Thesis Presentation On

PRICE DISCOVERY OF SELECTED AGRO-

COMMODITIES IN COMMODITY MARKET

Presented By

DATKE RUPALI YASHWANTRAO

ADVISORY COMMITTEE

1. Dr. V. K. Khobarkar (Chairman)

2. Dr. N.V. Shende (Member)
3. Dr. A.S. Tingre (Member)
4. Prof. N.A. Chaube (Member)

Department of Agricultural Economics and

Statistics
Post Graduate Institute, Dr. PDKV, Akola.
 OBJECTIVES

 To examine the trends in arrival and

prices of selected agro-commodities.

 To examine the presence of volatility in

the prices of selected agro-commodities.

 To discover the future prices of selected

agro-commodities.
 METHODOLOGY
Source of data :

• Government publications
• The different government web-sites

Period and crop : The daily recorded data for the year 2002-
2009 on price and arrival is collected.

Major markets in Maharashtra for selected crops:

Amaravati
Akola,
Latur
Lasalgaon
Nashik
Jalna
Hinganghat
Karanja

Crop :
• Cotton
• Soybean
 METHODOLOGY
A) Trend analysis
Trend indicates an increase or decrease of prices over constant
time period.

The trend will be computed by fitting ordinary least square and

exponential function of kind.

A) Ordinary least Square

Y = a + bt
B) Exponential function
Y = abt
Where,
Y = is a price of a agro commodity
a = constant
t = is a time variable
b = Regression coefficient

The significance of coefficients will be tested by applying `t’

test.
 METHODOLOGY
B) Volatility analysis
To estimate the volatility in prices of major agro-commodities
ARCH i.e. (Autoregressive Condition Heteroscedasticity)
model will be fitted as follows.

Estimation of error term

Pt = a + bt + u
Where,
P = Price of commodities
a = Constant
b = Regression coefficient
t = Time (daily data)
u = residual term / error term
 METHODOLOGY
B) Volatitlity analysis

u2 = α + β u2 (t-1) + γ u2(t-2)
Where,
α = constant
β = Coefficient of first lag
= Coefficient of second lag
u2 (t-1) = lag value of u2 at time (t-1)
u2(t-2) = lag value of u2 at time (t-2)
___
Standard deviation (SD) = √ u2
 

SD
Volatility per annum = ------------------- x 100
(1 / √ n )
C) To discover the future prices the suitable ARMA and ARIMA
model is found suitable and it is used for fitting trends
 METHODOLOGY
C) To discover the future prices the ARIMA model is found
suitable and it is used for fitting trends

Y= Φ0 + Φ1Yt-1 + u + ω1ut-1 and integrated term

Y =Price
Yt-1 = Autoregressive Term of Price
ut-1 = Moving average term of price
 RESULTS AND DISCUSSION
Structure of Results presentation

A)Trends
Linear
Soybean
Cotton
Exponential
Soybean
Cotton

B)Volatility
Soybean
Cotton

C) Price Discover by ARIMA

Soybean
Cotton
 RESULTS AND DISCUSSION
Table.5.1Linear Trends in Arrivel and Prices of Soyabean crop
for Amravati and Akola Markets

Year Amravati Akola

Arrivals Prices Arrivals Prices
2002 0.610*** 0.528 1.280 1.682***
2003 2.497*** -1.632*** 1.469*** -0.981***
2004 1.166*** -1.620*** 0.539*** -1.684***
2005 2.324*** -1.302*** 0.400*** -0.774***
2006 3.994*** 0.760*** 0.606*** 0.535***
2007 4.154*** 2.600*** 1.175*** 1.689***
2008 2.204*** -3.165*** 1.668*** -3.030***
2009 0.385 -1.283*** -0.170 -0.861***
Note: *** significant at 1% **significant at 5% *significant at 10%
 RESULTS AND DISCUSSION
Table.5.2 Linear Trends in Arrivel and Prices of Soyabean crop
for Latur and Lasalgaon Markets

Year Latur Lasalgaon

Arrivals Prices Arrivals Prices
2002 - - 1.315** 3.750***
2003 0.156** -2.995*** 0.613*** -1.693***
2004 9.854*** -9.737*** 0.019** -5.708***
2005 1.510*** -0.923*** 1.530*** -0.00051***
2006 1.001*** 0.338*** 0.201** 0.900***
2007 1.010*** 1.502*** 0.143*** 2.283***
2008 1.376*** -1.338*** -2.125*** 22.969**
2009 -0.540*** -0.494** -0.311*** -8.035***
 RESULTS AND DISCUSSION
Table.5 .3 Linear trends in Arrivel and Prices of Cotton crop for
Nashik and Jalna Markets

Year Nashik Jalna

Arrivals Prices Arrivals Prices
2002 - - - -
2003 10.931*** -8.749*** 4.846*** 5.227***
2004 -5.234*** -16.560*** -4.654** 0.607
2005 7.099*** -1.910** 8.885*** 27.261***
2006 2.254** 0.881 1.230 -0.463
2007 -2.687** 4.383*** 3.605*** 6.666***
2008 7.534*** 3.900*** 3.918*** 4.096***
2009 -9.393*** -0.006*** -18.116*** 13.3***
 RESULTS AND DISCUSSION
Table.5.4 Linear Trends in Arrivel and Prices of Cotton crop for
Hinganghat and Karanja Markets

Year Hinganghat Karanja

Arrivals Prices Arrivals Prices
2002 - - - -
2003 -8.406*** -59.767*** 0.0027** 0.000864***
2004 0.128*** -0.028*** - -
2005 - - 0.0215*** -0.0011***
2006 -0.212*** -0.007*** -0.007*** 0.000124
2007 0.006* 0.00095*** 0.0147*** 0.000299
2008 -0.002* 0.000711*** -0.0137*** 0.000165
2009 0.008*** 0.000957*** 0.0068** 0.001675***
 RESULTS AND DISCUSSION
Table.5.5 Exponential Trends in Arrivel and Prices of Soyabean
crop for Amravati and Akola Markets

Year Amravati Akola

Arrivals Prices Arrivals Prices
2002 1.095*** 1.0005 1.0776*** 1.0014*
2003 1.0287*** 0.998*** 3.213*** 0.999***
2004 1.0023 0.998*** 1.0071*** 0.998***
2005 1.0163*** 0.9988*** 1.0026** 0.999***
2006 1.0100*** 1.0006*** 1.004** 1.0004***
2007 0.993 1.0016*** 1.007*** 1.0010***
2008 1.011*** 0.9982*** 1.016*** 0.000932***
2009 0.983*** 0.9993*** 0.992*** 0.9995***
 RESULTS AND DISCUSSION
Table.5.6 Exponential Trends in Arrivel and Prices of Soyabean
crop for Latur and Lasalgaon Markets

Year Latur Lasalgaon

Arrivals Prices Arrivals Prices
2002 -- - 5624.19*** 1.0033***
2003 0.9906*** 0.9976*** 1.0120*** 0.9987***
2004 1.084*** 0.9925*** 1.0224*** 0.9958***
2005 1.0106*** 0.9991*** 1.0070*** 0.9988***
2006 1.0032** 1.00029*** 0.9997 1.0014***
2007 1.0016 1.0010*** 0.9908*** 1.0014***
2008 1.0079*** 0.9991*** 0.8878*** 1.0096**
2009 0.9905*** 0.9997*** 1.0204*** 0.9963***
 RESULTS AND DISCUSSION
Table.5.7 Exponential Trends in Arrivel and Prices 0f Cotton
crop for Nashik and Jalna Markets

Year Nashik Jalna

Arrivals Prices Arrivals Prices
2002 - - - -
2003 1.0850*** 0.9664*** 1.0308*** 1.0022***
2004 0.9291*** 0.9929*** 0.9771** 0.9998
2005 1.0963*** 0.9990** 1.20054*** 1.0152***
2006 1.0055 1.00047 1.00017 0.9997
2007 0.9968 0.9979*** 1.0167*** 1.0030***
2008 1.0093*** 1.0014*** 1.0040 1.00153***
2009 1.0021*** 0.9850*** 0.9658*** 1.0045***
 RESULTS AND DISCUSSION
Table.5. 8 Exponential Trends in Arrivel and Prices of Cotton
crop for Hinganghat and Karanja Markets

Year Hinganghat Karanja

Arrivals Prices Arrivals Prices
2002 - - - -
2003 0.7319*** 0.9847 1.0064** 1.00199***
2004 1.3451*** 0.9369*** - -
2005 - - 1.0509*** 0.9974***
2006 0.6134*** 0.9839*** 0.9835*** 1.00028
2007 1.0161* 1.0021*** 1.0344*** 1.00068
2008 0.9943* 1.00163*** 0.9688*** 1.0003
2009 1.0201** 1.0022*** 1.0158** 1.00386***
 RESULTS AND DISCUSSION
Tabl5.9 Volatility of Soyabean Prices in selected markets

Year Amravati Akola Latur Lasalgaon

2002 6.58 4.40 - 7.78
2003 5.18 5.74 11.78 7.67
2004 5.66 6.24 6.17 13.45
2005 1.19 0.53 4.95 3.46
2006 0.05 0.80 8.12 3.20
2007 14.60 0.18 8.36 4.6
2008 5.21 1.81 10.64 7.74
2009 3.99 2.50 4.67 58.46
 RESULTS AND DISCUSSION
Table.5.10 Volatility of cotton prices in selected markets

Year Nashik Hinganghat Karanja Jalna

2002 - - - -
2003 2.03 2.82 4.57 2.31
2004 4.06 2.30 7.72 45.7
2005 1.04 - 7.95 6.91
2006 3.15 1.79 2.21 0.0015
2007 1.92 2.15 2.22 6.92
2008 0.90 0.30 13.93 2.35
2009 0.92 0.12 12.92 2.47
Table 5.11 Prices discovered for Soyabean in Amravati Market( ARIMA
Model= 111)

Month Forecasted Value Lower Limit Upper limit

JAN-10 1829 1551 2107

FEB-10 1847 1404 2290

MAR-10 1858 1287 2430

APR-10 1868 1189 2547

MAY-10 1877 1103 2651

JUN-10 1887 1027 2746

JUL-10 1896 957 2835

AUG-10 1905 892 2919

Table 5.12 Prices discovered for Soyabean in Akola Market
( ARIMA Model= 111)
Month Forecasted Value Lower Limit Upper limit

JAN-10 1796 1479 2113

FEB-10 1752 1285 2219

MAR-10 1808 1239 2377

APR-10 1772 1105 2439

MAY-10 1821 1075 2566

JUN-10 1791 966 2616

JUL-10 1834 941 2727

AUG-10 1810 848 2772

Table 5.13 Prices discovered for Soyabean in Latur Market
( ARIMA Model= 111)
Month Forecasted Value Lower Limit Upper limit

JAN-10 1676 1310 2041

FEB-10 1678 1144 2212

MAR-10 1672 1020 2324

APR-10 1673 910 2436

MAY-10 1668 814 2522

JUN-10 1669 725 2613

JUL-10 1664 642 2686

AUG-10 1664 564 2765

Table 5.14 Prices discovered for Soyabean in Lasalgaon Market ( ARIMA
Model= 212)

Month Forecasted Value Lower Limit Upper limit

JAN-10 2331 2069 2594

FEB-10 2344 1955 2734

MAR-10 2344 1869 2818

APR-10 2337 1811 2864

MAY-10 2331 1774 2889

JUN-10 2331 1756 2906

JUL-10 2338 1750 2926

AUG-10 2351 1751 2951

Table 5.15 Prices discovered for Cotton in Nashik Market( ARIMA
Model= 011)

Month Forecasted Value Lower Limit Upper limit

JAN-10 3016 2865 3166

FEB-10 3028 2823 3233

MAR-10 3041 2792 3289

APR-10 3053 2767 3339

MAY-10 3065 2745 3386

JUN-10 3078 2726 3430

JUL-10 3090 2709 3471

AUG-10 3103 2694 3512

Table 5.16 Prices discovered for Cotton in Jalna Market( ARIMA Model=
110)
Month Forecasted Value Lower Limit Upper limit

JAN-10 3247 3065 3428

FEB-10 3271 3041 3502

MAR-10 3289 3012 3566

APR-10 3308 2992 3624

MAY-10 3327 2975 3679

JUN-10 3346 2960 3731

JUL-10 3364 2948 3781

AUG-10 3383 2937 3829

Table 5.17 Prices discovered for Cotton in Hinganghat
Market( ARIMA Model= 111)
Month Forecasted Value Lower Limit Upper limit

JAN-10 3049 2920 3179

FEB-10 3066 2891 3242

MAR-10 3084 2877 3291

APR-10 3101 2871 3331

MAY-10 3118 2869 3367

JUN-10 3135 2872 3399

JUL-10 3153 2876 3429

AUG-10 3170 2883 3457

Table 5.18 Prices discovered for Cotton in Karanja Market ( ARIMA
Model= 011)

Month Forecasted Value Lower Limit Upper limit

JAN-10 3232 2455 4009

FEB-10 3248 2464 4033

MAR-10 3265 2472 4058

APR-10 3281 2480 4082

MAY-10 3297 2488 4106

JUN-10 3314 2497 4131

JUL-10 3330 2505 4156

AUG-10 3346 2512 4181

Conclusion

1. The results of the price discovery of soybean and cotton

prices revealed that the Soybean and Cotton prices are
volatile over all the years and the their forecasting shows
that the prices are increasing over months.
2. The trend estimated for soybean and cotton by linear and
exponential are not matching with each other
Summary and Conclusion

1. The Linear trend in Soybean Arrival indicates that the

Arrival was increasing in all years except 2009
significantly .while the Prices were found declining in the
year 2003,2004 ,2005, 2008 and in 2009 significantly.
2. The Exponential trend of Soybean revealed that the Arrival
and prices were increasing by around one percent
3. The Linear trend in Cotton Arrival indicates that the Arrival
was decreasing in the year 2004 and 2009 in Nashik and
Jalna market.. while the Prices were found declining in the
year 2003,2004 ,2005, in Nashik Hinganghat and Karanja
market.
4. The Exponential trend in Cotton shows Arrival and Prices
inceases by around one percent only
5. The prices in soybean as well as cotton are more or less
volatile in all the years ranges from 0.0015 to 58.46
percent.
6. Considering the volatility (non-stationery state) in the the
prices, the ARIMA model found suitable for discovering the
prices
7. The prices of the all the commodities are forecasted
increasing price over the months upto the august 2010