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Chapter: Business Science : Rural Marketing : An Overview of Rural Marketing

Recent trends in Rural Demand

1. Steady growth 2. Welcome change in the composition of Rural Demand 3. Factors behind the growth and diversification in rural demand 4. Rural Demand is more seasonal-

Recent trends in Rural Demand


1.                Steady growth


2.                Welcome change in the composition of Rural Demand


a.     Several products already well-established in the rural market


b.     In many products, rural consumption accounts for a larger share than urban


c.      In many products, rural market has overtaken the urban in growth rate- detergent powder, washing soaps.


d.     Who buys the high priced durables in the rural area?


NCAER (National Council for Applied Economic Research) classified durables in three categories


Low priced durables- watches, radios, irons, fans, etc.


Relatively higher priced durables- TV, sewing machines, mixers, 2-in-1 music system.


3.                Factors behind the growth and diversification in rural demand


a.     New income due to agricultural/rural development


i.     Green revolution since 1970


ii.     New employment, income & purchasing power.


b.     The expectation revolution


i.     The rising expectation have enlarged the desire & awareness


ii.     Strengthened their motivation to work, earn & consume.


4.                Rural Demand is more seasonal-


a.     Agriculture dominate the income source


b.    Purchasing on marriages & festivals ( also the harvesting time)


Agricultural Inputs




a) Seed usage


A notable feature of the seed situation in Syria is the high seed replacement ratio for wheat. Considering that, in respect to self-pollinated crops, farmers ordinarily tend to plant home-saved seeds and do not replace them with fresh processed seeds, the high seed replacement ratio is commendable.

Farmers tend to compare the price they get for a kg of the commercial grain (the output) with the price per kg of seed, although this may not be sound economic reasoning considering the value of the incremental output. This price sensitivity is noticeable particularly in self- and open-pollinated varieties, where the farmer has the option to switch to home-saved seed if he considers the seed price to be high in relation to the crop price. The impact on yield and quality through continuous use of home seed is not often understood.


b) Production


The annual turnover of the public sector General Organization for Seed Multiplication (GOSM) is about SP4 billion. About 12-13 000 tonnes of wheat, barley, lentil and chickpea seeds are exported to Arab countries. GOSM is expected to sell seeds at cost and make no profit.


The private sector role in seed production is in the form of farmer participation in the multiplication activity. Seeds are multiplied through poly-generation method passing from nuclear seed through foundation, registered and certified I stages and finally to certified II seed, which is sold to farmers as commercial seed for raising the crop. The first two stages are multiplied in six stations at different locations directly under the supervision of GOSM, and the remaining two stages are produced on farms by cooperative members and by private farmers. Seed material is supplied to the farmer for multiplication to the succeeding stage at the same price as for the commercial grain, and not at its appropriate cost which naturally would be higher. Farmers raising the registered seed are paid a 25 percent premium over the commercial crop price for the output, and those raising the certified seed I and II are paid a premium of 20 percent. Breeder seed is obtained, free of cost, from the International Center for Agricultural Research in the Dry Areas (ICARDA), research stations and sources outside the country.


c) Delivery system


Seeds for all strategic crops - wheat, barley, lentils, chickpeas, cotton, and sugar beet - are produced only by GOSM, the public sector organization, for distribution through their branches and through the Agricultural Cooperative Bank warehouses. Hybrid seeds for vegetables are imported and marketed by private sector seed companies through a network of retailers spread across the country.


d) Seed importation by private sector


Importers are required to apply to the Directorate of Agricultural Affairs for approval of the seed variety before seeking an import license. The seeds are tested in the Government‘s stations for two seasons and, depending on the findings, approval is given or refused. The difficulty expressed by importers is that imported seed varieties keep changing rapidly and often when the approval is given after two years it is possible that the same variety may not be available. At the time of import, on arrival of the consignment at the port of entry, the customs take a sample and send it to Aleppo for analysis. The consignment is allowed for clearance after the sample is approved. A local facility for analysis could reduce the delay in clearances of consignments


e) Seed Law


There is need for a comprehensive Seed Law containing the following: making it illegal to produce, stock or sell seed unless it is an approved variety, packed, sealed, certified and the packing and label comply with disclosure requirements; stipulating procedures for new releases and registration of varieties; specifying quality standards; laying down penalties for deviation; prescribing obligations of seed producers and dealers; specifying disclosure requirements (variety name, producer‘s name and address, expiry for viability) and similar aspects.



f) Pricing


Pricing for barley, lentil and chickpea seeds need review to recognize the uncertainties of rain-fed conditions under which these crops are raised and to encourage a higher seed replacement ratio. There are also reports of over the commercial price for seed crops to be insufficient. As a result, they tend to divert the seed crop to the market instead of giving it to the processor. This interrupts the multiplication chain. To avoid diversion and to ensure continuity of the seed chain, the premium may have to be reviewed.


Presently, the Government fixes the maximum prices of imported seeds. This could be modified into a system of requiring the importer to file the cost of import and marketing, waiving the price fixation part of the procedure and allowing him to fix his own pricing. The market could be allowed to determine what price each variety deserves. The cost data filed by importer should be adequate for identifying undue price increases and corrective action.


2. Fertilizers


a) Fertilizer usage


The popular forms of fertilizers used are ammonium nitrate of both 30 percent and 33 percent grades, urea, triple super phosphate with 46 percent P2O5 (TSP), also commonly referred to in Syria as just super phosphate, sulphate of potash with 50 percent K and, occasionally, diammonium phosphate (DAP) with 18 percent N and 46 percent P2O5. Of these, the first three are locally produced and supplemented by imports to meet the gap between demand and local production.


b) Distribution system


About 60 percent of the total fertilizer requirement is produced locally at the only manufacturing unit located at Homs and the balance is met by imports. The Agricultural Cooperative Bank (ACB) distributes imported and locally produced material to farmers directly and through cooperatives. The ACB is both dispenser of farm loans and distributor of inputs. The quantity of fertilizer and other inputs is pre-determined according to a recommended crop plan (earlier, it was a mandatory plan subject to severe penalties for non-adherence but now mad and formalized by the issue of a crop license to every farm at the beginning of each crop year.


Farmers, or the cooperatives on their behalf, role in most cases is limited to physical facilitation involving no advance purchase, storage and working capital investment. The 5 361 agricultural cooperatives in the country play an important part in facilitating the redistribution of seeds and fertilizers from ACB to farmer members.


c) Production


The General Fertilizer Company (GFC), located in Homs, is a public sector organization and is the only fertilizer manufacturing unit in Syria. It has an annual installed capacity of 120 000 tonnes of ammonium nitrate, 330 000 tonnes of urea and 450 000 tonnes of triple super phosphate (TSP). The plant is located centrally with good and easy reach to most fertilizer consuming parts of the country. The source of natural gas is about 700 km at Hassake and is piped to the fertilizer unit and the neighbouring refinery. Rock phosphate deposits are also nearby at Palmyrah. Power supply is not a problem and is available at 97 piastres per kWh. The production at this unit has been erratic in relation to the installed capacity as will be seen from the following table. The capacity of the ammonia plant is not matched by capacities in the downstream ammonium nitrate and urea plants, which seems to be the major reason for under-utilization. These plants, as well as the sulphuric acid and phosphoric acid plants, need revamping requiring further investment. Considering the local availability of rock phosphate and natural gas (sulphur is imported from nearby sources) and the inherent comparative advantage for manufacture of nitrogenous and phosphatic fertilizer, it is worthwhile investing in this unit for revamping and de-bottlenecking.


d) Importation - Role of GEZA


Fertilizer import in its entirety is entrusted to the public sector organization called the Foreign Trade Organization for Import of Chemicals and Foodstuffs - referred to as GEZA, formerly known by the acronym TAFCO. Private sector is not permitted to import fertilizers. Recently, however, a decree has been issued allowing private sector in fertilizer import. GEZA imports through Tartous and Latakia ports - bulk urea cargo mostly through Tartous and bagged cargo through Latakia. Bulk urea is unloaded and bagged by automatic bagging equipment on the wharf and directly loaded onto trucks, saving about US$3 per tonne compared to import in bagged form. The purchase contracts are on C&F free out basis with the responsibility for wharfages resting with the seller. North Africa, East Europe and Russia are the main sources which offer advantages of short voyage time and distributed deliveries in lots of 5 000-7 000 tonnes. There are no constraints of truck availability at either port. Foreign exchange availability for fertilizer import is not a constraint.


e) Price coordination mechanism


Stocks at different prices are taken over by ACB - local production at cost plus a margin to the producing unit and imported material at varying C&F costs for different parcels plus 1 percent to GE?ZA. Therefore, the Bank has to go through a complex averaging process to arrive at a uniform farmer price for each fertilizer type regardless of the source. These selling prices are recommended and submitted for approval of the Supreme Agricultural Council.


3. Farm Machinery


Farming and farm machinery have continued to evolve. The threshing machine has given way to the combine, usually a self-propelled unit that either picks up windrowed grain or cuts and threshes it in one step. The grain binder has been replaced by the swather which cuts the grain and lays it on the ground in windrows, allowing it to dry before being harvested by a combine.


Flows are not used nearly as extensively as before, due in large part to the popularity of minimum tillage to reduce soil erosion and conserve moisture. The disk harrow today is more often used after harvesting to cut up the grain stubble left in the field. Although seed drills are still used, the air seeder is becoming more popular with farmers. Today's farm machinery allows farmers to cultivate many more acres of land than the machines of yesterday.


a.                 Tractor


b.                Corn Picker


c.                 Cotton Gin


d.                Cotton Harvester


e.                 Crop Rotation


f.                  Hay Cultivation


Rural market index


Thomson Rural Market Index


Market Research is done by market research companies and experts in the field to provide data about consumption patterns, purchase preferences and rural market potential. Hindustan Thompson Associates Limited, a market research and advertising company in India studied the rural areas in India in year 1972.


HTAL made its report in 1972 and developed overall indicators of rural market potential in India. These are known as Thompson Rural Market Index.


HTAL compiled data of 335 districts based on 26 measurable scale variables. HTAL collated data regarding agricultural details of output in each district.


Indicators considered in developing TRMI are:


Agricultural Labourers Gross Cropped Area Gross Irrigated Area


Area under non food crops Pump sets


Fertilizer consumption Tractors


Rural Credit Rural Deposits


Villages electrified



TRMI has become a useful guide in segmenting and targeting rural markets. Based on TRMI data, the districts have been classified A,B,C,D and E classes.

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