S r i G a n g a n a g a r c lu s te r b e a n s ( g u

30000
Trend of Custer bean prices in Sri Ganganagar
10000 20 00 0
0

2002m1 2004m1 2006m1 2008m1 2010m1 2012m1 2014m1 2016m1

Months/Years

INTRODUCTION TO
AGRICULTURAL PRICE ANALYSIS
Presented By: Richard Kwasi Bannor, PhD

05/19/2020 Richard Kwasi Bannor, PhD 1

S r i G a n g a n a g a r c lu s te r b e a n s ( g u
30000
Trend of Custer bean prices in Sri Ganganagar
20 00 0

 
10000 0

2002m1 2004m1 2006m1 2008m1 2010m1 2012m1 2014m1 2016m1

Months/Years

Role and Functions of Prices

Prices permeate and exert a controlling force on the
entire economy.
They include people to work and earn or produce.
They compel consumers to restrain demand.
The degree of force, nevertheless, varies from country
to country, depending on the extend of economic
freedom enjoyed by producers and consume GH¢.
In countries where producers and consumers enjoy
more economic freedom, prices play a greater role
compared to the centrally-controlled economies.

05/19/2020 Richard Kwasi Bannor, PhD 2

S r i G a n g a n a g a r c lu s te r b e a n s ( g u
30000
Trend of Custer bean prices in Sri Ganganagar
10000 20 00 0

Question
0

2002m1 2004m1 2006m1 2008m1 2010m1 2012m1 2014m1 2016m1

Months/Years

Prices perform a number of functions in an economic system.

In a competitive economy, the pricing mechanisms provide the
signals to the producers in deciding what and how much is to be
produced with the available resources for maximization of
income.
They also guide the consumers in planning their purchases
from a giving income so as to maintain the optimum standard
of living.
The directions given by prices vary according to the various
interest groups.
High and rising prices, in general, provide an incentive to
entrepreneurs to produce more but signal consumers to cut
down on consumption.
 The reverse may happen when prices are low and falling. T

05/19/2020 Richard Kwasi Bannor, PhD 3

S r i G a n g a n a g a r c lu s te r b e a n s ( g u
30000
Trend of Custer bean prices in Sri Ganganagar
10000 20 00 0
0

2002m1 2004m1 2006m1 2008m1 2010m1 2012m1 2014m1 2016m1

Months/Years

Thus the level and structure of agriculture prices have several

functions in an economic system. Some of these are :
1. they serve to serve a balance between demand and supply
2. they serve as allocator of resources in the production system
3. they serve as allocators of consumer's income
4. they serve as distributors of consumers income among
different sections of society
5. they regulate movement of commodities over time and space
6. they affect the rate of capital formation in the agricultural
and other sectors
7. they help monitor and forecast economic conditions
8. they help gauge the impact of monetary and fiscal policies

05/19/2020 Richard Kwasi Bannor, PhD 4

S r i G a n g a n a g a r c lu s te r b e a n s ( g u
30000
Trend of Custer bean prices in Sri Ganganagar
10000 20 00 0
0

2002m1 2004m1 2006m1 2008m1 2010m1 2012m1 2014m1 2016m1

Months/Years

1. Balance Demand and Supply

Price bring equilibrium between demand and supply
of commodities in an economy.
The excess supply accumulated in the market is
cleared by any downward movement in prices.
Similarly if supply is short, an increase in prices help
curtail demand, matching it with the supply.
Thus, price movement regulate supply and demand
and make for equilibrium in the market.

05/19/2020 Richard Kwasi Bannor, PhD 5

S r i G a n g a n a g a r c lu s te r b e a n s ( g u
30000
Trend of Custer bean prices in Sri Ganganagar
10000 20 00 0
0

2002m1 2004m1 2006m1 2008m1 2010m1 2012m1 2014m1 2016m1

Months/Years

2. Allocation of Productive Resources

This function of prices is very important for the
agricultural sector both at the macro (or aggregate)
and and micro (or individual) far level.
If aggragate farm product prices are higher relative to
prices of non-farm commodities and the terms of
trade are favourable to the farm sector, relatively more
resources will flow to the farm sector and continue to
stay there.
But if farm prices remain low vis-a-vis non-farm prices
and the terms of trade move against the farm sector,
there is a tendency for resources to move away from
the farm sector.
05/19/2020 Richard Kwasi Bannor, PhD 6
S r i G a n g a n a g a r c lu s te r b e a n s ( g u
30000
Trend of Custer bean prices in Sri Ganganagar
10000 20 00 0
0

2002m1 2004m1 2006m1 2008m1 2010m1 2012m1 2014m1 2016m1

Months/Years

Any scarce resources is allocated as per the dictates of

marginal return principle.
This applies both at the micro and macro levels. A
nation's scarce resources of land, water, labor and capital
are allocated where they have the maximum marginal
returns. 
Similarly, individual farmers allocate land, water, capital
and labour to various crops and livestock enterprises
according to the principle of marginal return.
Since marginal return is the product of marginal
physical product and price, changes in price (relative)
under certain circumstances have significant effect on
allocation of resources among agricultural commodities.
05/19/2020 Richard Kwasi Bannor, PhD 7
S r i G a n g a n a g a r c lu s te r b e a n s ( g u
30000
Trend of Custer bean prices in Sri Ganganagar
10000 20 00 0
0

2002m1 2004m1 2006m1 2008m1 2010m1 2012m1 2014m1 2016m1

Months/Years

3. Allocation of Consumer Income

Relative price of consumer goods help individuals allocate their
income to various commodities. This is done to maximize
satisfaction from a given level of income.
For a low income farmer or agricultural laborer, the allocation
of limited income on clothes versus oil, kerosine versus
fuelwood and child's school dress versus umbrella is dictated by
the relative prices of these commodities.
Manufacturing goods like radios, transistors, bicycles, and
buckets find in a rural if their prices are attractive to the rural
masses.
The price elasticity of demand for these durable consumer
goods is quite high in rural areas. Therefore, a lower price can
attract higher spending on such goods.
05/19/2020 Richard Kwasi Bannor, PhD 8
S r i G a n g a n a g a r c lu s te r b e a n s ( g u
30000
Trend of Custer bean prices in Sri Ganganagar
10000 20 00 0
0

2002m1 2004m1 2006m1 2008m1 2010m1 2012m1 2014m1 2016m1

Months/Years

4. Distribution of Income
Prices affect distribution of the income of the
agricultural sector in two ways:
i. they affect transfer of income between the farm and
the non-farm sectors of the economy via terms of
trade; and
ii. they affect income distribution between large and
small farmers, famers and agricultural laborers, crop
farmers and livestock breeders and between
farmers/regions engaged in growing different crops.

05/19/2020 Richard Kwasi Bannor, PhD 9

S r i G a n g a n a g a r c lu s te r b e a n s ( g u
30000
Trend of Custer bean prices in Sri Ganganagar
10000 20 00 0

5. Regulation of movement of
0

2002m1 2004m1 2006m1 2008m1 2010m1 2012m1 2014m1 2016m1

Months/Years

commodities overt time and space

Prices help in the movement of commodities over time
(different seasons of the year) and over space (different places)
in the economy.
The production of most agricultural commodities is confined to
a specific season but their consumption is spread throughout
the year.
This necessitates the carrying of goods (storage) from the
harvest period to other periods of the year. The extent and
timing of storage are guided by the price at harvest time,
expected price rise during the year and cost of storage.
These factors, including the price gap at two points of time,
affect traders' decisions relating to storage and enable them to
make the goods available in the lean season to the consume
05/19/2020 Richard Kwasi Bannor, PhD 10
S r i G a n g a n a g a r c lu s te r b e a n s ( g u
30000
Trend of Custer bean prices in Sri Ganganagar
10000 20 00 0
0

2002m1 2004m1 2006m1 2008m1 2010m1 2012m1 2014m1 2016m1

Months/Years

6. Capital formation in farm sector

Price affect capital formation, which, in the long run, affects
production potential. An increase in farm product prices encourage
increased investment in the farm sector. This happens in two ways:
1. higher prices of farm products increase value of farm output which
leads to increase in returns in investment in farming. Higher
investment leads to further increase in output which further
increases the value of output (unless the price increase slows down).
Higher value of farm output also implies higher farm income. Part of
this additional income also gets invested in farming.
1. Due to the higher farm product prices, food prices for non-farm
workers rise, and they demand higher wages and this leads to a
higher wages and this leads to a decline in profits. The squeeze on
profits leads to lower incentives for investment in the non-farm
sector, part of which may be diverted to the farm sector.

05/19/2020 Richard Kwasi Bannor, PhD 11

S r i G a n g a n a g a r c lu s te r b e a n s ( g u
30000
Trend of Custer bean prices in Sri Ganganagar
10000 20 00 0

7. Monitoring and Forecasting of economic

0

2002m1 2004m1 2006m1 2008m1 2010m1 2012m1 2014m1 2016m1

Months/Years

conditions
Prices serve as a means to aggregate output of a varied
nature and help in monitoring the movements in
aggregate agricultural production, farm income and
inflationary trends.
A large number of economic variables like peer capita
income, price index numbers, terms of trade and real
wages, are affected by prices. Price series records help
in monitoring these variables and making forecasts.
 

05/19/2020 Richard Kwasi Bannor, PhD 12

S r i G a n g a n a g a r c lu s te r b e a n s ( g u
30000
Trend of Custer bean prices in Sri Ganganagar
20 00 0

IMPORTANCE OF PRICES
10000 0

2002m1 2004m1 2006m1 2008m1 2010m1 2012m1 2014m1 2016m1

Months/Years

In the previous section, it was seen that prices play a very
important role and perform several functions. It is, therefore,
obvious that unless a close watch is kept on prices, they might
have a perverse effect.
A particular movement of agricultural prices my facilitate the
achievement of certain goals, while the same movement may
operate against some other goal.
For example, a steep rise in the price of food grains may fulfill the
goal of remunerative price to the farmers but it might adversely
affect the standard of living of agricultural laborers, other wage
earners and non-farm consumers who buy grains. Therefore, a
continuous watch on prices is necessary for all societies.
The usefulness and importance of knowledge of prices for the
government , farmers and business organizations can be
looked at separately.

05/19/2020 Richard Kwasi Bannor, PhD 13

S r i G a n g a n a g a r c lu s te r b e a n s ( g u
30000
Trend of Custer bean prices in Sri Ganganagar
10000 20 00 0

1. Overall Economic Control

0

2002m1 2004m1 2006m1 2008m1 2010m1 2012m1 2014m1 2016m1

Months/Years

As seen in the previous section, agricultural prices have

enormous human and political implications. Therefore,
every government has to keep a continuous watch on
prices.
The importance of agricultural prices arise from the
immense magnitude of the economic forces involved.
Governments often intervene to achieve the right level of
agricultural prices and the range of fluctuation in the
context of changing economic circumstances, political
configurations and national goals
The intervention, to be effective, necessitates, sufficient
knowledge of agricultural prices, the factors affecting
them and aspects affecting them.
05/19/2020 Richard Kwasi Bannor, PhD 14
S r i G a n g a n a g a r c lu s te r b e a n s ( g u
30000
Trend of Custer bean prices in Sri Ganganagar
10000 20 00 0

2. Component of Agricultural
0

2002m1 2004m1 2006m1 2008m1 2010m1 2012m1 2014m1 2016m1

Months/Years

Development Strategy
There are three basic foundations for building a sound agricultural
economy. These are:
1. a package of productive technology
2. efficient input and service delivery system, and
3. remunerative market prices.
Even if the farming community has applied modern technology and
produced efficiently to meet the requirements of the economy, the
marketing and pricing system can inflict undeserved losses on the
farmer GH¢ .
In this perspective, along with efforts to achieve a technological
transformation of traditional agriculture, a sound price support
mechanism has to be made an essential element of agricultural
development strategy.

05/19/2020 Richard Kwasi Bannor, PhD 15

S r i G a n g a n a g a r c lu s te r b e a n s ( g u
30000
Trend of Custer bean prices in Sri Ganganagar
10000 20 00 0
0

2002m1 2004m1 2006m1 2008m1 2010m1 2012m1 2014m1 2016m1

3. Plan and Project Formulation

Months/Years

Information on past, present and possible future prices of inputs

and output is necessary for public agencies for the formulation
and evaluation of investment proposals related to agricultural and
rural development.
The projections of streams of costs and benefits from various
plans and projects is based on predictions of the likely prices of a
host of things.
The plans and projects related to dams, crop production, animal
husbandry development, fruit production, soil conservation,
watershed development, afforestation, drought proofing, and area
development require a lot of information on past and present
prices.
The financial and economic feasibility of all such projects depends
on the vector of prices used.
05/19/2020 Richard Kwasi Bannor, PhD 16
S r i G a n g a n a g a r c lu s te r b e a n s ( g u
30000
Trend of Custer bean prices in Sri Ganganagar
10000 20 00 0
0

2002m1 2004m1 2006m1 2008m1 2010m1 2012m1 2014m1 2016m1

Months/Years

4. Monetary and Fiscal Policy

Monetary and fiscal policies affect prices. This fact
necessitates a knowledge of the price situation while
formulating or introducing monetary and fiscal policy
measures. Foreign trade, i.e., level of imports and
exports, id also affected by prices of different
commodities in various countries.
Therefore, for formulating such policies, knowledge of
prices is necessary.

05/19/2020 Richard Kwasi Bannor, PhD 17

S r i G a n g a n a g a r c lu s te r b e a n s ( g u
30000
Trend of Custer bean prices in Sri Ganganagar
10000 20 00 0
0

2002m1 2004m1 2006m1 2008m1 2010m1 2012m1 2014m1 2016m1

Months/Years

5. Market information and intervention

Since prices affect the decision of farmers, traders, agro-
processors, transporters, warehouse owners, manufacturers and
consumers, adequate information on prices need to be collected,
compiled, preserve and disseminated.
Though all the people concerned keep essential information on
some prices the Government has, of necessity, to see to this
important function.
Most governments keep in mind the objectives of assuming
remunerative prices to farmers and making available goods to
consumers at reasonable prices.
To achieve this conflicting objectives, close monitoring of prices at
the farm gate (primary village markets) and retail level becomes
necessary. The market intervention mechanism is devised on the
basis of knowledge of prices at different stages of marketing.

05/19/2020 Richard Kwasi Bannor, PhD 18

S r i G a n g a n a g a r c lu s te r b e a n s ( g u
30000
Trend of Custer bean prices in Sri Ganganagar
10000 20 00 0
0

2002m1 2004m1 2006m1 2008m1 2010m1 2012m1 2014m1 2016m1

Months/Years

6. Long term Planning of farm Business

Knowledge of prices is useful for farmers in making
long-term farm investment. Investment in buildings,
farm machinery, land development and irrigation
structures is long term investment. Prediction of likely
returns from this investment is done on the basis of
prices.
 

05/19/2020 Richard Kwasi Bannor, PhD 19

S r i G a n g a n a g a r c lu s te r b e a n s ( g u
30000
Trend of Custer bean prices in Sri Ganganagar
10000 20 00 0
0

2002m1 2004m1 2006m1 2008m1 2010m1 2012m1 2014m1 2016m1

Months/Years

7. Selection and Management of

Enterprises
Information on prices is beneficial to farmers in
taking decision pertaining to selection and
management of different crop and livestock
enterprises.
The optimum combination of different enterprises is
worked out under limited resource situation by using
the principle of opportunity cost.
Similarly, the least cost combination of different
inputs given a fixed level of output can be worked out
by using information on prices of inputs and outputs.

05/19/2020 Richard Kwasi Bannor, PhD 20

S r i G a n g a n a g a r c lu s te r b e a n s ( g u
30000
Trend of Custer bean prices in Sri Ganganagar
10000 20 00 0
0

2002m1 2004m1 2006m1 2008m1 2010m1 2012m1 2014m1 2016m1

Months/Years

8. Planning Time, Place And Method Of Marketing Farm

Products And Purchase Of Inputs

The price of input and output varies according to the

place and time of sale and the form in which the
product is sold. Judicious planning of sales affects the
income of farmer in GH¢.
 Similarly, the price of input varies from time to time
and brand to brand.
 A knowledge of prices helps farmers take correct
marketing decisions consistent with the goal of profit
maximization.

05/19/2020 Richard Kwasi Bannor, PhD 21

S r i G a n g a n a g a r c lu s te r b e a n s ( g u
30000
Trend of Custer bean prices in Sri Ganganagar
10000 20 00 0
0

2002m1 2004m1 2006m1 2008m1 2010m1 2012m1 2014m1 2016m1

Months/Years

A knowledge of prices is beneficial for cooperatives and private

business organizations in various ways:
1. It helps them planning the character, location, size and other
features of the agricultural business enterprise.
2. It also helps them to determine the time and place of purchase of
raw materials or supplies and governs policies with respect to
expansion or scale down of the business. Businessmen take
decisions about time and place of purchase of raw materials on the
basis of prices in different markets and different times of the year.
Most industries such as oil mills purchase oil seeds for processing
in the peak marketing season and use them in the following
months to reap profit. Decisions on inventory expansion,
contracting and hedging in the commodity are taken on the basis
of present and expected prices of various commodities.
3. Prices helps them in selecting the markets for their products, the
timing of the sales and the adoption of promotional sales efforts.

05/19/2020 Richard Kwasi Bannor, PhD 22

S r i G a n g a n a g a r c lu s te r b e a n s ( g u
30000
Trend of Custer bean prices in Sri Ganganagar
10000 20 00 0
0

2002m1 2004m1 2006m1 2008m1 2010m1 2012m1 2014m1 2016m1

Months/Years

Question

Why the Need for Price

Analysis

05/19/2020 Richard Kwasi Bannor, PhD 23

S r i G a n g a n a g a r c lu s te r b e a n s ( g u
30000
Trend of Custer bean prices in Sri Ganganagar
10000 20 00 0
0

2002m1 2004m1 2006m1 2008m1 2010m1 2012m1 2014m1 2016m1

Months/Years

Any Questions

05/19/2020 Richard Kwasi Bannor, PhD 24

S r i G a n g a n a g a r c lu s te r b e a n s ( g u
30000
Trend of Custer bean prices in Sri Ganganagar
10000 20 00 0
0

2002m1 2004m1 2006m1 2008m1 2010m1 2012m1 2014m1 2016m1

Months/Years

THANK YOU

05/19/2020 Richard Kwasi Bannor, PhD 25