Price dynamics in Indian wholesale wheat markets: Insights and implications

2004

This paper examines the issue of volatility of agricultural prices, with regard to the possibility of transmission of international price volatility to domestic markets. It attempts to measure the degree of price instability of important agricultural commodities in major domestic and international markets, compares the patterns of variability in the two, and looks at the implications for Indian producers and consumers

Government policy is playing an important role for sustainable agriculture growth. The price fluctuation pattern is as different as it has assumed generally. The widespread hunger established in many nations of the world is not due to the non-availability of food in the market but is due to inflation in food crops. So inflation affects purchasing power of the society of rural as well as urban areas. Wholesale prices index based study of food grains, wheat, rice and cereals of every month of last ten year analyzed that growth rate of price index of food grains, wheat, rice and cereals is much higher in the last quarter of the year. Growth rate of price index of food grains, wheat, rice and cereals is much higher in the last quarter of the year. Food grains price index growth rate highest in the month of December and lowest in the month of June. The Growth rate of price index in wheat is highest in November and lowest in March. The growth rate of rice is highest is the month of December and at its lowest during the months of June and July. The growth rate of cereals price index is highest in the month of November and at its lowest in the month during April to August.

Journal of Agricultural Science and Technology, 2019

Uncertainty in staple food prices places the economy under jeopardy if not managed coherently and markets are not integrated. An attempt was made to analyze the wheat price behavior and extent of integration across selected wholesale and retail markets in India sourcing monthly data from FAO (July 2000-June 2016). Findings indicated that the price in wholesale and retail markets as well as its divergence was lowest in Patna, implying a major production and consumption zone, and highest in Chennai, indicating a negligible production. Monthly price indices exhibited a clear-cut seasonality linking with the arrivals of post-crop harvest. Extent of price integration was examined using Johansen's approach to know whether markets share a linear deterministic trend followed by testing the Law Of One Price (LOOP). The maximum likelihood test indicated a strong integration in different combinations of markets with some market pairs showing unidirectional-causality, while the rest exhibiting either bidirectional-causality or no-causality. Barring Patna, Delhi, and Mumbai's retail and wholesale markets, the rest of the market combinations did not confirm the LOOP. The study advocates rational allocation of resources based on the extent of price integration and reducing the market distortion for improving the overall performance.

Though India adopted Policy of Economic Liberalisation in 1991, the agrarian sector was liberalized in 2004 when more than 400 agrarian commodities were exposed to global competition. Food price volatility became perennial problem after that. “Price fluctuations are a common feature of well-functioning agricultural product markets. But when these become large and unexpected – volatile – they can have a negative impact on the food security of consumers, farmers and entire countries. Since 2007, world markets have seen a series of dramatic swings in commodity prices. Food prices reached their highest levels for 30 years during the summer of 2008, collapsing the following winter, before rapidly rising again in the months that followed. Food prices today remain high, and are expected to remain volatile.”

Uncertain price movement in staple food commodities puts agrarian economies at risk if not monitored and managed consistently. Hence, an attempt has been made to analyze the price behavior and integration across major wholesale and retail markets for rice and wheat in India. Monthly data (July 2000 to June 2022) on prices viz., wholesale and retail were sourced from the Food and Agriculture Organization and analyzed using growth rate, instability index, seasonal price index, Johansen’s test on cointegration, Granger causality test, and impulse response function. Findings indicated strong evidence of price dynamics in the selected markets in terms of spatial and temporal variation, clear-cut seasonality linking to production, and price divergence between wholesale and retail markets. Johansen’s test indicated a strong integration between wholesale and retail markets exhibiting unidirectional-, bidirectional- and no-causality. Impulse response analysis revealed that the selected wheat...

2014

The present study highlights the context of wheat futures trading in India and examines its performance in terms of price transmission between Indian and US futures, domestic futures and spot markets, and, extent of integration between those markets. Role of wheat futures in price stabilisation/volatility reduction and its relevance to the small scale production system in the country have also been examined. Evidence of unit root in price series and a strong integration between spot and futures markets in India were found through Johansen’s test. Despite the integration of domestic markets, US and Indian futures are not integrated in the long-run. Application of Generalized auto-regressive conditional heteroscedasticity (GARCH) model indicated a high degree of volatility in spot prices right from inception of trading and revival of trading, however it was low during the ban period. This showed that the function of price stabilisation of futures trading has not been fulfilled. Despit...

Journal of Economic Cooperation and Development, 2017

Rapid price increase in food/agricultural commodities has gained attention after the “Price Spike” in 2007-2008. Again the same trend was observed in 2010 due to which it increases concern about the volatility in commodity prices. This study aims to investigate the factor affecting volatility of selected food and agricultural commodities. Monthly data from April 1983 to April 2013 is taken for analysis. GARCH (1, 1), GJR (1, 1) and EGARCH (1, 1) models are estimated for all the variables using normal and Student-t distribution. The results conclude that the mean and the volatility effect of exchange rate and interest rate are transmitted across all the selected commodities. Volatility in the price of fertilizer is only transmitted on the volatility of sunflower oil. Later, analysis shows that past price has significant impact on current prices for all the commodities except for soybean oil, sunflower oil and cotton.

Indian Journal of Economics and Development, 2013

Globalization and trade liberalization have exposed agricultural sector of many developing countries to sudden disturbances, caused not just by demand-supply conditions within their economies but also by volatility in global commodity prices, exchange rate and surge in imports. This paper evaluates the magnitude of sensitivity of Indian agriculture to these factors, and explores policy options that may neutralize their adverse effects, maintain price incentives and stability. The analysis is undertaken for one important tradable commodity viz. wheat by applying a structural econometric model, separately under the exportable and importable scenarios from 1980-81 to 2009-10. Findings reveal wheat to be increasingly driven by an incentive structure based on its linkages with world price, exchange rate and other factors. Counterfactual simulation experiments indicate that due to trade and sector-specific policies, wheat price and output tend to be much more resilient to fluctuations in international price and other shocks compared to its exports and imports.

2020

The work is devoted to the methodology for predicting the variability of price conditions that determine producer operation in agriculture. There were investigated the series of producer price indices by crop and livestock industries. Additionally, the dynamics of the food price index volatility was examined. The main objective of the study was to form, according to available data, models of generalized autoregressive conditional heteroscedasticity-GARCH. The analysis was based on the data from index growths, hyper-parameters and model specifications were selected by information criteria. A preliminary exploratory analysis of time series was carried out, an intermediate simulation of average values was made using SARIMAX algorithms. Selected models were used to formulate the forecast for the next period, including twelve months of 2020. Conclusions are drawn from the data. Difficulties in further use of predictive models and implementation of the received forecasts are indicated. They are primarily related to the growing uncertainty in the world and domestic economies.

2003

The price volatility of agricultural commodities assumes critical importance in the context of the ongoing debate regarding agricultural trade liberalisation in India. The arguments against agricultural trade liberalisation are often based on the issue of larger volatility in international markets. In order to make informed judgements about this crucial aspect of agriculture, which has implications for the entire economy, it is essential to study the volatility patterns in international and domestic markets in a comparative framework. The present study by CSC Sekhar is an attempt in this direction. The study, using monthly price data, finds little evidence to show that the international agricultural prices are uniformly more variable than the domestic prices. The study shows that the intra-year variability is higher in domestic markets while the inter-year variability is higher in the international markets. The current bound rates ofduty are generally found adequate in this study ex...

Munich Personal RePEc Archive, 2014

Volatility in agricultural commodity prices is a priority policy agenda in the ongoing debate on commodity markets vis-à-vis food inflation. The extent of volatility in food commodities has been examined by comparing different indicators. In comparison to previous two decades, food prices are volatile globally and more in rice and wheat particularly during the decade since 2000. In contrast, the extent of price volatility in absolute and relative terms for India elucidated that rice and wheat are less volatile. Plausible drivers of price volatility have been empirically verified based on the arguments in economic forums besides elaborating its impact on economy. The study also highlights the various existing price stabilisation measures and concludes with a pragmatic approach of policy interventions to encounter the rising food prices.

Agriculture is the backbone of India with a sizeable population depend on it for employment and livelihood. Therefore, the effective functioning of markets of agricultural produce is important for cultivators, other producers, policy makers, etc. The markets are expected to realize a fair price for farmers, traders, which are often a serious issue due to seasonality, lack of storage facilities, yield differences across different geographical regions in our country. The abundance during harvest season, with damped price and differences in yield and quality, frequent government interference with administered prices on select commodities is resulting in a complex marketing environment for agricultural produce. This environment throws the farmers and traders to price uncertainty at every harvest season. Against this background, an attempt is made in this paper to provide a description on Indian commodities markets with a brief profile of agriculture commodities selected for detailed study is presented. Further, it also analysed the price volatility during the period of study. Finally, it came with suggestions for the providing a fair price for the agricultural products to the cultivators by way of regulating these futures markets.

Each time prices of grain, pulses, vegetables and milk shoot up, either foods or drought are blamed, while at a grass root level farmers report bumper crop. The Corporate Houses buy vegetables-tomatoes, potatoes, onions and pulses at through away price. International pressure through World Trade Organisation and General Agreement on Trade and Tariff pressure the poor countries not to give farm subsidies in terms of support price and let market reign supreme without accepting the fact that there is no perfect competition.

JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org. Abstract The paper evaluates government price policy in controlling food price variability using monthly indices of wholesale prices of wheat, rice and coarse-grains. Annual price analysis showed that inter-year variability in annual nominal prices declined for both wheat and rice in the nineties as compared to eighties. The variability declined for the real price of rice also but the real price of wheat and nominal and real prices of coarse grains displayed increased variability during the 1990s in comparison to 1980s. Analysis of monthly prices revealed that intra-year variability shot up for wheat while it came down for rice during the nineties in comparison to eighties. The rise in price wedge in wheat and in course cereals during the nineties was caused by rise in seasonally, trend and cyclical-irregular factors. In the case of rice, on the other hand, the contribution of these three factors was in different directions. The regression results indicated that the government actions of buying and selling were more successful in reducing the seasonal range in wholesale prices in the case of rice as compared to wheat. Variations in production of coarse grains also significantly caused seasonal hike in prices of wheat and rice but they were more close substitutes to wheat than to rice. Any deviation of cereals' availability from long term trend led to higher government intervention in terms of procurement and disbursement of wheat and rice. Similarly, deviations in own output of wheat and rice also led to higher intervention by the government in these two commodities. Deviations in rainfall, yield and wholesale prices were the significant variables, which lent instability into the production of wheat and rice.

Currently change of price in agricultural products is a global problem. Price volatility in markets of major cereals crops remains high in the Ethiopia (Rashid, 2010). However, agricultural products market policies in this country have undergone dramatic changes over the past several years, the desirable outcome of any policy measure or other system of intervention to prevent the markets from going into market price volatility, however, remained very unsatisfactory. This paper provides a critical assessment of the volatility of price of some selected agricultural products in Ethiopia. The main aim of this paper is to fit an appropriate model that best describes the log-returns price volatility of some selected agricultural products in Ethiopia and to forcast price for some future time. The appropriate methodology is the Autorgressive Conditional Heteroskedasticity (ARCH) and Generalized ARCH (GARCH) models. Result suggest that GARCH( 1,1), GARCH( 1,2 ) and GARCH(2,1 ) models are the most appropriate fitted models to use one has to evaluate the volatility of the log-returns of price of cereal, pulse and oil crops respectively. Price volatility is persistent in all three categories (cereal, pulse and oil crops) of selected agricultural goods. This shows that past volatility is important in forcasting future volatility.