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Prices Of Agricultural Products: Cost Of Fundamental Products

Agricultural products are the fundamental or the basic need of an individual that are completely irreplaceable. Whether we are talking about the consumers or the farmers, they are totally dependent on each other. Without food, we cannot imagine our life. Food is one of the basic essentials that we need in order to survive. They reach us as the final products, but at the initial stage, the price fixation system is different. Prices of agricultural products are fixed in a different manner. To understand this in detail, keep reading further.

Prices Of Agricultural Products

The prices of agricultural commodities generally fluctuate according to the growth of crop in that particular season. For instance, there is heavy rain in a certain year and the crops are destroyed, in such case the prices of commodities would reduce. Agricultural commodity prices are principally determined by domestic demand and supply factors influenced by domestic price policy. The price transmission and the final consumer prices are also influenced by the nature of markets facing the agricultural commodities and imperfections. Countries like India meet the bulk of its large food demand through domestic production.

Behaviour Of Prices Of Agricultural Products.

Prices of agricultural products, particularly of foodgrains and oilseeds, play an important role in the national economy of India. As India is an agricultural based economy, thus the prices have a lot of impact on the economy. Variations in prices of agricultural commodities cause big problems in Indian agriculture because of the dependence of production on monsoons. Prices of agricultural products exhibit spatial and temporal price fluctuations which include seasonal, annual and long-term fluctuations.

Fluctuations in retail prices have been distinct in different markets depending on the local demand and supply conditions. Diversity in tastes and species used over the centres also pose difficulties for comparison of retail costs. For instance, there is higher demand for spices in India whereas crops like maize have a higher demand in the united states of America. 

Inflation In The Prices Of Agricultural Products

The rise in prices of agricultural products has become a concern for policymakers worldwide. These peaks have an influence on domestic costs directly or indirectly. This occurs largely due to inadequate supply response to increasing demand, intensified by various other logistic and market-related constraints. Inflation affects the poor and adversely impacts the goal of poverty eradication. 

Increasing productivity, production and reducing market imperfections are some of the solutions to reduce the increasing inflation. Inflation leads to the increase in the prices of the agricultural products, making them costly.  The pandemic situation in the country lead to a large amount of reduction in the price of agricultural products and both producers as well as manufacturers had to bear a huge amount of loss. Even though the demand for these products had increased the supply chain had completely stopped working leading to a great food crisis around the world.

Market Reforms

The increasing trend of agricultural production has brought in its wake, new challenges in terms of finding markets.. Agricultural commodity markets commonly function under the normal compulsions of demand and supply. The prime concern of the government is to reform the existing agricultural laws and create new and well developed market infrastructures.

To achieve an efficient system of buying and selling of agricultural commodities, most of the governments have enacted several legislations to provide for the regulation of the Agricultural Produce Markets. The basic objective in the setting up of a network of physical markets has been to ensure reasonable gains to the farmers by creating a market environment where there is a fair balance between market forces of demand and supply, transparency in transactions and strong laws to regulate the market. Amidst growing agricultural production, the amount of controlled markets has also been rising.

Contribution Of Agriculture

From the beginning only, agriculture has a pivotal role to play in the development of the Indian economy. India being an agricultural based economy, most of the people are into this agriculture.

  1. For a developing country like India, the prices of agricultural products and agriculture itself plays an important role, as it is directly associated with the living standards of most of the rural population. Agriculture is a major occupation of the country and a large number of people depend on agriculture for their livelihood. 
  2. For all those people who are living in the villages or belong to the rural sector of the economy, agriculture is a major source of employment for them. We can also say that it is the major source of income for those people. If they do not earn anything, they tend to move to the urban areas which leads to overpopulation.
  3. The major share of income that the government of India earns is from the agriculture sector only. Thus it also contributes a lot in the development of the economy too. 

Therefore, we can say that the agricultural sector has a large part to play in the Indian economy. From every viewpoint it is really necessary.

Impact Of The Prices Of Agricultural Products

The prices of various agricultural products have a direct impact on the working of an economy and on any individual’s life too. It is really difficult to sustain life without food. When the prices of any agricultural product increases, the demand for that particular product decreases leading to over abundance of that product. While on the other hand, when the prices decrease the demand for the particular product increases leading to shortage in supply. This even leads to the hoarding of that particular product and can even cause a lot of speculations in the market.  

Price policies play an important role in the development of agriculture. We can simply call them the pillars of the agricultural market. An important aspect of these policies 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 the sine qua non of building modern scientific agriculture. For more information related to this topic you can contact PL Global Impex Pte Ltd.

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