118 CHAPTER - VI PATTERN AND SEASONALITY BEHAVIOUR OF ARRIVALS AND PRICES Introduction The behaviour of prices (in terms of price level, trend and fluctuation) is the most important factor in determining the competitiveness of a commodity at the domestic and at international level, to draw inferences for future prices and to formulate long term strategy on trade (Chand, 2002). The instability in the prices of agricultural commodities has been one of the major factors affecting the income level of farmers as well as pace of agricultural production. This instability in prices of agricultural commodities is influenced by a number of factors such as annual variation in production, low price elasticity of demand and seasonality of agricultural production (Kahlo and Tyagi, 1989). Due to these factors the producer has no control over price which leads to price uncertainty. Therefore, the analysis of price behaviour would be useful to take decisions like, “when to grow and when to sell” on the part of farmer and “when, where, how to store and dispose of the produce” on the part of businessman. Market price information with respect to fruits and vegetables is important for the orchard owners to make decision regarding choice of market and time and to maximize returns from the sale of their produce.
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118
CHAPTER - VI
PATTERN AND SEASONALITY BEHAVIOUR OF
ARRIVALS AND PRICES
Introduction
The behaviour of prices (in terms of price level, trend and
fluctuation) is the most important factor in determining the
competitiveness of a commodity at the domestic and at international
level, to draw inferences for future prices and to formulate long term
strategy on trade (Chand, 2002). The instability in the prices of
agricultural commodities has been one of the major factors affecting the
income level of farmers as well as pace of agricultural production. This
instability in prices of agricultural commodities is influenced by a
number of factors such as annual variation in production, low price
elasticity of demand and seasonality of agricultural production (Kahlo
and Tyagi, 1989). Due to these factors the producer has no control over
price which leads to price uncertainty. Therefore, the analysis of price
behaviour would be useful to take decisions like, “when to grow and
when to sell” on the part of farmer and “when, where, how to store and
dispose of the produce” on the part of businessman.
Market price information with respect to fruits and vegetables is
important for the orchard owners to make decision regarding choice of
market and time and to maximize returns from the sale of their produce.
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A well-informed orchardist can safeguard his interests better than the ill
informed one against the moves of the buyers to gain advantage in the
transaction. The increase in the level of production and marketable
surplus of fruits and vegetables has created a situation in which most of
the farmers have been confronted with a glut in the market and
consequent fall in prices. It is therefore, necessary to study farm prices.
On the basis of price studies, the farmers can make decisions for proper
allocation of the crop areas by anticipating future prices based on the
lagged prices. Fruits and vegetables are produced seasonally, but the
market requires these products throughout the year. For many decades,
the problem of matching the product availability with consumer demand
is solved in two ways: (i) selling fresh products during harvest and
shortly after harvest; and (ii) processing the rest of the produce to meet
the demand during the rest of the year. As technology improved and
consumer’s income increased, it has become possible to provide fresh
produce year-round. This chapter surveys crop seasons and analyzes
seasonality of market arrivals and prices of fruits (guava, ber and mango)
and vegetables (potato, tomato and peas).
Issues
From supply side, market arrivals represent the ultimate
destination of the producer’s activity with which they are generally
associated. Are market arrivals of fruits and vegetables homogeneously
distributed throughout the year like the supply of industrial products? If
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not, what is the nature of their month-wise distribution? How do
product prices respond to month-wise arrivals and vice-versa? What is
the role of market expectations in directing the market supplies? Is the
existence of negative relation between market arrivals and prices
independent of market expectations? This chapter is devoted to the
examination of these types of related questions.
Crop Seasons
Different fruits and vegetables are grown in different seasons and
their harvesting time is also different. The proportion of the crop
marketed in the immediate post-harvest period has frequently been used
as an index of the holding power of the cultivator, on the assumption
that higher the holding power of the cultivator, the lower the proportion
marketed in the immediate post-harvest months, when the market price
is low. In this section, the sown and harvesting periods of selected fruit
and vegetable crops are discussed (Table 6.1).
Guava: Guava has two marketing seasons. The winter season is between
December–March and summer season is between August-November. The
arrivals of winter guava are less as compared to summer season. Small
cultivators are observed to have marketed their surplus earlier in the
season probably because of relatively low staying power.
Ber: Ber arrivals are harvested from the end of December to mid March.
The months of the least activity are August-November.
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Mango: Market arrivals of mango increase in February, remain particular
heavy in May-July and taper off in August. Approximately, 95 per cent of
the arrivals are brought to the market between April-July.
Table 6.1 Peak, Mid and Lean Periods of different Fruits and Vegetables
Source: Calculated using month-wise arrival data obtained from Market Committee of Patiala. Note: Figures in parentheses are the percentage of total arrivals
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In the case of vegetables, (Table 6.9) as expected during the year
2004-05, for potato, the maximum price was observed in the month of
August, i.e., Rs.463 per quintal when arrivals were only 13543 quintals
whereas during the year 2009-10, the price was maximum in September
month, i.e., Rs.1132 per quintal when the arrivals were the least, i.e.,
24355 quintals. For tomato, during the year 2004-05, the maximum
price was observed in September month, i.e., Rs.1198 per quintal when
the arrivals were lowest, i.e., 2954 quintals. During the year 2009-10,
the price was at its peak level in November (Rs.1811 per quintal) and the
arrivals were 4297 quintals only. Lastly, in the case of peas, the
maximum price was noticed in the month of October (Rs.1916 per
quintal) when arrivals were only 1002 quintals during the year 2004-05.
But, during the year 2009-10, the price was at its peak in the month of
November, i.e., Rs.4326 per quintal when the arrivals were only 2196
quintals.
Like arrivals, prices also depict seasonality. If it is assumed that
arrivals depict supply and prices depict demand, then there should be a
negative correlation between them. If the above proposition is followed,
during the peak period where there is concentration of arrivals, prices
should be low and during the lean months when arrivals are scarce,
prices should be high. Our seasonality index of prices corroborates the
fact. It indicates the maximum price during the lean months and the
minimum price during the peak months. In the case of fruit crops,
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(Table 6.10) as far as guava is concerned, the index of monthly prices
was low in the month of August (76.1) and its peak level (116.5) was in
the month of January.
Table 6.10 Month-wise Index of Seasonal Variations of Fruits Prices in Patiala
District Markets, 2004-10
Month Guava Ber Mango
January 116.5 152.9 168.6
February 113.2 135.9 156.5
March 116.4 107.6 133.2
April 110.9 140.2 89.9
May 104.5 127.2 69.4
June 79.9 - 51.8
July 90.5 - 65.1
August 76.1 - 81.2
September 82.6 - 108.6
October 105.7 189.7 132.2
November 97.1 180.4 150.1
December 111.7 172.2 -
Source: Calculated using month-wise price data obtained from Market
Committee of Patiala.
The price movement was characterized as less than average from
June to September when the price index was less than 100. For the rest
of year, except November, the index was higher than 100. In the case of
ber, the index of monthly prices was low in March month (107.6) and its
peak was in the month of October, i.e., 189.7. For mango, the index of
monthly prices was low in June month (51.8) and its peak level (168.6)
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was in the month of January. The price movement was characterized as
less than average from April to August when the price index was less
than 100. For the rest of year, the index was higher than 100. The
producers can use such a seasonal index of fruit crops to market their
produce.
In the case of vegetable crops (Table 6.11), firstly for potato, its
peak reached in the month of September at 128.5 and its lowest level
reached in the month of February at 62.1.
Table 6.11 Month-wise Index of Seasonal Variations of Vegetable Crop Prices in
Patiala District Markets, 2004-10
Month Potato Tomato Peas
January 71.6 84.7 64.3
February 62.1 80.3 52.9
March 73.5 59.7 47.2
April 90.8 75.7 102.2
May 101.9 77.6 99.9
June 106.3 86.1 135.0
July 113.7 107.5 125.2
August 119.9 140.7 123.7
September 128.5 118.5 150.9
October 127.8 125.7 142.3
November 122.8 139.5 92.7
December 87.5 98.4 63.1
Source: Calculated using month-wise price data obtained from Market Committee of Patiala.
138
The price movement was characterized as less than average from
December to April when the price index was less than 100. For the rest
of year, the index was higher than 100. In the case of tomato, its peak
reached in the month of August at 140.7 and its lowest level reached in
the month of March at 59.7. The price movement was characterized as
less than average from January to June when the price index was less
than 100. For the rest of year, except for December, the index was
higher than 100. For peas, the index of monthly prices was low during
March month (47.2) and its peak level (150.9) was in the month of
September. The price movement was characterized as less than average
from December to March when the price index was less than 100. For
the rest of year, except for 1-2 months, the index was higher than 100.
Relationship between Production, Arrivals and Prices
There exists a dynamic relation between production, supply
(arrivals) and prices. A rising trend in prices may result in higher
production levels and in turn higher supplies in the future. But this
assumption may hold true for industrial sector and generally fails to hold
good in the case of agricultural products, the latter being, generally,
seasonal in nature and not produced throughout the year. The nature of
fruit and vegetable production reflects wide fluctuations in prices, supply
(arrivals) and demand throughout the year. Therefore, in the short run
analysis, it is not possible to relate production, market arrivals and
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prices. In other words, only the relationship between market arrivals
and prices can be examined.
As already discussed, that arrivals are at peak when prices are low
and vice-versa, i.e., a negative relationship between prices and market
arrivals is indicated. Correlation analysis was adopted to verify the
relationship between month-wise prices and corresponding market
arrivals for each of the years between 2004-05 and 2009-10
(Table 6.12).
Table 6.12 Correlation Coefficients of Monthly Arrivals and Prices of Fruits and
Vegetables in Patiala District Markets, 2004-10
Year Fruits Vegetables
Guava Ber Mango Potato Tomato Peas
2004-05 -0.34 -0.50 -0.60 -0.59 -0.89 -0.66
2005-06 -0.74 -0.97 -0.74 -0.32 -0.42 -0.63
2006-07 -0.39 -0.87 -0.74 -0.71 -0.73 -0.57
2007-08 -0.05 -0.81 -0.77 -0.61 -0.58 -0.73
2008-09 -0.60 -0.81 -0.71 -0.89 -0.74 -0.69
2009-10 -0.51 -0.79 -0.78 -0.63 -0.58 -0.67
Source: Calculated using month-wise arrival and price data obtained
from Market committee of Patiala.
The negative values of the correlation coefficients computed
between the month-wise arrivals and corresponding market prices
confirm the existence of inverse relationship between market arrivals and
prices. This is generally true for each of fruit and vegetable crops. The
reason for the existence of inverse relationship between market arrivals
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and prices is that the storage cost increases the cost of supplies and as a
result, there is a rise in the price as moving away from the harvest
period. The year-after-year existence of inverse relation between prices
and market arrivals implicitly assumes that prices are increasing over
time, i.e., there are positive price expectations. Thus, there prevails
inverse relationship between market arrivals and prices. These results
confirm our hypothesis.
Summing-up
From the analysis it has been found that the seasonal behaviour of
fruit and vegetable crops has created glut in the market during the post-
harvest season, which resulted in sharp fall in prices and affected the
producers adversely in Patiala district. It has also been found that the
major portion of the farmer’s produce was sold at the lower price in the
post-harvest period thereby lowering their incomes. The major reason is
the perishable nature of the produce and the non-availability of cold
stores and storage techniques. So, the government at the block and at
the district levels should develop cold storage facilities. Further,
emphasis should be given towards developing those varieties whose
ripening can be delayed which would streamline the supply of the
produce. Moreover, arrangements should be made for proper distribution
of the produce in different parts of the country or export to other
countries. The transportation of these perishables by providing
refrigerator van services to distant markets in the state and country and
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air lifting will go in long way to avoid glut in the market. This will avoid
slump in prices in the peak season and also helps to tap those potential
markets, where prices are generally higher. This will ensure
remunerative prices to the farmers for their produce.