An Analysis of the Price Behaviour of Agricultural Commodities in India

Abstract

Volatility in agricultural commodity prices assumes a lot of significance since its associated uncertainty is one of the major factors affecting the income security of producers and traders. The study aims to investigate the fluctuations and instability of the two crops, paddy and wheat, in the states of India. It has estimated instability in prices over the years (2006–2023) for paddy and wheat for the top three producing states by using coefficient of variation (CV), Cuddy-Della Valle index and Coppock’s index. Then it estimates volatility by generalized autoregressive conditional heteroskedasticity (GARCH) framework. It is observed that the average standard deviation of prices across mandis for paddy in a given month is 0.18 and for wheat it is 0.22. Both for paddy and wheat Punjab has the maximum instability among the three states if we consider CV and Coppock’s index. But if we consider the Cuddy-Della Valle index, Madhya Pradesh has the maximum instability for wheat. The noticed unpredictability in the price series of paddy revealed that the value of ARCH (α) has significant term and value of GARCH (β) was also significant for all the price series. The volatility (α + β) was quite persistent of the order of 0.985 in case of Uttar Pradesh. In case of wheat Punjab has the maximum value 0.95 signifying explosiveness. In case of wheat Punjab has the maximum value 0.95 signifying explosiveness.

Citation

Das, D. and Mukhopadhyay, D. (2024), "An Analysis of the Price Behaviour of Agricultural Commodities in India", Das, R.C. (Ed.) Sustainable Agricultural Practices: Economic and Environmental Implications, Emerald Publishing Limited, Leeds, pp. 43-55. https://doi.org/10.1108/978-1-83608-336-820241004