The Nature of Agricultural Products
Unlike manufacturing products, agricultural products have peculiar characteristics which affect their lifespan, their transportations well as their prices.
Agribusiness owners must understand these characteristics and their implications on decision making on production and marketing activities.
Nature of Agricultural Products
The nature of agricultural products include the following;
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 loose value.
They therefore have to be disposed off 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, that is, they have much more volume or weight or size than their real value. The volume/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 implication for storage and 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 be differentiated in quality e.g. palm oil and gari in which we have different grades.
They may also be differentiated by customer affinity in which case a consumer sticks to only a retailer for his purchase of say gari or rice.
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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, e.g. 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. Raw Materials
Agricultural products are raw materials for agro-allied industries. When industrial demand competes with domestic demand, prices can become raised especially in adverse production conditions.
The nature of agricultural products and their production processes, as discussed above, make their marketing to be unique and different from the marketing of industrial products.
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 summary, 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 the middle men.
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