Module 3 Chapter 3.2 Subchapter 3.2.3 (1) Processing and marketing - - PowerPoint PPT Presentation

Module 3 Chapter 3.2 Subchapter 3.2.3 (1)

Processing and marketing Slideshow 1: Agricultural long value chains

• Prof. Dr. Wolf Lorleberg, Rolf Morgenstern, Bernd Pölling

SWUAS, Soest, Germany

Overview

Examples of common value chain:

• Horticultural value chain
• Pork meat value chain
• Milk and dairy value chain

Marketing complexity Typical rural farming marketing

• Value chains: horizontal / vertical
• Producers‘ associations
• Auctions and exchanges

The horticultural value chain

…a first exemplary and simplified impression of the horticultural value chain, here for fresh products.

Figure (adjusted) from Klett-Verlag, Lehrmaterialien

Figure (adjusted) from Klett-Verlag, Lehrmaterialien

The pork meat value chain

....with its different specialized members.

butcher slaughter- house

slaughter weight 95 kg fattened pig (220 kg) piglets (25 kg)

breeding farm

gestation 16 weeks breeding sow (artificial insemination) 8-10 piglets (3 weeks with sow) fertilizer for crops manure

fattening farm

220 days in 10-12 groups (slatted floor) maize and cereals (own farm or bought in) feeding stuff import (cereals, soya) mineral nutrients

The milk and dairy value chain

supply production

transport

direct marketing processing sale

Figure (adjusted) from Klett-Verlag, Lehrmaterialien

Marketing complexity

Visualization of the marekting complexity for a basic product like wheat – an exemplary material flow chart for German wheat market some years ago (language is German, but the intention is to show the complexity only)

How do typical rural farms market their products?

• Typically, farms market their products not directly to the

consumers, but to the food processing industry or trading enterprises.

• Often farm production is bundled by specialized private or

cooperative trading enterprises, or other forms of producers‘ associations for joint marketing. Without bundling farm production logistic and transaction costs would be too high, and the competitivity position of farmers against food processors and supermarkets would be too weak – and they would not be able to meet quantity and quality requirements

• f the modern marketing chain...

Producers‘ associations (joint marketing associations) in the pork meat value chain:

To bundle farm production by producer owned (and controlled) enterprises is typical for

• pork meat,
• arable crops,
• fruit and vegetable production

This is also called „horizontal integration“. There are also commercial cooperations along the value chain, mostly in the framework of so called contract production. Contracts – often together with input supply, advisory and a guarantee for marketing are offered by food processors and sometimes by supermarket chains; it is typically strong f. e. in chicken, potato and vegetable products industries. This model is also called „vertical integration“. Farms have the advantage of a sales and income guaranty, but give up their entrepreneurial independence....

Producers‘ Associations Fattening farms

F F F F F F

(Marketing) Slaughtering / Processing Piglets Breeding

(Contract) cooperation between partners:

• Farmers / organizations
• Slaughterhouses
• Processing companies

Figure (adjusted) from Moser & Funk, 2003: 181

Especially for horticultural products (but existing also for slaughter animals), marketing via auctions is an

• pportunity to distribute high quantities with modern

logistics. Further, commodity futures exchanges have two functions related to agricultural product marketing, but there are traded only „products on paper“ (= derivates), not physical products:

• Price formation by future contracts are

supporting/trend setting – often determining (!) market price formation on physical markets and

• Producers, processors and traders can cover their

price risks making use of future contracts; this is called „hedging“.

Auctions and exchanges – two modern instruments of agricultural marketing

Photo: deutsche-boerse.com Photo: wz.de