Analysis of agricultural crops price fluctuation

Abstract

The objective of this project is to study ‘the cobweb effect’ in agricultural products. Based on this effect we hypothesized that farmers expect price for their products based on their information of previous prices. Due to the recency effect farmers consider current market price as a basis while making crop selection decision. The period which is required for the harvest would match with the delay in the response of the supply in the market and subsequent price changes. Using regression analysis, we tried to identify the correlation between past prices and arrival. While performing this regression the efforts were focused on identifying the time range for which the prices would affect the most on arrival. Four crops namely Tomato, Onion, Arahar, Soybean were chosen for the study. The selection was done considering the past behavior of commodities prices. These commodities showed higher level of fluctuation. Two of these crops are perishables and others can be stored, this would help get rid of externalities involved in the behavior.