Prices of agricultural products fluctuate depending upon several factors. It was determined that producer income vari
es greatly depending on annual vegetable prices.Some sustainable efforts such as production planning can be recom
mended to prevent these price fluctuations. In terms of agricultural product prices the effect of producers, and accord
ingly costs, are fairly limited in
comparison with their effects in the industrial sector.
Producers usually have to accept established prices as
fact. This is because the price of an agricultural product
for a given year is not determined by the costs incurred
during that year, but by the total supply and demand for
the product over the year. In addition, since the supply of
agricultural products cannot be altered in the short term,
demand is more determinative of price. Price fluctuations observed in agricultural products
constitute one of the most important aspects of the
agricultural economy. Major changes in agricultural
product prices from year to year affect product supply and
producers' decisions about production.
******OBSERVATION******
It is observed that only five states namely, Madhya Pradesh, Andhra Pradesh, Punjab,
Maharashtra, and Haryana have more than 60 percent of the total capacity of godowns
sanctioned in the country. Other states like Karnataka, Uttar Pradesh, West Bengal and
Gujarat are picking up whereas there is little progress in the states like Goa, Jharkhand,
Kerala, Uttarakhand, and Bihar and the North Eastern States. Long payback period and low
levels of viability are attributed to be the main reasons for this imbalance. In the North
Eastern Region, there has been a lack of response also due to the reluctance of financial
institutions to provide credit facilities to such back-ended credit linked projects due to a
community land holding pattern which does not facilitate land collateral in the name of
individual borrowers.
The important observation is the geographical variation in the location of
markets. First, there is large variation in the number of markets farmers have access to
across states. Mandi density is considerably higher in states like Punjab
and Haryana as compared to other like Rajasthan and Madhya Pradesh. Second, even
within states the spatial distribution of mandis is far from uniform.
(*********MADE IN TABLE FORMAT*******)
Down below are the observed fluctuation of the prices within the state
State Standard Deviation
Andhra Pradesh 0.15
Chhattisgarh 0.13
Gujarat 0.14
Haryana 0.13
Jharkhand 0.14
Karnataka 0.18
Kerala 0.17
Madhya Pradesh 0.21
Maharashtra 0.16
Odisha 0.70
Punjab 0.26
Rajasthan 0.14
Tamil Nadu 0.21
Uttar Pradesh 0.11
West Bengal 0.07
This procedure considers the
various factors which together determine an indicator (such as the overall variation in
prices), and assigns to each factor the average marginal contribution of each factor. The
technique ensures that the decomposition is always exact and that the factors are
treated symmetrically. One important time invariant location fixed factor that we’ll explicitly consider in
this paper is the spatial location of mandis. As already discussed there has been
insignificant mandi construction in our period of study. We look at how this might affect
prices later in the paper. The unexplained variation could be due to location and time
varying factors like rural road construction, or procurement of grains by state agencies.
*****CONCLUTION*****
In thiS we have approached the
problem from an all-India perspective. Based on a large, unique dataset we find large
overall variation in prices among mandis. About 37% of this variation is because of time
invariant location specific factors and another 39% is because of time and location
varying factors.
In trying to understand the mechanisms that might explain these results we
focus on key government interventions in agriculture output markets:
Geographically selective intervention by the government in procurement of grains
and the market power that the mandis enjoy because of restrictions in the APMC acts.
We find that selective intervention by the government creates a 2-4% variation in prices depending
on crop.
We find that for paddy, government intervention improves terms of trade in
favor of the farmers as one would expect but in the case of wheat it goes the other way
round.
A reason could be that procurement results in lower-grade varieties (or distinct varieties) being
sold in mandis and thus government intervention might depress the market price.
We also find that farmers sell their produce at up to 5% lower prices in
geographically isolated mandis which enjoy market power because they face little
competition, compared to areas where mandis enjoy little market poweR.
****REFERENCE****
http://www.ncaer.org/events/ipf-2016/IPF-2016-Paper-Chatterjee-Kapur.pdf
Price data from Agmarknet http://agmarknet.dac.gov.in/
https://www.insightsonindia.com/wp-content/uploads/2013/08/agricultural-prices-and-markets-state-of-india-agricul
ture-report.pdf