Co-operatives’ Role in Marketing Agricultural Products

BANGLADESH – Most Bangladeshi farmers do not have the financial and logistic capacity to sell their products to the final consumers. They depend on rural usurers for capital at the highest interest rate during the cultivation period, also they are bound to sell their products to a supply chain of middlemen.

Agricultural marketing covers the services involved in moving an agricultural product from the farm to the consumer. Numerous interconnected activities are included in doing this, such as planning production, growing and harvesting, grading, packing, transport, storage, distribution, and sale.

Farmers are involved in the production and primary processing, the intermediaries are involved in aggregation, processing, distribution, and marketing. The agents of marketing operation are ‘Farias’ or collectors, ‘Beparis’ or assemblers,’ avatars or wholesalers and retailers.

The marketing system of rice is slightly different. In between farmers and consumers, there is a group of intermediaries in the market chain. Bepari and Aratdar directly purchase rice from the farmers. They send the rice to a miller for husking processes. The rice miller sometimes sends it back to Aratdar, while Aratdar sells it to the wholesaler. In some cases, the rice miller directly transmits to the wholesaler. The retailer collects from the wholesaler. In this chain ends with selling by retailers to consumers. The market chain of vegetables and fruits is almost similar to rice, but there is no miller in the chain.

These different supply chains use different types of vehicles like pushcarts, rickshaws, vans, tempo, pick-ups, boats, buses, and head load were used as a mode of vegetable transportation. Among them, the pickup was mostly by Bepari, Aratdar, and Paiker. Retailers mostly used the van as their primary mode of transportation.

An empirical study “The Marketing System of Agricultural Products in Bangladesh: A Case Study from Sylhet District” by Md. Mizanur Rahman1 and Shahnaz Begum Neena published in Bangladesh Journal of Public Administration (BJPA), 26(2): 61-78, 2018 revealed that the total highest marketing cost of 100 kg of rice was Tk. 298.76 incurred by Retailer followed by Bepari (Tk. 200.75), Paiker or wholesaler (Tk. 121.87), and Aratdar (Tk. 71.42). The Aratdar pays the highest commission (62.35%) for Bepari (wholesaler). In the case of Aratdar, loading and unloading was the top cost item followed by market toll (19.67%), wastage (16.34 %), wages& salaries (15.21 %), rent and electricity (8.64 %), storage (5.82 %)and personal expenses (5.61 %).

Retailers spent the highest cost for wages and salaries (26.05%)followed by rent and electricity (17.88%), storage (11.77%), transportation (11.24%), wastage(8.11), market toll (7.02%), loading and unloading (5.56%) and the personal expenses (2.01%). The Paiker spends about 46% of the total marketing cost in for transportation, loading, and unloading. No intermediary class spends any money on grading. Secondly, the personal expenses varied from one group to another. Wastage was another essential cost item for all the traders. Low security cost indicated an excellent business environment. The marketing costs incurred by the various traders for Aus, Aman, and Boro rice were different.

Despite the law of agricultural marketing, there is no support system of the government. Consequently, middlemen are playing a marketing role and due to this reason, farmers are not getting fair prices for their products. Under these circumstances, Cooperative Marketing can be one of the Models of Agricultural Marketing for our farmers.

One of the difficulties of marketing agricultural products is the fluctuation of the price level. Just after the harvest the market price of crops falls and increases later. This is because just after the harvest farmers sell their produce as soon as possible to repay their loan. The lack of storage facilities also plays a compelling role in the affair. At this time of the year, produced output outruns the demand and thus the price falls. As the price is low during the harvest, the farmers are deprived of their due income from their products. To overcome this problem the government often buys crops, especially paddy from the farmers at a fixed price. As the price fixed by the government is higher than the market price, the farmers are supposed to gain from this. But this is not often possible as it is costly and problematic to sell the crops in selling outlets, Crow.

A cooperative can also serve to improve the marketing system. It might be organized to pursue one or a combination of the economic objectives, such as, (1) providing services at a lower cost, (2) offering an alternative market outlet to offset monopoly in the local market, (3) providing new or improved marketing services and (4)channel technical information, new practices and new inputs to producers and better Co-ordinate production and marketing.

The history of economic development of Denmark, Sweden, and Germany showed that these countries achieved the highest level of economic development by utilizing a cooperative philosophy in their development strategy. On the other hand, the Cooperative Society in Agriculture Marketing can utilize the synergy effect. The term synergy refers to management that which joint efforts’ output is much greater than that of individual effort in economic activity.

In Japan, cooperatives handle 70 to 80 percent of the rice marketed. These cooperatives undertake only limited responsibilities as receivers and storage agents for a monopoly government food agency with a secure base as sole assembling agency, and carrying a steady handler’s commission, these cooperatives provide credit and sell fertilizer and other supplies to farmers on easy terms. Co-operative buying among farmers has developed extensively in some countries.

In some less developed countries, the cooperative movement was initiated with the organization of cooperative marketing societies. Coffee marketing in Tanzania, cocoa marketing in Nigeria, cotton marketing in Uganda, and rice marketing in Malaysia are examples of similar cases.

The marketing procedure is highly imperfect in Bangladesh, as supply does not correlate with the actual demand. This situation has led to severe bottlenecks in the processes of marketing. Despite the current opportunity for upgrading the marketing systems of crops, no effective strategies have been taken yet to develop this sector. The role of central government and local government is totally absent. The huge supply chain has been vested in the private sector without any support from the government.

The supply chain needs re-structuring and overhauling of the market management system and updating regulatory and institutional setup. The Ministry of Local Government & Cooperative Society can play a vital role in minimizing the dominance of the middlemen in marketing agricultural products in Bangladesh.

M S. Siddiqui – The writer is a Non-Government Adviser at the Bangladesh Competition Commission

SOURCE: DailyObserver