Agricultural products are of a different nature than industrial products. The features of these products can be divided into three major types based on production, marketing, and consumption. Each of these features has a bearing on the risks associated with agricultural production.
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Key Features of Agricultural Products
1. Perishability:Agricultural products are highly perishable, being highly susceptible to adverse weather conditions, such as excessive heat, dryness, or wetness. They easily deteriorate under unfavorable conditions and lose value. They therefore have to be disposed of quickly, either by consumption or sale. Farmers cannot easily keep them to take advantage of better prices later.
2. Bulkiness: Agricultural products are very bulky, meaning they have much more volume, weight, or size than their real value. The volume-to-value ratio is very high. For example, yams, potatoes, rice, gari, and even vegetables occupy a lot of space, though their monetary value may be small. Industrial products are usually less bulky. This has implications for storage, transportation, and the final price of the product.
3. Differentiation: Agricultural products are not homogeneous; rather, they are differentiated physically in size and shape, for example, yams, potatoes, oranges, and eggs. They may also be differentiated in quality, such as palm oil and gari, which come in different grades. Additionally, they may be differentiated by customer affinity, where a consumer sticks to only one retailer for their purchase of gari or rice, for instance.
4. Substitution: Agricultural products have zero or negligible elasticity of substitution. Food products are agricultural products. There are only a few synthetic products that may be used as food in special circumstances.
Items of foodstuffs may be substituted one for the other, for example, cocoyam may be substituted for white yams in making pounded yam. Rice and maize are close substitutes in the making of pottage (“tuwo”), but they are not perfect substitutes. Agricultural products therefore have negligible elasticity of substitution.
5. Role as Raw Materials: Agricultural products are raw materials for agro-allied industries. When industrial demand competes with domestic demand, prices can rise, especially under adverse production conditions.
The nature of agricultural products and their production processes, as discussed above, make their marketing unique and different from the marketing of industrial products.
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Industrial products are not easily perishable, not as bulky as agricultural products, and are not seasonal; they are more homogeneous than agricultural products and often have acceptable substitutes. Prices do not therefore fluctuate in industrial marketing as in agricultural marketing.
In this article, the nature of agricultural products and their implications for transportation, demand, and supply have been discussed. Agricultural products, unlike manufacturing products, are primary products; hence, they command low prices unless they are processed.
Some of them are bulky, thus transportation from the farm to the market is often a problem, a condition that compels farmers to sell their products at the farm gate, at a relatively low price, to middlemen. These unique characteristics highlight the challenges and risks inherent in agricultural production and marketing.
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