External Forces on the Farming Industry that Cause Strain to the Market - Term Paper Example

External forces on the farming industry that cause strain to the market External forces on the farming industry that cause strain to the market Introduction According to Ridout (2002), the demand for basic commodities increases with the growth in human population. Human sustainability is highly dependent on availability of agricultural produce. Human existence will be curtailed without enough agricultural production in the economies. Several external forces affect the farming industry thus causing the market to struggle. Thesis statement: external forces of the farming industry cause the markets to struggle. Since the market for agricultural products has become more complex economically, there is dire need to unravel the truth about the forces that cause struggle to the market. The global demand for agricultural production increases at a rate of 6 percent annually thus several measures must be undertaken to increase the supply of the agricultural production and meet the demand. Strategic planning process must ensure all stakeholders have relevant information on the external environment trends and factors influencing the trends in the external market. According, agricultural managers and other relevant stakeholders must undertake measures to mitigate the negative impact of the external forces that may negatively affect the productivity of the agricultural industry (Ridout, 2002). Demand and supply Suppliers in agricultural industries have the potential of creating competitiveness in the industry by implementing innovative farming techniques and understanding the trends in consumption in the market. Some factors that influence demand of agricultural products include the changes in income levels, changes in consumer preferences and shifts in consumer tastes. The production levels of agricultural produce are basically driven by factors of demand and supply and suppliers undertake measures to fulfill the demand in the market. For instance, the increase in human population both in rural and urban settlements has increased the demand for agricultural products. Accordingly, the emergency of modern farming technology has created demand for high quality agricultural products thus affecting the consumer preferences. In this case, a decline in consumer incomes leads to a decline demand for the products thus culminating to a decline in the prevailing market prices. Accordingly, an increase in the prices will lead to an increase in supply, but this trend will negatively affect the demand of the products in market. In this case, excess supply leads to decline in process while excess demand leads to an increase in the prices of the products. (Sarris & Hallam, 2006). Considering the escalating market prices, increased production costs and some of the challenges that arise between the points of productions to the consumption of a commodity, the total amount of supply has never been enough to cater for the expected demand. This is because the global human population is constantly increasing while the available agricultural land has remained constant. However, the emergency of modern farming technologies has increased the production output per acreage of agricultural land. In addition, it is clear that most of the agricultural regions have reached the maximum level of production potentials but increased production in agricultural industry would therefore demand for a continuous research. Consequently, the variations in climatic conditions require technological innovations to sustain adequate supply for the existing market demand (Sarris & Hallam, 2006). Price fluctuations Price stability has been a major problem in agricultural industry since changes in supply and demand lead to price fluctuations that distort the smooth functioning of the market. Despite all these reasons, consumers and the other stakeholders in the business industry still have to proceed with the utilization of these products even when the prices seems to be in the rise. Price fluctuations have been found to cause several changes in the quantity of consumption of some specific agricultural produce but these effects have never been relevant when it comes to the issues of demand. Prices for commodities such cereals and green vegetables have often been easily fluctuated depending on various conditions such as climate, or the subsidiary factors of a specific country (FAO, 2004). Fluctuations in prices hinder normal market competitive functioning. Unethical practices like commodity hoarding will lead to artificial shortage that definitely leads to increase in commodity prices thus distorting the normal functioning of the markets. In this case, hoarding will increase the prices thus negatively affecting the consumption level in the market. However, it has been noted with great concern that the prices of agricultural products definitely escalate when there is an inconsistent supply and expectation of uncertainties that exists extensively for some duration. Since agricultural production is seasonal, the price fluctuations are short-lived and prices will stabilize after short-time durations. This reduces the possibility of risks associated with price escalations that may be of unnecessary danger to the society (FAO, 2004). Competition and substitute products Marketing processes are supposed to be implemented immediately the agricultural production process commences. However, this process has to continue through production, supply of the products, storage and finally consumption. Appropriate legislation must be enacted to control competition in perishable products in order to ensure market integrity. In order to succeed in any form of marketing of the agricultural products, organizations must concentrate on the quality of produce and minimize the production costs in order to implement competitive pricing strategy for perishable commodities (Stallings et al, 2010). The potential buyers of agricultural products are very susceptible to any slightest change when it comes to the pricing of either inputs or the outputs of the substitute commodities. This is because, price of a substitute product creates much pressure on what an organization is able to adopt. Therefore, any slightest change in pricing would be considered significant to the causing a big effect when it comes to pricing (Stallings et al, 2010). Government policies and interventions Agricultural production in most countries is subject to government involvement through polices and regulation that determine what is essential to the citizens. National government offer subsidies to agricultural companies in order to foster high productivity and ensure consumers are charged minimal prices for the commodities. The national governments ensure food security through buying and storing agricultural produce to ensure that citizens have access to the commodity in times of disasters and low production seasons. Accordingly, government agencies engage in agricultural production thus distorting the free market in agricultural industry (Anton, 2009). Firstly, the government puts in place food and safety modernization act that ensures the right practices are done in accordance to the feed industry. Additionally, the act ensures hazards that concerns both agricultural industry and agricultural markets are identified. According to this act, food products that are manufactured, processed and packed must be reflected through appropriate records so that citizens can access them. Nevertheless, this reason is seen by most of the agricultural companies as an exposure of confidential factors of an industry that derails the competitive advantage in the market. Besides, this act gives more and excessive authority to officials concerned and this is seen as a risk especially when some of the products are called with a perception that they are considered unfit to be sold to the public. For the reasons above, several loses are inflicted by this policies because it interferes with the marginal plan of pricing of the products and the economy at large (Anton, 2009). In some countries, the government plays some regulation role on specific products such as cereals or product that are perceived to be of high returns to the economy of a country, this has to a wider margin reduced the effort of diversification. Some of the income payments that are related to the evolution of pricing returns are subject to the agricultural farming industry. For instance, in some countries, agricultural stability policies reduce the demands for the commodity thus leading to a decline in overall production in the economy. This is seen to derail payments for the agricultural unions that should be at the forefront advocating for better returns in this industry (Brooks, 2012). The relationship between agricultural policies and production has so far driven the government ideology when it comes to the issues of agricultural development and marketing infrastructure. Since the government strategies are based on international donor funds meant to aid the production and purchase of inputs such as fertilizers, it is very clear that the process attributes to pricing of the most common agricultural products especially during seasons when the yields are not promising. Despite the wide spread of positive policies by most governments, some policies such the ones supporting genetically modified foods (GMF) are too weak to allow for advantage to the farmers on the implications of economic trends. Nonetheless, most of these policies have succeeded in increasing production while ensuring sustainability in production. Besides, is has led to the improvement of farmers’ standards of living (Brooks, 2012). Conclusion Agricultural industry plays considerable role in the society by ensuring consistent supply of produce throughout all the seasons. However, there is economic imbalance when the market for these products is met with many difficulties. The point to note is that agricultural markets has experienced the problems of demand and supply, fluctuation in prices, constrains of the government policies. References: Anton, J. (2009). Managing risk in agriculture: a holistic approach. Paris: OECD. Brooks, J. (2012) .Agricultural policies for poverty reduction. [Paris]: OECD. Food and Agriculture Organization. (2004). the state of agricultural commodity markets. Rome: FAO. Ridout, M et al. (2002). People, places and themes. Oxford: Heinemann. Sarris, A & Hallam, D. (2006). Agricultural commodity markets and trade: new approaches to analyzing market structure and instability. Cheltenham [u.a.] Elgar [u.a.]. Stallings et al. (2010). School meals: building blocks for healthy children. Washington, D.C.: National Academies Press. Read More