Does price volatility matter? Evidence from major tomato markets in India

Price volatility of agricultural commodities is a critical factor in incomes received by farmers and needs to be addressed if the goal of raising farmer's incomes is to be met. The present paper analyses the price behavior of tomato in selected centres of Karnataka and Madhya Pradesh, the two largest tomato producing states in the country. In each state, major districts were identified and subsequently market centres in each district. Prices from AGMARKNET were examined for these centres for the last five years from 2013 to 2017. The study showed high variability in prices across months, centres, and years. The variation in prices across centres was analysed using the average modal price for the agricultural year as a whole. There was similar year-to-year variation across the centres in both the states. However, the price levels were not the same across the centres even in the same month and in the same year. The intra-year coefficient of variation was high in all years and in all centres. The across month variation over the five years indicated a large variation in prices in Chhindwara district of Madhya Pradesh. Decomposition of tomato prices into seasonal, trend and cyclical and irregular factors was undertaken. We suggest improved storage and processing infrastructure is essential to reduce price fluctuations in tomato and stabilize farmer's incomes.