Experiment -2: Study of relationship between market arrivals and prices of some

selected commodities

Definition of Time Series

When we observe numerical data at different points of time, the set of observations is known
as time series. For example, if we observe production, sales, population, imports, exports etc.
at different points of time, say over the last 5 or more years, the set of observations formed
shall constitute time series.

1. A time series is a set of statistical observations arranged in chronological order

2. When quantitative data are arranged in the order of the occurrence the resulting statistical
series is called a time series.

There are four types of components or elements of time series

1. Secular trend

2. Seasonal variations

3. Cyclical variations

4. Irregular variations

Seasonal variations

Price have to play an important role in economic planning. Price determine not only what
should be produced, but how much should be produced and their distribution. The wide
fluctuation in prices affects the grower‟s capacity for increasing production. These
fluctuations in the prices of agricultural products are the greatest hurdle in the way of
agricultural development as they bring ruin to many. Besides, annual variations in
productions and low prices elasticity of demand, another contributory factor to the instability
of farm prices are the seasonality in agricultural production.

It is therefore, necessary to study the farm prices, which form an essential requirement for
policy formulation

On the bases of price studies the cultivators can make decisions for proper allocation, of the
crops areas by anticipating future prices based on the prices which prevailed in the past. From
the time series data on arrivals and prices of pulses we can examine the extent and nature of
seasonal fluctuations in arrivals and prices.

Measurement of Seasonal variations

Most of the phenomenon in economics and business show seasonal pattern. When the data
are expressed annually, there is no seasonal variation. However, monthly or quarterly data
frequently exhibit strong seasonal movements.
There are many techniques available for computing an index of seasonal variations. The
following are some of the methods more popularly used for measuring seasonal variations

1. Ratio to monthly averages / method of simple averages (weekly / monthly / quarterly)

2. Ratio to 12 months moving average method

3. Ratio to Trend method

4. Link relative method

Exercise 1 : Collect the daily data of price of an agricultural commodity and plot
it on the graph.

Experiment 3: Computation of marketable and marketed surplus of important

commodities

Producers surplus

It is the quantity of produce which is or can be, made available by the farmers to the non-
farm population. Producers surplus is of two types

1) Marketable surplus
Marketable surplus is the residual left with the producer-farmer after meeting his
requirement for family consumption, farm needs, for seed and feed for cattle, payment
to Labour in kind, payment to artisans-carpenter, blacksmith, potter and mechanic,
payment to land lord as rent and social and religious payments in kind. This may be
expressed as follows
MS = P – C
Where,
MS = Marketable surplus
P = Total productions
C = Total requirement (family consumption) Farm needs, payment to labour, artisans,
landlord, and payment for social and religious work.
2) Marketed surplus
Marketed surplus is that quantity of the produce which the producer- farmer actually
sells in the marketed irrespective of his requirements for family consumption, farm
needs and other payments
The marketed surplus may be more, less or equal to the marketable surplus depending
upon the condition of farmer and type of crop. The relationship between the two terms
may be stated as follows
 Condition 1 : The marketed surplus is more than the marketable surplus when the
farmer retains a smaller quantity of the crop than his actual requirements for family
and farm needs. This is true especially for small and marginal farmers, whose need for
cash is more pressing and immediate. This situation of selling more than the
marketable surplus is termed as distress or forced sale. Such farmers generally buy the
produce from the market in a later period to meet their family and/or farm
requirements. The quantity of distress sale increases with the fall in the price of the
product. A lower price means that a larger quantity will be sold to meet some fixed
cash requirements.

Condition 2 : The marketed surplus is less than the marketable surplus when the
farmers retain some of the surplus produce. This situation holds true under the
following conditions.

a. Large farmers generally sell less than the marketable surplus because of their better
retention capacity. They retain extra produce in the hope that they would get a higher
price in the later period. Sometimes, farmers retain the produce even up to the next
production season.
b. Farmers may substitute one crop for another crop either for family consumption
purpose consumption purpose or for feeding their livestock because of the variation in
prices. With the fall in the price of the crop relatives to a competing crop, the farmers
may consume more of the first and less of the second crop.

Condition 3 : The marketed surplus may be equal to the marketable surplus when the
farmers neither retain more nor less than his requirement. This hold true for perishable
commodities and of the average farmer.
Estimation of marketable and marketed surplus
In India production activity is carried out by millions of farmers which are spatially
scattered, the estimate of marketable / marketed surplus of agricultural products at the
national level is not easy especially of the food grains and other food items such as
milk which are consumed by the producing families also.
Estimation of marketed and marketable surplus at the level of individual farmer is
easy

Exercise 1: A farmer has cultivated a crop in 4 Hectare. He received a yield of 20

Qtl/Ha. Market price of produce is Rs. 1000/Qtl. He needs 1 Quintals of
produce for seed for next sowing season, 10 Quintals for payment to hired
labor and 5 Quintals for own household consumption. Due to some urgent
requirement of money he sold 3 Quintals more than the marketable
surplus. Calculate marketable surplus, marketed surplus and producer’s
surplus.
Exercise 2: A farmer has planted Tomato in 1 Hectare area and obtained a yield of 25
tonnes per Ha. He sold 1000 kg to Arhatiya in nearby market at the rate of
Rs. 20/kg. He retained 50 kgs for own consumption and 200 kgs for their
relatives and 100 kgs for payment to hired labor and remaining to a
Ketchup factory at the rate of Rs. 30/Kg. Work out the marketable and
marketed surplus and producer’s surplus of the farmer.