Farmers' markets have increasingly become an important link between the urban areas and the farms. Since 2014, the number of farmers market listed in the USDA’S National Farmers Market directory was 8,771 (United States Department of Agriculture, 2016). The popularity of the market could be attributed to the consumers’ interest to purchase fresh farm products directly from the farmer. In addition to allowing customers access locally produced vegetables, fruits, and meat, farmers markets ensure that the farmers develop personal relationships with their customers. Direct marketing present in the farmers markets is a significant sales outlet for producers in the United States. This paper aims at analyzing the farmers market in terms of consumer/ firm distribution, market demand, constraints and regulations, the impact of prices on equilibrium, the implication of improved production technology, market efficiency and how the market divides market surplus between producers and consumers.
The distribution of consumers in the farmers market is affected by several factors. The consumers present in the farmers market are of different social and economic status. The produce brought to the market by the farmers is affected by consumer lifestyles, customer convenience, population and the income of the consumers (Karl et al., 2019). Additionally, demographic aspects of the population such as age and household size affect consumption trends. In a study by Govindasamy et al, consumers were asked to identify the factors that affected where and how often they purchased farm produce (2011). Approximately 63 percent and 59 percent of the sample selected quality and freshness respectively, 20 percent valued convenience and only 16 percent identified price as an affecting factor (Govindasamy et al., 2011). Almost 87 percent suggested that the quality and availability of farm produce influenced their choice of the market (Govindasamy et al., 2011). Moreover, about 80 percent were concerned about the origin of the products they purchased (Govindasamy et al., 2011). In general, the number or the characteristic of consumers present in a specific market is dependent on their personal preferences and it is expected that anyone can visit any market of their choice. Notably, there are no firms associated with the Farmers markets as marketing, buying and selling is a direct interaction between the farmers and the consumers. However, non-profit organizations and cooperatives exist to ensure that the farmers gain maximum profit from their farm produce.
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Consumer demand is the total amount of goods that an individual consumer is willing and able to purchase. Market demand, on the other hand, is the total amount of goods demanded by all the consumers in the market (Karl et al., 2019). Consumer demand can be denoted as which refers to the total amount demanded by a particular consumer. Market demand is an aggregate of the consumer demand which could be denoted as, where n is the number of consumers in the market at one particular time. The quantity demanded is a function of price. Market demand is influenced by the price of the commodity, price of related goods, the income of the consumer and the quality of the products offered. The model above could be used to generally represent Farmers market demand.
Changes in input prices significantly affect market equilibrium. Market equilibrium is affected by changes in either supply or changes in demand. When the input price increases, farmers produce fewer commodities and consequently the supply of the farm products decreases (Karl et al., 2019). The quantity of goods produced by the farmers becomes lower than the quantity demanded by the consumers. At this time, the market is not at equilibrium. Similarly, when the input prices decrease, farmers produce more products which consequently increases the supply. At this point, the amount produced might be exactly what the market needs, in which case the market will be at equilibrium, or the quantity produced will be more than what consumers are willing to purchase at a particular price. In both cases, whether the supply increases or decreases, market equilibrium is affected.
The farmers market has several programs and policies that regulate all the activities. Several federal policies and programs are supporting the markets. Food Insecurity Nutritional Program (FINI) provides grants to low-income consumers to enable them to purchase more vegetables and fruits from the farmers markets. The Farmers Market Promotion Program (FMPP) struggles to increase access to and consumption of locally or regionally produced farm products (USDA, 2016). The FMPP also develops new opportunities by expanding and improving the farmers markets. The third program is the Senior Farmers Market Nutrition Program (SFMNP) which provides low-income seniors with coupons to purchase honey, unprocessed fruits and vegetables (USDA, 2016). In 2015, 817,751 seniors benefited from the SFMNP (USDA, 2016). Other programs in the farmers market include WIC Farmers Market Nutritional Program (WIC FMNP), Supplemental Nutritional Assistance Program (SNAP), Food Safety Modernization Act (FSMA), and WIC Fresh Fruit & Vegetable Vouchers (CVV) (USDA, 2016). The policies and programs in the farmers market incorporate every almost aspect of the market. However, I think that a policy to regulate the wastes from the market would significantly improve the efficiency of the markets. Some of the farmers markets in the USA have developed programs on waste disposal and they have been effective. I would recommend that certain rules are developed in all farmers markets to ensure that both the farmers and the consumers dump their surplus products safely.
Improvement in production technology would play a critical long-term role in agriculture. There are many innovations in the Information Technology (IT) world that can positively impact farms. For instance, farm management software, power systems, and precise tools are available to almost every farmer. Proper utilization of these tools would increase production and improve the efficiency of farm management. The increasing population demands that farmers produce more goods. The use of improved systems of management would enhance resource efficiency and increase productivity. For instance, a more productive field could be created by optimizing fertilizer applications. This implies that farmers will produce more fresh products at a cheaper price. Secondly, smart machines could be used to quickly access the quality of farm produce (an aspect that is critical in the farmers market). Consumers will, therefore, be guaranteed that the products they purchase from the farmers market are safe for consumption. The supply chain would also be improved at the production level, market level, and consumption levels. The whole process of quality assessment, management, and increased production will eventually benefit both the farmer and the consumer.
A market is termed efficient if the prices are close enough to the actual market value. Several conditions have to be met if a market is to be termed efficient. First, the inefficiency of the market should provide strategic schemes to beat the market: the source of the inefficiency should be traded and transaction costs should be smaller than the profits expected (Kristoufek & Vosvrda, 2016). Second, profit-maximizing individuals have to be present: persons who recognize the potential to gain excess returns and who can duplicate beat the market, among others (Kristoufek & Vosvrda, 2016). In essence, the rule is that an efficient market cannot be beaten and investors strive to make it happen. In the farmers market, the actual assets of inefficiency which are the fresh farm produce are traded and essentially the costs used in the transactions are less than the profits gained (Hoelscher, Zanin, & Kramer, 2016). The high prices of vegetables and fruits in the market are associated with quality and freshness and we, therefore, cannot conclude that the prices do not match the true market value. Furthermore, the investors in the farmers market are always striving to provide quality fresh farm produce to their consumers in an attempt to gain more income. The farmers market, therefore, satisfied the market efficiency conditions outlined by Kristofer and Vosvrda and it can be concluded that the market outcome is efficient.
Farmers markets use reduced prices strategy to share market surplus between the consumer and the farmer. Market surplus refers to a situation where the quantity of goods supplied is higher than the demanded quantity, a common situation in the farmers markets. In some cases, farmers are unable to sell their produce (Hoelscher et al., 2016). The excess supply induces farmers to sell the commodities at low prices. Consequently, consumers will respond to reduced prices by purchasing more of the same product. This shifts the market towards equilibrium where the quantity demanded equals the quantity supplied.
Farmers markets provide direct interaction between the farmer and the consumer. The popularity of the market is due to the increased demand for fresh and quality farm produce. The distribution of consumers in a farmers market is affected by the quality of the produce, income of the consumer, household size, and convenience. For most people, the decision on where to purchase is affected by quality and freshness. Changes in input prices affect equilibrium by either causing an increase or a decrease in supply. In addition to the already existing policies and programs, waste management policies should also be implemented in the farmers markets. Improvement in production technology would increase market efficiency and maximize the profits gained by the farmers. The farmers markets are efficient since they fulfill the market efficiency conditions outlined. The farmers markets use a price reduction strategy to distribute market surplus between the farmers and the consumers.
References
Govindasamy, R., Zurbriggen, M., Italia, J., Adelaja, A. O., Nitzsche, P., & VanVranken, R. (2011). Farmers markets: Consumer trends, preferences, and characteristics (No. 1326-2016-103597).
Hoelscher, C. S., Zanin, A. C., & Kramer, M. W. (2016). Identifying with values: Examining organizational culture in farmers markets. Western Journal of Communication , 80 (4), 481-501.
Karl, E., CASE, F., OSTER, R., & SHARON, E. (2019). PRINCIPLES OF MICROECONOMICS . Pearson.
Kristoufek, L., & Vosvrda, M. (2016). Gold, currencies and market efficiency. Physica A: Statistical Mechanics and its Applications , 449 , 27-34.
United States Department of Agriculture (2016). Farmers Markets and Direct-to-Consumer Marketing. Retrieved From https://www.ams.usda.gov/services/local-regional/farmers-markets-and-direct-consumer-marketing Accessed on 4th October, 2019.
