance the crops to cultivate and decide the market to sell their produce in order to get better returns. The above centres will have Internet facility and electronic display board. The daily price and arrivals that prevail in different regulated markets will be transmitted to all information centres which will be displayed in the electronic display boards for the benefit of farmers and traders. A data bank on area and production of various agricultural commodities including fruits and vegetables, wholesale markets etc. is maintained in this department. These particulars are given to the entrepreneur, who intends to establish Food Processing industries in the state. It is proposed to prepare a shelf of model food processing projects through consultants and the same will be made available in all District Industry Centers for the use of entrepreneur. Agricultural Marketing and Agricultural Business department participates in all the agriculture and food related exhibitions, seminars in which the advantages of food processing and value addition are disseminated.