Farming is truly something beyond an occupation. The vast majority of individuals are occupied with it. It requires a ton of difficult work and commitment. Consequently a rancher needs a right and fair cost for his yield. Ranch product costs are the idea that a large portion of individuals need to comprehend. Allow us to get it in more detail.
What Are Farm Commodity Prices?
Farm commodity prices are mainly defined by domestic demand and supply factors influenced by domestic price policy. The price transmission and the ultimate user prices are also impacted by the character of markets handling the agricultural commodities and imperfections. Countries like India meet the majority of its huge food demand through domestic production.
Performance of Farm Commodity Prices
Farm commodity prices, particularly of foodgrains and oilseeds, play an influential role in the national economy of India. They affect production decisiveness by the farmers and their incomes. Alterations in farm commodity prices cause big difficulties in Indian agriculture because of the dependency of production on monsoons. Farm commodity prices portray spatial and temporal price fluctuations which include seasonal, annual and long-term fluctuations.
Inconsistencies in retail prices have been distinct in different markets depending on the local demand and supply conditions. There is substantial variation in average prices in major cities and states. Heterogeneity in tastes and varieties used over the centers also pose difficulties for comparison of retail costs.
Farm Commodity Prices VS Inflation
The climb in farm commodity prices has become a concern for policymakers globally. These peaks have an impact on domestic costs directly or indirectly. This occurs extensively due to inadequate supply response to increasing demand, augmented by various other logistic and market-related constraints. Inflation affects the poor and adversely impacts the goal of poverty removal.
The enduring answer to price inflation lies in enhancing productivity, production and shrinking market imperfections.
Factors Affecting Farm Commodity Prices
There are numerous factors that affect the farm commodity prices at large. Read on further to understand them in more depth and detail.
1. Laws By The Governing Body
The rules and regulations made by the governing bodies or in simple terms by the government are really important for the farm commodity prices to operate freely. The prices work as per the laws only.On the basis of the policies made by the authority, one can fix the prices. Those who go out of that authority, they all have to face some consequences.
2. Exchange Rates
The prices of the commodities are ranked in the US dollars. Thus the movement of the dollars affects the prices of the commodities too. When the US dollar hikes up, the prices of the various commodities also increase a lot. This changes the equilibrium between the demand and supply.
3. Market Forces
The free forces i.e the demand and supply are the one that creates a lot of imbalance in the market. They never remain stable. Due to some or the other factors, they keep on changing. The prices are the ones that are most affected by this. Price and demand are having negative relationships. As the prices rise the demand falls, and on the other hand, demand rises when the prices fall. Thus there is no equilibrium between them.
4. Economical Growth
The overall growth and development of the economy affects the farm commodity prices directly. In other words, it is related to the purchasing power of the residents of the countries. If the residents of a country are rich, they will purchase more of the commodities. And on the other hand, if the residents will be having low purchasing power, they will purchase less commodities.
5. Overhead Expenses
In the farming process, a lot of overhead expenses are there. For example storage cost, transportation cost and many other things. Sometimes these overheads are more expensive. This affects the overall production process as well as the cost of the agricultural costs.
In case the expenses are more, it will lead to reduction in the supply of the agricultural products. More the shipping rates, more will be the costs involved, thus creating a kind of inflation.
Therefore, these are some of the factors that directly affect the farm commodity prices. Some of these factors can be controlled, while some of them cannot be controlled. Thus, one must invest carefully and wisely.
Reforms In the Market
The booming trend of agricultural production has brought in its wake, new challenges in terms of finding markets. Agricultural marketing reforms and the development of marketing infrastructure has therefore been a prime affair of governments. Agricultural commodity markets commonly function under the normal compulsions of demand and supply.
For delivering an efficient system of buying and selling of agricultural commodities, most of the governments have enacted numerous legislations to provide for the regulation of the Agricultural Produce Markets. The essential goal in the setting up of an organization of actual business sectors has been to guarantee sensible increases to the ranchers by establishing a market climate where there is a reasonable play of organic market powers, to control market rehearsals and to achieve straightforwardness in exchanges. Amidst growing agricultural production, the amount of controlled markets has also been rising.
It plays an influential role in the evolution of agriculture. It has been acknowledged as an insurance against the impulses of the market. An important aspect of these reforms is assuring to the farmers that his efforts to augment production through the adoption of improved technology would not become unremunerative through the price factor. Such policies are fundamental pillars of building advanced scientific agriculture.
The Bottom Line
Though there are some factors that can create a rift in the profits and you, there are a lot of reforms in the farm market that will help you grow and earn higher profits. For more information related to this topic, you can reach out to PL Global Impex Pte Ltd.