Abstract: We provide new insight into the seeming puzzle that many farmers in low-income countries sell their crops at harvest, when prices are low, rather than waiting until prices increase later in the year. We use 20 years of data from 1037 retail markets in 30 African countries to demonstrate that the lean season price (the “high price" season) fails to rise above the harvest season price (the “low price" season) 23% of the time on average, leading to negative returns to intra-annual arbitrage. On the basis of that stylized fact, we propose that aversion to these negative returns may contribute to farmers' decisions to opt out of storage. We show that even moderately risk averse farmers would opt out of storage in 16% markets.
Presenter:
- Lila Cardell, Research Economist, USDA Economic Research Service
Moderator:
- Joachim De Weerdt, Country Program Leader, IFPRI-Malawi
Date & Time:
- 13 April 2022 @ 3:00 pm to 4:00 pm CAT
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Read and download the full paper here (PDF 744 KB)
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