Behaviour of Spot and Futures Prices of Sugar in India
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Date
2011
Authors
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Journal ISSN
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Publisher
UAS, Dharwad
Abstract
Analysis of prices and forecasting the prices over time is important for
formulating a sound agricultural policy. Fluctuations in market arrivals largely
contribute to price instability. Price instability is useful to farmers in order to decide
the optimum time for disposing their produce to their best advantage. In view of this
the present study was undertaken by collecting weekly spot prices of sugar in major
markets of India for a period of 6 years (2004-05 to 2009-10). The futures prices for
sugar were collected for Aug 2007 to Nov 2009. The growth rate analysis revealed
that production growth rate is highly significant. An increasing trend in prices was
observed in all the markets, but the quantum of increase varied from one market to
another. Price of sugar was found to be highest during off season and lowest during
sugarcane harvest season. The higher weekly seasonal indices of prices were observed
during March to April, low during the months of June and August. Hence, the sugar
factories should plan their marketing strategy particularly in these weeks. ARIMA
analysis was employed to quantify the variation in prices and also to forecast sugar
prices. The forecasted prices in all the markets showed an increasing value. Analysis
of co-integration showed that there existed a strong integration between spot and
futures prices for sugar markets. Hence, sugar economy should take this advantage to
encourage the production of sugar. The analysis revealed that, by storing sugar and
selling during off season would help the producer in getting higher returns. Finally it
was recommended to disseminate the forecasted prices to sugar factories for their
advantage.