Market-driven research

P.S. Cornish

NSW Agriculture & Fisheries Horticultural Research & Advisory Station P.O. Box 581 Gosford 2250

Australian industries have traditionally been oriented towards production, being isolated from and largely unresponsive to market forces. The reasons for this are diverse but range from protection to long marketing chains which isolate producers from consumers. But change is in the wind. The National Farmers Federation noted through its Director, Andrew Robb (1) that:

"Public debate (throughout 1986) slowly brought the community to realise that economic progress depends on constant adaptation to change - change in what we produce, how we produce it, the demands for new products and services, for response to changes in fashion, for new markets and supplies".

This clearly signals, at least in agriculture, a marked shift from producers to consumers as sovereign in the marketing chain.

Public debate in the late 1980's has also centred on the funding of agricultural research: who pays, how much and what the priorities should be. Whether it is appropriate or not, the market-driven rationale has been applied here, too. The Rural Industry Research Funds (RIRF's), in concert with the Bureau of Rural Science, will play a decisive role in the next decade in determining research priorities (2, 3), in spite of their relatively small but increasing contribution to the total cost of agricultural R and D (4). It is also clear that all of the RIRF's will be increasingly industry-driven by virtue of their membership and also because of economic rationale and perhaps Government direction. Like the industries they serve, the RIRF's will become more market-oriented and they will look more often for short-term financial returns within the context of longer-term strategic plans (5).

Fig.1. It is said that some scientists are unhappy with trends in research emphasis.

According to popular reports (e.g. The Land, April 27, 1989), some scientists find these trends disconcerting (Fig.1). There is certainly some cause for concern, that I shall consider later, but I do believe that consideration of market factors can lead to more relevant and satisfying research with no loss of scientific integrity. My objectives in this paper are (i) to alert you to changes in the food and fibre markets in which agriculture is operating, and which will influence the direction of agriculture and of agricultural research and (ii) to provide a rational basis for incorporating market considerations when planning and executing production research. I will first give an overview of the pressures that will constrain agronomists to be more market-oriented, pressures that can be ignored in the short term but will eventually require reaction. I will then consider some principles of marketing which will suggest how production research can support marketing. Finally, I will consider some of the barriers to becoming rationally market-driven and some of the pitfalls we may encounter along the way.

The changing face of agriculture and agricultural research

Market forces, in their widest sense, will influence increasingly the total allocation of resources to agricultural R and D, the type of research undertaken, and ultimately the funds available for production research, i.e. agronomy in the context of this Society. Apart from general economic growth
and the effect of macroeconomic policies, the most important factors to determine the direction of funding for rural research are:

1. The need to increase off-farm efficiency

To remain competitive, Australian farmers must not only increase on-farm efficiency but also (i) reduce input costs (these equal around 80% of farm output (6)) and(ii) increase the efficiency of the post farm-gate sector (e.g. around two-thirds of the cost of food in Australia is incurred in transport, storage, processing and distribution of farm products (6), Fig 2).

Fig.2. Agricultural sector production and marketing chain

Whilst there is some difference of opinion about precisely where the emphasis should be placed, between on-farm and off-farm research (compare 6,7 and 8) there is agreement that post farm gate research has been under-resourced. The Strategic plans adopted by the RIRF's now specifically set about to redress the perceived imbalance in allocation of research funds. This should come as no surprise. After all, of 203 contributed technical papers at the 4th Agronomy Conference (1987), only seven reported effects on product quality or were obviously inspired in any way by marketing considerations.

The shift to post farm gate research will not occur quickly because of the need to develop new skills and provide the necessary infrastructure. In the meantime, production scientists such as us should be alert to changes in on-farm management which could improve off-farm efficiency. An example would be reducing vegetable fault in wool through pasture improvement and stock management (9). Another is production of lean meat requiring less trimming (10). A third is development of vegetable cultivars or production techniques which ensure longer storage life (11) thus enabling sea freight rather than costly air freight. Tomatoes with higher solids content are cheaper to process, and solids may be increased by management (12).

Agronomists who are attuned to industry fund priorities will stress aspects of their research which could improve off-farm efficiency.

Economic models (e.g. 8) will be used increasingly to target research to the areas most likely to increase efficiency in the farm sector. Such models could be used to state the goals for research without necessarily appreciating what is achievable (see (13) for entertaining comments on this). It should be conceded, however, that a sound basis is needed for deciding where to place the emphasis in research. This applies to "on" v "off" farm research as much as it does to the choice between research on the large commodities (e.g. wheat, wool) and "sunrise" industries (e.g. sections of horticulture) or value-added processing. Carroll (2) points out that subjective value judgements have been used for these decisions in the past and argues for objective priority setting based on whether there is a research problem, cost-benefit considerations, the probability of success and adoption, duration, availability of skills etc. Economic models will aid objectivity in identifying areas most sensitive to the injection of research funds.

2. The need for marketing expertise to match growing market sophistication

Australian agriculture has generally performed poorly in marketing its products, displaying indifference to the needs or demands of the purchasers. This is changing as international markets become more sophisticated. For example, 25 years ago wheat was sold as a largely undifferentiated bulk commodity with virtually all wheat being received and marketed in the F.A.Q. (Fair Average Quality) classification. Today, over 20 grades of wheat are available in any season (with a potential for over 60), with the possibility of precisely targeting specific markets. These markets are intensely competitive and demanding in terms of quality, description and reliability of supply. Successful marketing thus requires considerable expertise.

Agricultural industries are now looking more closely to R and D to support their growing marketing expertise. To continue with wheat as an example, Wheat Research Council (WRC) and the Australian Wheat Board (AWB) have recently held consultative meetings resulting in a clearer definition of the required direction for research related to wheat market quality characteristics (1987-88 WRC Annual Report). WRC will support market-oriented programs to (i) develop systems to provide increasing levels of analytical information to markets, (ii) communicate changing market needs to growers, (iii) modify cultivar evaluation to include more market requirements, (iv) develop better ways to communicate market signals to growers, (v) develop rapid objective tests for wheat and wheat products and (vi) to ensure that market imperatives are integrated within the grain handling system (15). Underlying these programs is the explicit aim of understanding and continually modifying the product and its description to meet changing market requirements.

The rewards for accommodating rising sophistication in export markets is apparent with wheat, where more classifications and better quality control allowed the AWB to almost double exports between 1975 and 1985 in a period when international trade increased by only 45% and marketing subsidies and support programmes assisted other major exporters (14). Australia has obtained prices above subsidised international levels.

3. Rising affluence: the demand for quality, variety and convenience

The determinants of future rural prosperity in Australia were discussed at a Symposium of the Australian Institute of Agricultural Science in January 1987. At that time it was agreed that the key determinant of future prosperity was rising per capita income at home and abroad, and the industries' ability to meet the demand for increased quality, variety and convenience (16). These demands can be seen as threats to our future agriculture from indulgent consumers or as exciting opportunities to compete effectively with imports and to expand exports. I venture to say that our success in raising funds for production research will be related more and more to our skill in facilitating attempts by industry to meet these demands.

As incomes rise, the total quantity of food eaten increases rather little (except in very poor countries) but expenditure on food can rise quite steeply (17, Fig.3). This occurs when higher-priced foods such as fruit, vegetables, meat and dairy products substitute for dietary staples (cereals, potatoes etc), as "luxury" lines substitute for basics (e.g. gourmet cheese for basic cheddar) and more services are purchased along with the food (i.e. processed and convenience foods or, in the extreme, restaurant food). If you doubt the trend towards convenience and restaurant food consider that, in 1988, Americans ate more than half their meals away from home and in Japan the restaurant industry is bigger than the car industry!

Fig.3. Trends in per capita food expenditure and quantity consumed. U.S.A., 1947-55.

Rising affluence also increases the demand for luxury fibre (wool) and for aesthetic products: cut flowers, potted flowering plants and interior and exterior landscaping. Rising affluence has also spawned a spectacular increase in interest in "healthy" foods such as lean meats, cholesterol-free products, and organically grown produce which promise freedom from pesticide residues plus a mysterious "natural wholesomeness". The premium which consumers are prepared to pay for natural or organic produce is uncertain although "free-range" eggs retail in Australia for about a 30% price margin. My observation is that this is typical of fruit and vegetables also.

Fig 4. Consumers are generally demanding improved quality, variety and convenience. The demand for’ healthy" food may hold particular importance for Australia.

Affluence also increases the demand for a multitude of other agricultural products such as essential oils and medicinal herbs. Throughout the world, at least in western cultures, there is also a growing demand for diversity in diet which is fuelled by affluence, international travel, immigration and perhaps simply a desire to be "different" in a conformist society. This is reflected in the large number of shelf-lines in the supermarket (over 30,000 in the average U.S. supermarket) and underscores the role of "newness" and "difference" in marketing.

The specific effects of rising affluence and change in lifestyle on trends in consumption depend very much on the market. The challenge faced by market analysts, of course, is to understand what the market really wants at the present and to predict future trends so that Australian rural industries are well positioned to exploit developing/changing markets. Market research plays an important role here. For example, U.S. meat consumers have been classified according to the following Table. The Australian "Tendercut" marketing program (lean, tender beef) in the U.S. is targeted at the active lifestyle and health oriented groups (18).

Table 1 Market Research - U.S. Meat Consumers

The data in Table 1 are obviously insufficient to market the product. The additional data required are illustrated by the market development strategy for "Finecuts" lamb (10) which included research on specific consumer preferences and retailer requirements and resulted in a strict product specification to which animals are produced.

Australia's main agricultural exports can be ranked according to their potential to meet the needs implied by demographic and lifestyle trends. Horticultural products have been placed at the top and wheat at the bottom, with wool also near the top (19). We should note, however, that even wheat should have a secure future if the commodity is differentiated according to quality and reliability of supply, the latter perhaps being sometimes difficult for Australia with vagaries in the weather and industrial relations. Rising affluence and increasing discernment amongst wheat consumers has led to rising demand for specific qualities for particular end uses.

The challenge presented by rising affluence discussed so far is to understand and meet contemporary change. The other is a longer-term challenge: to anticipate where the major centres of economic growth and future export opportunity lie and to predict the demands of consumers in those centres.

4.Rising affluence: regions of economic growth and new markets

Since the 1950's the importance of Europe as an export market for Australia has declined whilst that of Asia has grown (16), (Fig. 5). The changes reflect past economic growth in Asia (principally Japan).

Projected growth produces a most surprising picture as the less developed countries (LDC) of Asia embark on economic growth. LDC's have relatively low incomes per head of population. The average proportion of any increased income spent on food and agricultural produce is high, often more than 60%. As a result of economic development, the demand for food in developing Asia is likely to increase at 6% per annum or more whilst the domestic agricultural sector will expand at only about 2-3% per annum (6, 20, 24). The gap fuels the demand for agricultural exports which, many commentators have been quick to point out, Australia is well placed to satisfy (6, 20, 21).

According to Hooke (21) the total income of developing Asia presently comprises about 7% of world income but will account for 25% of world income by 2020 and 45% by 2040 (Table 2). He notes:

"In about 40 years - i.e. as far into the future as the Korean war is into the past - the economy of developing Asia will be larger than that of Japan, the United States and Europe combined".

Table 2 World Income Shares 1986 - 2040 (%)

The assumptions underlying potential growth of agricultural exports to developing Asia are discussed in detail by Hooke (1989) and make good reading. If Asian markets grow in the way projected for them, it will be the first time this has happened since the Industrial Revolution. In the past, technological progress has allowed food production to expand faster than consumption (22).

Other existing major opportunities for increased agricultural exports to Asia include Japan, as import policies are liberalized, and India where more than 70 million people enjoy average incomes and wealth above the Australian average (6).

At this stage we can only speculate about the products which developing Asia will demand, but if the projections for growth are at all realistic we need first to minimise the speculation by market research and then start to invest in scientific research and strategic development of the industry. We clearly cannot invest in developing every possible opportunity and there will need to be careful targeting of our resources.

The shorter-term future markets of Japan and India, and of course the traditional markets of Europe and North America, present a lesser problem for predicting what consumers want. Nevertheless the market research needs to be done as a basis for industry development, including the scientific research.

Some principles of marketing - keys to significant production research

I don't propose to discuss marketing theory, but it seems to me that a few important principles indicate where production research can support marketing. This section develops the argument that improved marketability is achieved with better specified and differentiated products (3).

1.Matching product specifications with market requirements

Market demands can be quite specific in terms of description, presentation quality and timing of supply. In the U.S., for example, most meat is marketed through supermarket chains which have declining in-house butcher skills (10). Therefore meat must be delivered in packages, ready for the shelf, but not in just any package. Portion size needs to suit the consumer and 80% of households on the U.S. west coast have only 2 people. I have already discussed particular qualities desired by segments of the U.S. meat market.

Quality is terribly important, but the buyers' view of quality may not coincide with the producers'. And the buyer is always right. The large, lucrative market for onions in Europe exists because, in our supply period, European onions are coming out of storage and are declining in quality. A premium is paid for our onions, but the market will disappear if the quality drops. Perceptions of quality of horticultural produce depend on variety, size, shape and colour and varies between markets. Pack size and even the colour of the writing on the package may be important. Different end-users may also alter perceptions of quality (e.g. Chinese cook lettuce and seldom eat it raw).

Perceptions of quality, or premiums paid or penalties incurred, will also depend on what else is available in relation to demand. With wool, for example, the penalties applied to vegetable contamination are related less to the increased cost of processing than to current supply and demand (9). When prices fall, lower quality wools are generally the first bought by the AWC.

Market requirements may also dictate the need for precise timing of supply (i.e. in market "windows"), or a continuous year-round supply. Restrictions or pests, weed seeds etc, or pesticide residues may be imposed. Market requirements can also change, both in specific markets, and as new markets arise.

Market requirements can only be established by market research. This research is the first, essential step in providing a rational basis for market-driven production research.

Plant genotype as well as crop (and pasture or animal) management play a crucial role in determining that products comply with current or potential future market requirements for description, quality and timing. This presents a challenge to production research, if genetic improvement is included. The following examples illustrate the scope for production research to help match products to market requirements. You will note that I stress particularly the effects of crop management on product quality. I have done so deliberately because past agronomic research has concentrated on production or production efficiency, as noted earlier, but this must change to include quality. I am not sure that the RIRF's fully appreciate the role of production research in this.

Examples of production research facilitating marketing include production scheduling of crops like broccoli, allowing year-round supply. As well as plant selection, this may require research on basic developmental physiology and modelling of phenology. Management of broccoli could focus on storage life (not yield per se) because this determines the mode of transport used for export and this ultimately determines profitability (11).

With wheat there is a need for new varieties with quality characteristics which so closely match market requirements that quality differences due to variety will not be noticed in the market (15). This enables different varieties to be selected and grown for reasons relevant to local use, such as the need for early or late sowing, without affecting marketability. To produce these varieties will require not only breeding of agronomically different types, but physiological studies underlying responses to heat and water stress and variable nutrition - with the primary focus on quality, rather than yield as in the past. WRC has funded much research on heat stress but none, to my knowledge (except possibly at Macquarie University), has focussed on quality. Yet heat shock proteins appear to occur ubiquitously in response to sudden thermal stress - do they affect grain quality? This is a question of some importance to a country like Australia where sudden, large increases in temperature in spring are common.

With sheep research it may mean a comparison of nutrition, genetic selection or management (sex selection) as a means to meet the "Finecut" product specification. Or it may mean further research on reproductive physiology that allows precise control over lambing time and hence enables a continuous supply to market. This then implies nutritional research to maintain lamb growth rates year-round. My point here is that if ewe/lamb nutrition studies were done it would not be to increase growth rates per se but to meet a demand from the market for lambs of a specific size, year-round.

2.Product differentiation/market segmentation

Market segmentation implies a degree of heterogeneity within a market, or between markets. Markets may segment on the customers' product requirements (discussed above) or geographic, demographic, psychographic, economic and behavioural factors. In a segmented market, products can be differentiated and targeted to the segment which maximises returns to the producer (niche-marketing). Alternatively, different product lines can be developed to appeal to different segments. The health-minded sector is one example (Fig. 6). In all cases, products should meet the market requirements of the targeted segment. These approaches contrast with an undifferentiated marketing program which appeals to the widest number of buyers.

Undifferentiated commodities are most likely to compete on price. For these products, production research and technical innovation which increase on-farm efficiency are very important to maintain competitiveness with declining terms of trade. Such is the proud history of Australian agriculture. For undifferentiated products, quality and conformity to an appropriately prescribed product description is relatively unimportant. So the need for market-related R and D will be minimal compared with that required for on-farm efficiency.

With growing sophistication in marketing the required type of R and D support has changed. Targeted niche marketing requires high standards of quality and conformity and a correspondingly high level of R and D support for marketing. But the range of product lines (and hence R and D support) will be less than where a number of market segments are to be serviced. Similarly, with niche marketing where a variable product is graded and inferior produce placed in price-sensitive markets, the need for R and D support will be less than where a range of high quality lines is required.

Product differentiation and market segmentation are the basis for increasing total market share. In competitive markets, further product differentiation is also the key to maintaining market share by demonstrating superior quality, lower pesticide residues, less fat, more oat bran in the biscuit or whatever appeals to the buyer. Thus the role of research is twofold:

to see that products can consistently meet the market requirements,
to develop new traits enabling a competitive advantage to be maintained or new markets or market segments to be penetrated.

It is worth noting here that differentiating products at the production end, where Australian agriculture generally enjoys a comparative advantage, may be more economic than processing and then marketing value added or highly specialised products (22). It should also be remembered that differentiating products on quality will frequently add value.

3. Strategies for product differentiation

Differentiation will usually occur along lines of: quality, as previously discussed; price, which is probably not an option for most Australian products; and newness, covering new products, special features and convenience.

As a general rule, small changes which differentiate a familiar product will be more acceptable to consumers, although the magnitude of change likely to be acceptable should be established by market research. Thus a research strategy for any industry should endeavour to have available a steady stream of slightly different but new features achieved by plant improvement or management. The extreme example here is in floriculture, where new colours are always in strong demand.

On the other hand, totally new crops, which compete with nothing on the target market, are least likely to encounter restrictive trade barriers. Innovative products or totally new crops should still be developed with the market in mind, however, as New Zealand did with kiwifruit. Bear in mind that 90% of innovations in manufacturing fail. The same could occur with innovative crops. There certainly have been failures (jojoba and babaco), but careful market research should reduce the risk.

4. Flexibility

Markets are dynamic in product specifications, volume of demand, prices paid and access. Therefore, producers must be flexible to withstand fluctuations in world markets. From the viewpoint of this Society the most important contribution to flexibility, I believe, is varietal choice. Therefore, I see a need to maintain a high level of input into plant improvement and there should be some concern over Lazenby's suggestion (23) that public plant breeding should be scaled down. This is mainly because private plant breeders must for economic reasons, work on genotypes of immediate relevance whereas successful exporting depends, in part, on a resource of potentially useful genotypes.

Pitfalls in being market driven

1. Subjective priority setting

Enterprise, innovation, better marketing, relevance and accountability - all of these have become "motherhood" propositions, not to be argued against. But in seeking to make research more market-oriented, or market-driven, there is a danger of directing or re-directing investment for subjective reasons -simply because it may be government policy, for example, to fund "new" industries or value-added processes. Research funds should be directed on efficiency grounds (as well as achievability etc.) not just because an industry or activity is new, high-tech or value added (22).

Similarly, the drive for relevance and accountability may propel us too far along the "significance" scale of Table 3 - robbing industry of future innovation. When we can only apply the findings of others it implies we will always be followers!

2. Assuming the market knows best

A serious potential pitfall in being market driven is to uncritically accept that the market knows best. This can place too much credibility on the "market signals" and also fail to account for what is achievable in both research and adoption. The best protection from the unachievable is to integrate the process of product/market development, as we discuss in the next section. All relevant parties contribute to priority setting and the scientist is able to influence decisions on the basis of what is achievable, and how it can be achieved.

The credibility of the market signals is directly related to the expenditure of time and money in obtaining the data. Agricultural markets are notoriously imperfect in the economic sense: prices don't necessarily move predictably in response to supply and demand. The markets are also complex, with many suppliers each of whom is sensitive to prices and demand. The demand/price structure of markets can be quantified, and so can the projected supply/cost statistics of potential competitors, but a degree of uncertainty and error must be accepted....but the more data, and the more critically it is appraised, the better. Other market signals include consumer and trade requirements, barriers to trade etc. Once again, some of these data can be quantified but a degree of subjective judgement is required. A major risk is of becoming overly reactive to subjectively evaluated, short-term phenomena.

3. Failure to allow scientists to create opportunity

A related pitfall is to get so close to the market that research is subject to the whim of the marketer. Marketers are reactive, they see products and markets essentially as they are and try to put them together. If research serves this purpose alone it could become whimsical and, worse, fall far short of its potential to contribute. Scientists have the potential to create opportunity and should work to do so. Where a salesman thinks in terms of the product he can sell, a scientist thinks in terms of "things he could sell if ....". Much of this research will be long term and at quite a basic level.

For example, an exporter may see a huge market for carnations in the USA but not consider it because of insufficient vase-life to accommodate transport. The genetic engineer, on the other hand, may see the opportunity to genetically tailor vase-life to market needs.

Bieleski (24) lists five activities that DSIR scientists engage in to ensure their research is both scientifically sound and relevant to market needs. These activities apply specifically to Japan, but have a general validity. (Dr. Bieleski is Director, Division of Horticulture and Processing, and is well-known for his fundamental research on plant nutrition):

1. Knowing the market. Marketers (importers and exporters) provide ideas for opportunities. These are checked in two ways; by Trade and Industry officers stationed in the relevant country, and by market statistics.

2. Seeing for themselves. Whilst the marketer knows the products he has to sell, the researcher has a much better idea how to "change the rules of the game" (this is how scientists can create opportunity), or if the rules can't be changed. The scientist is the right person to judge what is achievable.

3. Talking with visitors. Visiting delegations and scientists, or other short-term residents from target countries, are used in a variety of ways to assess what qualities markets look for and to highlight defects in existing products.

4. Finding out rules. These cover both written rules (e.g. quarantine) and other expectations. For example, fumigation (the written rule) may require packaging in a certain way (designed by potharvest scientist) to meet the fumigation methods used (the unwritten rule).

5. Achieving and maintaining quality. Bieleski lists 10 areas in which research contributed to setting and maintaining quality standards for kiwifruit. Seven of these involved production research.

Prerequisites for being successfully market-driven

1. Integrating production research into the production-marketing continuum

For too long production research in Australia has been isolated from marketing, or for that matter from other components in the continuum of innovation, adoption, production, processing, transport and marketing. There is a growing demand for all these components to be integrated better. Integration can give strong direction to research and overcome some of the pitfalls just mentioned.

As researchers there are times when it is beneficial to see explanations for observed phenomena: this brings satisfaction, often it brings promotion, and it establishes principles which have validity beyond sites and seasons. There are also times when it pays to take a broader view to question the significance of what we are doing and rearrange priorities. Integration of research into the continuum from innovation to marketing allows this wider view to be taken. On the other hand, preoccupation with the broader view can allow important detail to escape un-noticed. The following discussion pursues these issues: the casual reader may prefer to resume after Table 3.

The value of integrating agricultural research, production and marketing is supported by theories of hierarchical systems. Agriculture can be viewed as a layered or hierarchically organised system in much the same way as a biological system. Layered systems proceed from lower to higher levels of organisation, each with its own language. Passioura (25) likens a layered system to the printed page. At the lowest level or layer of organisation we view an "array of dots". At a higher level of organisation (greater distance) we view areas now described as "light and shade". At the highest level of organisation we see the true significance of the dots and use a new language to describe what we see - "a nose, mouth" etc. As scientists we tend to see the world at certain conceptual levels of organisation - the cellular level, the whole plant level and so on. Marketers see consumers and their satisfaction.

Passioura claims that, in science, discovery at a given level of organisation is stimulated by thinking at adjacent levels. Moreover, higher levels require lower levels to operate effectively, but not vice versa. This implies that our understanding of a biological phenomenon is incomplete unless we can relate it to phenomena in adjoining levels of the organisational scale. If we cannot relate it to a higher level, the phenomenon may be trivial. If we cannot relate it to a lower level, our knowledge is merely descriptive and unlikely to have the understanding needed to change the system. The search for explanation, if not balanced by a concern for significance, tends to drive research down the organisational scale. The search for significant description, if not balanced by a concern for theory, tends to drive research up the organisational scale.

Table 3 applies Passioura's analysis to plant improvement and illustrates, at level N, the range of organisational levels associated with plant improvement - from low (genetic engineering, plant physiology) to high (niche marketing on some quality trait). For each level of organisation, aspects of their significance (level N + 1) or explanation (level N - 1) are given. The table is read vertically.

For example, when it comes to plant improvement (Table 3), a farmer who is concerned with production will benefit from understanding that the range of genotypes available to him may well respond differently to management and seasonal conditions (N-1 level). Also, that he can exploit these differences to better match his product to market requirements. He will be aware of these requirements if he is thinking at the significance (N+1) level - few farmers seem to do this.

Table 3: Scale of Organisation in Agriculture, Illustrated by Plant Improvement.

There are some outstanding examples of integrated research, development and marketing. The kiwifruit is one (24) but the development of export table grapes in Australia is no less remarkable. The table grape industry had existed in Australia since the 1930's but expanded greatly after 1983/84 (Fig.7) due, in large measure, to the integration of research, extension and marketing (26).

2. Targeting: focusing market and product development as a prerequisite for market-driven research

Whether we market in a single niche or several or all segments of the market it is essential that each line is produced, packaged and promoted to the appropriate target. These are the tactics of marketing and market development. As not all market opportunities are of equal value, market development is targeted to the best opportunities in terms of the producers' comparative advantage, likely barriers to trade (e.g. quotas or quarantine restrictions to be overcome), size of market, volume of shipping available, projected price trends, likely future competition, the adequacy of infrastructure (cool stores etc) and the amount of product development needed to access the market.

Product development is the R and D needed initially to match the product with market requirements and to differentiate it in terms of quality or other features that may be valued by importers or consumers, such as health-relate qualities or continuity or reliability of supply. R and D may also be required to overcome quarantine restrictions, increase shelf-life (which influences mode and cost of shipping as well as quality on arrival in the market), and to maintain market share once it has been established. As resources for R and D are very limited, product development must be targeted according to the same criteria as market development, as well as meeting the criteria discussed earlier under objective priority setting for rural R and I (2).

The successful targeting of market and product development depends on the quality of market research.

3.Market research: The essential prerequisite

Market research includes not only day-to-day prices, required for marketing, but detailed information on all aspects of the market and the activities of competitive suppliers, as previously discussed. Very often the quality of these data are poor, except for the major commodities of wool, meat and wheat. The data that are available don't necessarily flow through to all of the people who can use it, although steps have been taken to rectify this, e.g. with wheat (15).

Summary

Emphasis in rural research will gradually shift to increasing off-farm efficiency and to areas that are seen to underpin better marketing. Thus production-oriented scientists, though still in demand to reduce costs and increase efficiency on-farm, will see a declining share of research funds. Production research will be most likely to attract industry funding where it is clearly linked to off-farm efficiency or improved marketing.

Improved marketability will result from clearer specification of market requirements and differentiation of products to meet particular needs. Production research, including both plant improvement and management, has a key role to play in enabling products to reliably meet market specifications. A second role is to develop new traits or qualities in products that give a competitive advantage and allows market share to be enlarged or, given any increase in competition, to at least be maintained.

Whilst a strong market-orientation for production research is seen as highly desirable there is a risk in becoming too close to and therefore too influenced by short term trends in the market and of downgrading other information when deciding research priorities. These risks can be minimised by integrating research, extension, production, regulation and marketing. The essential prerequisite for being successfully market-driven is, however, access to reliable information about the market. In Australia, this is the weak link.

Increased emphasis on production research being market driven is unlikely to greatly change the type of research being done, at least in the short term. But placing that research in the marketing context, and the implementation of research with a marketing component, should greatly improve the focus of the work and its usefulness to industry. In many cases the experiments won't change - but the data collected and their usefulness will.

References

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