Chapter 3


 up stocks in the post-harvest period is recompensed for the use of his or her capital and
 storage facilities by being able to sell the commodity at a profit when the market is tighter.
 In the same way, traders can store from one year to the next. However, this has a much more
 speculative element as it is difficult always to predict what will happen in the next year's
 harvest. As a result, for food grains, inter-annual storage is often carried out primarily by
 government. For certain food commodities, such as fruit and vegetables, it may be very
 expensive to store for more than a few weeks, and these commodities are traded primarily on
 a seasonal basis.

 Processing is the third logistic function which a marketing system undertakes. This can
 cover anything from the milling of grain to the canning of fruits and vegetables. Processing
 can be a very major part of the value of the final product, as it is in many Western countries.
 for example for pre-prepared meals, or it can be negligible, as with many fresh fruits.

 Organizations involved in the logistics side of marketing can perform any or all of these
 logistical functions. In addition, they can provide finance for trade and also finance upstream
 production. The diversity of organisational form can be immense, even within a single
 region in a country. As countries become more developed, the importance of the marketing
 stages of the food chain increases. Processing moves outside the home and becomes larger
 scale. In general terms, the higher a country's income, the more important processing is as
 part of the value added of the food sector. It can also be an important employer. In Malaysia.
 after two decades of high growth, food processing now employs over 15% of all industrial
 workers. Similar patterns have developed in other South East Asian economies. Although the
 percentage of the population deriving their food entitlements directly from agricultural
 production may be declining over time, the numbers indirectly dependent on agricultural
 production for employment will tend to increase.

 As for all stages in the food chain, each organisation involved in processing has to generate
 positive financial value added on a year to year basis, to pay the wages of those involved, to
 give a normal return to any capital committed to the marketing function and to give profits to
 the owner of the enterprise. The efficiency of the various enterprises, and the degree of
 competition with respect to the various functions in the marketing process, and at the
 producer and consumer level, will determine the number of enterprises involved in
 processing, transport etc., and the distribution of income from their activities.

 On the information side, markets are the channel for the price signals which harmonise
 supply and demand. If they do not function properly then information may not reach the
 appropriate agents. If traders do not know that prices in one region are rising because maize,
 say, is scarce, then they will not transport maize to sell on the markets in that region. and
 regional food security will be endangered. If farmers do not know that the price of maize is
 rising nationally, because traders are managing to secure all the increase in consumer prices
 for themselves, as increased profit, then they will not plant more grain to meet the rising
Demand. In some countries where state institutions regulate the market and undertake most
 of the functions of the marketing system, these price changes may not be observed. The
 marketing agency has then to develop some other type of information, such as increases in
 the size of customer queues, or in unsold stocks of grain, to give them information about the
 relative demand and supply of the commodity.