Sources and conditions of supply of agricultural commodities

Supply of agricultural commodities can be broken down into the sources of the commodity and the conditions of supply. The sources of the agricultural commodity may be categorized on the basis of both the geographical location of the commodity and the stage of the marketing system.  On the basis of geography, agricultural commodities may either be concentrated in one location or scattered in several locations. Concentration in one location may be attributable to the area being high potential with favorable weather and abundant resource endowments. A good example is the Kenyan grain basket which is located in the Rift Valley province where a major proportion of maize produced in Kenya originates. Such concentrations present fewer commodity assembling problems for marketing agents. Scattered supply sources may be attributable to many producers who produce the commodity, but are dispersed all over the country. A good example is the small-scale maize farmers who are scattered all over the country thus presenting assembling bottlenecks for marketing agents.

On the basis of marketing stages agricultural commodities may be sourced from farmers or middlemen. Agricultural commodities sourced from farmers are most likely to be in their raw forms especially in developing economies where farmers have not seriously embraced value addition. However, in economies where farmers have embraced value addition a number of processed products emanate from farms. Agricultural commodities sourced from middlemen may either be in non-processed or processed forms. Examples of middlemen include assemblers, processors, wholesalers, retailers, brokers, commission agents. While some of the middlemen change the form of the product as they facilitate movement across the marketing system, some of them only facilitate the movement in the marketing system without changing the form of the product.

The conditions of supply may refer to not only the form of the product which may either be in raw or processed form, but also the quality and quantity specifications as defined by the market and government. It is therefore important for the producers to supply the commodity in the right form and adhere to the quantitative and qualitative requirements. For example it is a requirement that dairy products delivered to the public be in a form that does not render the products susceptible to contamination.

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This module was developed by Moi University, Department of Economics and Agricultural Resource Management with support from OER Africa and Bill & Mellinda Gates Foundation