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IV. STANDARDIZATION OF THE PROGRAMME OF COLLECTION
OF PRICES RECEIVED BY FARMRS
Market procedures survey
Before drawing up any programme of price collection
suited to a particular country, it is necessary first to collect
information on the procedures adopted therein for the marketing
of different agricultural commodities. From the farm, one commodity
may 90 directly to the exporter, another directly to the processor
or miller, a third directly to the retail market and a fourth may
pass through several stages of marketing before reaching the ultimate
consumer. If prices for these commodities are not available at the
farm-gate, they will have to be collected at the first point of
sale which will vary for each of the four commodities. A commodity
may also pass through other channels; e.g. an itinerant
merchant may collect the produce of small farmers for sale in a
nearby market; a commission agent may locate appropriate buyers;
processors (flour millers, rice millers, cotton ginners, tobacco
curers) may process the commodity and sell it in processed form;
a cooperative marketing society may undertake to sell the produce
of its members; and transporters, shippers, forwarding agents and
warehousemen may also play a part. All these and related aspects
will have a bearing on the organization of a system of price collection,
definitions of the prices and instructions to the price reporters.
Hence the need for a study - however broad - of the marketing procedures
followed for each commodity. Information on the seasonality of marketing
and of prices, and on government taxation, subsidy and price regulation
will also be useful when formulating the price collection programme.
While the items on which information may be collected will depend
on the requirements of those drawing up the programme, the following
deserve consideration:
- Names of agricultural commodities and major varieties grown
in the country; regions of concentration of production for each
commodity.
- Harvesting period for each commodity.
- Marketing procedures adopted; different stages of marketing;
Channels through which a commodity passes before reaching the
final consumer.
- Which commodities mainly enter domestic consumption and which
are grown mainly for export.
- Location of markets with an indication of their size (annual
turnover may be a suitable indicator).
- Seasonal variations in quantities sold and in prices.
- Major agencies engaged in sale or purchase operations.
- Processing facilities and their location.
- Storage, accomodation and its location.
- Government taxation and subsidy policies.
- Government price regulation measures.
Information on marketing procedures can be obtained
through properly designed surveys or from agencies and individuals
who are either in the business of sale and purchase of agricultural
commodities or are otherwise knowledgeable. The information
once collected would need to be checked periodically and brought
up-to-date, since significant changes could necessitate revisions
to the price collection programme.
Technical considerations
In standardizing the programme of collection of prices
received by farmers, several technical aspects connected with price
reporting require to be considered with a view to ensuring that
the data are collected at a reasonable cost, on a uniform basis,
with adequate accuracy, and are suitable for the purpose for which
they are obtained. These aspects pertain to the framing of standard
definitions of product, variety and quality; time, period and frequency
of price collection; unit of quotation; selection of markets, etc.
Definition of prices received
by farmers
The price received by a farmer for an agricultural
commodity produced by him has been defined as the average (notional
or actual) price measured at his farm-gate at which he disposes
of the commodity. Where sales do not take place at the farm-gate,
the notional price must be estimated by subtracting from the wholesale
or retail price, as the case may be, those costs included in that
price such as the transportation expenses, marketing charges and
taxes, etc., paid by the farmer for activities which take place
after the product has left the farm-gate. For ascertaining the magnitude
of these deductions, it will be necessary to undertake appropriate
surveys or other investigations (see: Descriptive
market schedules).
Techniques of averaging-prices
(see also Averaging for comparison purposes)
The price should be an average price. Different lots
of a commodity may not all be marketed at a uniform, identical,
price. Even if they belong to the same variety, the prices may-differ
according to difference in moisture content, refraction, admixture,
etc. The price of a commodity can thus vary within a range every
day. But, for purposes of comparison of prices over two or more
points of time, it is more convenient and meaningful if, for each
point of time, a single quotation, instead of a range, is available.
The single quotation should neither be the minimum price nor the
maximum price quoted in the reporting day in as much as these two
extremes will not be representative. For the same reason, it should
neither be the opening nor the closing quotation of the day. It
should be an average of the day’s quotations, a measure of the day's
central tendency.
What kind of average should it be? If it is to be
an ”arithmetic average” or ”median”, the price for each transaction
during the day will have to be recorded. It is to be the "weighted
mean”, data will be needed additionally on the quantities transacted
at each price. This is a laborious task and while there is no objection
to using such averages, the time and energy spent on the operation
would hardly be commensurate with the advantage to be gained. The
purpose would be served equally well by taking the modal price,
i.e. the price at which the majority of the day's transactions take
place. Oral enquiry about such price - the most commonly quoted
price - m the reporting day should be enough to reveal it. (It should
be emphasized that we are here speaking of prices actually agreed
for transactions, not prices asked for, or offered, in advance of
the transactions being completed). The modal price gives the overall
sense of the market and may be established at the wholesale or retail
level, or for farm-gate prices.
Subject to me important condition, modal prices are
satisfactory for valuation purposes too, although for an accurate
valuation it is necessary to have data on quantities and prices
involved in each transaction, or for a representative sample of
such transactions. The condition is that not only should the modal
price be the price at which the major number of the day’s transactions
takes place, but it should also be the price at which the major
part of the total quantity marketed is transacted. For instance,
if 10 quotations at the same price for lots of 1 ton each were accompanied
on the same day by 2 lots of 10 tons each at a very different price,
the modal price (i.e. the former) would not be sufficiently accurate
for valuation purposes and would be misleading as a price average.
Selection of commodities
In formulating a programme for the collection of prices,
it is necessary to make a selection of the commodities for which
data are to be obtained. In market economies, practically all agricultural
commodities find their way to the market. Accordingly, in a comprehensive
programme of price collection, all agricultural commodities offered
for sale should be covered. But if their number is very large, then
a selection must be made depending upon the uses for which the data
are needed and the resources available for their collection; the
remaining commodities can be included later when necessary or feasible.
As first priority, those commodities for which estimates of production
are available should be included since this enables an accurate
evaluation to be made.
Specification of variety and
quality
When reference is made to the price of an agricultural
commodity there is generally an implicit assumption that the commodity
is homogeneous, i.e. that each unit thereof is a perfect substitute
for any other unit. In practice, this assumption is rarely correct.
Not all wheats, for example, are the same wheat. Wheat has several
botanical varieties: Triticum durum, Triticum vulgare, Triticum
turgidum, Triticum dicoccum, and Triticum compactum. Of these varieties,
the first two are widely grown. Each variety is subdivided into
a few colour groups. Durum has two colour groups: amber and red;
vulgare has three: white, amber and red. The kernel structure of
the grain varies from soft to semi-hard and hard. Durum wheat is
also known as macaroni wheat: it has a high gluten content and is
much used in, making semolina and vermicelli. For these characteristics,
it fetches a premium over other varieties. Vulgare is also called
common wheat and is generally used by the milling industry for manufacture
of flour. The same is true of many other agricultural products.
For each variety of a commodity, there may be several
qualities. Wheat, for example, may be designated by different grades,
depending on the percentages it contains of foreign matter (like
dust, chaff, straw); edible food grains other than wheat; wheat
of other varieties mixed with the main variety; or damaged, immature,
shrivelled, and weevilled grains. Uniformity of size, shape and
colour and the moisture content are other factors taken into account
in determining the grade.
A commodity may thus consist of several varieties
and for each variety there may be several grades. Prices of the
commodity will therefore vary with the difference in botanical and
commercial characteristics. Some varieties and qualities will command
a high premium while others will sell at a discount.
What varieties and qualities then should be specified?
A comprehensive programme for collection of prices may provide for
collection of price statistics of most varieties and qualities of
an agricultural commodity. In this case, a spectrum would result
throwing light on inter-varietal and inter-quality differences in
prices of the same commodity. Prices of those varieties and qualities
most needed can then be selected, while the full range of price
data along with quantities of each variety and quality marketed
would be available for valuation purposes. Such a comprehensive
programme is possible only if the volume of work involved is manageable
with the available resources. The volume of work can be reduced
if the varieties and qualities of a particular commodity can be
standardized into a few. Where, however, the varieties and qualities
are numerous and standardization is difficult to achieve, it should
be remembered that the mass of information which results is often
confusing to the user apart from being expensive to collect.
There is, however, a solution. Just as the price to
be collected can be the modal price, so the selected representative
variety and quality may also be modal; that is, the modal price
could refer to the most commonly traded variety and quality. Clearly,
care must be taken, before deciding on this course of action, that
limiting the price reporting to the modal variety only does not
exclude some important other varieties.
The criterion for selecting the modal variety in each
market should be whether it is the most commonly traded among the
different varieties, and whether it is transacted continuously over
the larger part of the marketing year, if not over the entire year.
If the specified modal variety ceases to be transacted during the
marketing year, another frequently traded variety, as close as possible
to the variety originally chosen, may be substituted provided that
the circumstances are fully noted since this will be of importance
when constructing price indices. If such substitution has to take
place, it would help the splicing of prices if quotations for the
two varieties - the initial and the substitute - are collected for
a few reporting days when both varieties are being traded.
After specifying the modal and substitute varieties
for each market, the next step would be to prescribe the modal quality
or grade composition.
If quality standards are in force for a commodity,
the most commonly traded quality may be chosen; otherwise, the choice
may fall on what is generally called the fair average quality. In
the latter case, the grade specifications will be determined on
the basis of trade descriptions and must be defined unambiguously.
Situations may arise where, simultaneously with the
newly harvested produce, the remainder of the old harvest is still
on sale and the two are sold at different prices. In such situations,
prices for the new harvest should be reported from the date when
it is reasonably certain that disposals from the new harvest will
be fairly continuous. Prices for produce from the old harvest should,
however, continue to be recorded as long as the quantities traded
remain significant.
Time of price collection
If it is intended to collect data on prices and quantities
involved in each transaction m the reporting day, obviously the
price reporter will have to be at work the entire day unless there
are some institutional arrangements (like a market committee or
an association of market men) to do the job. If the prices to be
calculated for the various agricultural products are the modal prices,
the price reporter need not be in the market the whole day. It would
be sufficient if he visits it during the peak marketing period of
the day, that is, when the bulk of the transactions usually take
place. The peak period will not necessarily be the same hour of
the day in all markets and throughout the marketing season or the
year. Accordingly, the programme for price collection should provide
for determining the peak marketing period of each market over different
months of the marketing year.
Period of price collection
Unlike most industrial products, agricultural products
are characterized by seasonality. In general, the marketing year
for an agricultural crop may be defined as starting with its harvesting
and continuing until the next harvest. (There are, of course, exceptions
to this, e.g. where a crop is grown under contract and sold even
before harvesting). Whether or not the agricultural producer spreads
his sales over the twelve months of the marketing year after the
harvest depends on the volume of output, the perishability of the
crop and on the storage facilities, owned or hired, available to
him. lf the storage facility is inadequate or non-existent; or if
the roads are fair-weather roads and not all-weather roads; or if,
as the marketing year advances, snowfall or rains might interrupt
the transportation or damage the commodity in transit; or if the
cash needs of the producer are very pressing immediately after the
harvest in all such cases, the producer will have little option
but to dispose of his produce within a short period after the beginning
of the marketing year. Again, even if none of these disabilities
exist, the crop may be too small to permit sales to be spread over
the full year. The period of collection of farm-gate prices will
therefore coincide with the period of marketing, which may stretch
over a full year in some instances, but not in others. The programme
for collection of prices received by the farmer should, therefore,
lay down appropriate guidelines for determining, in respect of each
location and each commodity, the period over which the prices should
be reported.
This problem will not generally arise in the case
of wholesale and retail markets. They run on a regular basis, making
continuous reporting of prices possible.
Frequency of price collection
How often should prices be collected: daily, weekly,
fortnightly or monthly? The answer depends on the uses to which
the prices are to be put. Anyone interested in the buying and selling
of a commodity, and thereby earning a profit, requires daily prices
of that commodity. A state or public agency wishing to disseminate
market prices for the guidance of producer-sellers through the press,
price bulletins, radio or television also needs daily quotations.
For administering a policy of direct market intervention, the State,
with the help of daily prices, would be enabled to decide where
to buy in order to support prices and where to sell in a bid to
counter excessive price rises.
The above are special cases which call for collection
of daily prices. For other uses, such as for studying price trends,
making comparisons, or watching price movements as an indication
of the inter-action of the forces of supply and demand, daily
prices are unnecessary. A fortnight or a month, on the other hand,
is a rather long period, particularly where wide variations in prices
are known to occur. A week is probably the most suitable period,
and instructions for price reporting might, therefore, provide
for collection of prices on a specified day of every week.
Which particular day in the week should be declared
as the price repotting day? ordinarily, any day of the week would
be as good as any other day excluding, of course, the day (or days)
on which the market is closed. U the market opens for only one day
in each week~ as is riot uncommon for primary wholesale markets
in several countries, there is no choice except to report on the
weekly market day. lf the market opens more often than one day per
week, the reporting day should be chosen so that the weekly postal
holiday does not intervene to cause additional delays in the transmission
of prices to the headquarters of the organization where such communications
from various reporting markets are received for compilation, ,study
and dissemination,
The day prescribed must be adhered to so that prices
are reported on the same day every week. Sometimes, instead of specifying
a day of the week, dates in a month are prescribed, such
as the 7th, 14th, 21st and 28th of each month.
Unit of quotation
In determining the unit of quotation, three points
require investigation. The first concerns the unit of weight. In
a country where standardized weights and measures are in use, there
should be no problem and prices may be reported per standard unit
of weight applicable to the commodity, such as, per metric ton,
per quintal or per kilogramme. Where, however, weights have not
yet been standardized and a wide variety of local weights are in
use, differing from region to region within the country, the price
reporter should be provided with a table of coefficients with which
to convert the prices collected in local units into standard units
before reporting the latter to the headquarters. It would be the
duty of the supervisor, during his inspection tours, to provide
the necessary guidance to the price reporter and to verify the accuracy
of the conversions.
The second requirement is to define the form of the
commodity to which the unit of weight should refer. For example,
in the case of wheat, should it relate to the net weight of the
grain, or be inclusive of the weight of the bag, sack, or basket
in which it may be brought for sale? Decisions m this point will
have to be taken in advance so that they can be applied uniformly
to the commodities concerned in all reporting markets in order to
permit valid comparisons of prices. Prices should, however, normally
refer to the unit net weight of the commodity, the weight of the
container in which it is brought for sale being excluded. If there
is any insurmountable difficulty in doing this, and the prices for
a commodity are, for example, quoted including the container in
some markets and without it in others, the facts should be specified
by the reporter when reporting the prices to enable the user to
make appropriate adjustments and to exercise caution when comparing
such quotations.
In this context, it should also be noted that farmers
generally sell their produce in the form in which it is harvested.
A grower of paddy would normally sell unhusked paddy rather than
cleaned or milled rice (also called dehusked paddy). A cotton producer
normally sells raw cotton as harvested, that is cotton from which
cotton seed has not been separated. These situations are applicable
to farm-gate prices or prices in primary wholesale markets. In secondary
wholesale markets and retail markets, however, the form of the product
will most probably have undergone a change due to processing. There,
milled rice or cotton lint (also known as ginned cotton) would be
sold. The form of the commodity to which the prices refer should,
therefore, be unambiguously defined and kept in view when comparing
farm-gate prices with wholesale or retail prices, or when estimating
farm-gate prices from wholesale or retail prices.
The third requirement is how to express the price.
Prices should be quoted in terms of so many units of a country's
currency per unit of standard weight, and not in terms of so much
weight per unit of currency. If international comparisons of prices
are desired, up-to-date information on exchange rates to convert
national currency into currencies of other countries will be needed.
Other technical aspects
A few other technical problems touching on price collection
must be considered. Firstly, what price should be reported if no
transaction takes place on a particular reporting day. This may
happen in either of two ways: either the market may be closed because
of a holiday or strike, or the market may be open but there may
be no transaction because of, say, the non-arrival or non-availability
of the commodity, or ~a may have decided for some reason not to
bid on that day. While these situations call for local solutions,
a general rule is that, in the former case quotations for the previous
day should be repeated, while in the latter case notional prices
should be estimated. A notional price is a ”probable” price and
may be estimated by adjusting the previous day's price for the specified
variety and quality in line with the changes observed in prices
of other varieties in the same market, or price changes of the specified
variety in neighbouring markets. The principle underlying the reporting
of the previous day’s or notional prices is to achieve continuity
and comparability of quotations even when no transactions have actually
taken place in the selected variety and quality in the selected
market. Such situations fortunately tend to be the exception rather
than the rule. Nevertheless, it must be emphasized that unless the
price reporter is very experienced, his notional estimates may be
inaccurate, particularly in the case of commodities where the price-quantity
relationship is sensitive. The fact that estimates have been made
must, therefore, always be reported.
Another problem relates to what prices to report when
a public authority imposes a statutory control over market prices
and yet the market transacts at different prices. This, again, is
a matter calling for local solution. Whether the dual price system
is legally permitted, i.e. where statutorily
controlled prices apply only to certain transactions while others
are left open to free market forces, or whether sales at higher
than the statutorily controlled prices are not legally
recognized even though they do take place, the price reporter either
has to exercise his judgment as to which of the two groups of transactions
represents the larger bulk and report those prices, or he must compute
the weighted average of the two prices using the quantities transacted
as weights. An alternative would be to quote both the statutorily
controlled prices and the open (or black, or grey) market prices
giving also the best estimate of the relative proportion of transactions
at the two prices.
A question may arise as to whether the price reporter
should obtain price quotations always from the same set of dealers,
selected in advance. This arrangement is acceptable as a minimum
arrangement where the price reporters are not very experienced,
but the aim should be to train reporters to assess the overall sense
of the market by contacting a wide variety of dealers in the reporting
market, supplementing this oral enquiry with personal observation
of at least some transactions during the peak marketing hour of
the reporting day.
A problem sometimes occurs in distinguishing a wholesale
transaction from a retail transaction. Should a limit on the quantity
handled in a transaction be prescribed, so that all sales above
that quantity may be regarded as wholesale and those below as retail?
This would be incorrect. No hard and fast rules regarding minimum
quantities can be prescribed in as much as the minima will vary
from commodity to commodity and from market to market. On the other
hand, dealers in the markets generally understand what a wholesale
transaction is, so that market conventions will be a better
guide in this matter than any written rule.
Selection of markets
In selecting markets for regular price reporting,
the most important consideration is whether the national price collection
authority is responsible for collecting only prices received by
farmers, or prices at all stages of marketing. If the latter is
the case (which is the most likely) the list of markets selected
should include farm-gate locations, primary, secondary and terminal
wholesale markets and retail outlets. If, however, the authority
is charged with collecting farm-gate prices only, the selected list
can be confined to farm-gate locations, But if in a country, or
for some commodities in a country, the majority of transactions
are not made at the farm-gate, it will be necessary to select markets
where the producer-sellers generally dispose of their produce.
Markets should be selected on the criterion of their
being representative. A market, regardless of the volume of transactions
it handles, can be considered as representative if it is sensitive
to changes in supply and demand conditions; i.e., if it reacts or
responds quickly to Changes in prices in other markets with which
it has trade links.
In selecting the reporting markets from such representative
markets preference should be given to those which operate throughout
the year so that continuous price data would be available and, in
the interests of staff economies, to those from which quotations
for more than one commodity can be reported.
The choice of the number of markets will depend on
how extensive are the needs for price data. If it is intended to
evaluate agricultural production by districts or by smaller regions
within a country, or if the inter-regional variations in prices
within a country are known to be large, the number of markets to
be selected for reporting price data needs to be much greater than
if it is intended merely to observe overall price trends. Likewise,
the implementation of price support measures, for example, would
call for a much larger spread of markets than that needed for constructing
price indices.
As a general rule, the number of reporting markets
should be such as to ensure that the calculated national, regional
and sub-regional average prices for a given commodity are sufficiently
accurate for the objectives in view. At the sub-regional level,
the concerned authority may require information on prices in respect
of a few important markets, located within its administrative jurisdiction
for, say, an appraisal of the economic situation or an estimation
of the value of agricultural output in the sub-region. The total
number of markets for all sub-regions within a region may turn out
to be too large for the purposes of the regional authority who may
therefore, for its own uses, select a manageable number of markets
from the sub-regional lists. Likewise, the national price collection
authority may find the total number of markets in all regional lists
too unwieldy for its purposes and may therefore select from the
regional lists only the more sensitive and important markets. Thus,
the sub-regional lists will include the regional lists, and the
regional lists will include the national list of markets.
In conclusion, while the number of markets should
be selected in the light of technical considerations such as those
mentioned above, a limiting factor is the availability of trained
reporting staff and/or resources for appointing new staff. It should
be the aim, however, to strengthen the reporting staff gradually
over the years until all the selected markets are covered.
Descriptive market schedules
For every market selected for price reporting, a schedule
should be drawn up to show certain important details. (A suggested
schedule is given at Appendix II). Firstly, the schedule should
give the market's identification - where is it located; in what
direction and at what distance from a well-known place; and by what
route is it reached? Is it situated on a river bank, or near a lake,
or in hilly terrain, or in a desert area or a plains region? Is
it approachable by rail, by road, or by boat? Secondly, what are
the means of communication; i.e. are postal, telegraph and telephone
facilities available in the market, so that the price reporter knows
in advance the fastest means to adopt in case of need?
For each market should be indicated details of the
individual commodities traded and their varieties and qualities
for which price data are to be collected. The nature of the market
should also be stated, i.e. whether the market is a farm-gate location,
a primary, secondary or terminal wholesale market, or a retail market.
If this function varies with commodities, it should be stated separately
in respect of each. A detailed inventory of market practices should
also be included (see Appendix II, para. 7).
Lastly the price reporter should be informed through
the schedule about any institutions, such as a market committee
or a chamber of commerce, and any individuals who are well conversant
with the market, the system of sale adopted in it, the marketing
practices and charges, etc., to whom the reporter may turn for clarification
or closer understanding.
It should be emphasized that all the information about
markets will have to be kept up-tc).-date and the schedules revised
periodically since they will be in constant use not only by the
price reporters but also in headquarters.
Price reporting form (prices
received by farmers)
The descriptive schedules will provide essential information
for the completion of the standard form which all price reporters
will be required to transmit to their headquarters. Such a form
should include the following details:
Price reporting form for prices received by farmers
Name of market:
Sub-region (county or district):
Region (province):
Prices as on (date):
Time of visit to market:
| Commodity |
Modal Variety &
Quality orStandard Specification(specify) |
Standard unitof weight(specify)
|
Prices per standard
unitof weight |
Nature of price (i.e.
farm-gate, primary, whole, retail, etc. (specify) |
| 1 |
2 |
3 |
4 |
5 |
| |
|
|
|
|
| Date of Despatch: |
Signature of price reporter: |
From the prices for a particular modal variety and
quality recorded in column 4, the farm-gate modal price will be
calculated at headquarters (see: Averaging
for comparison purposes) unless the price reporter is sufficiently
experienced to determine the modal price himself.
Instructions for field staff
In addition to the descriptive market schedules appropriate
to his place of work and a set of price reporting forms, each price
reporter should also be provided with a set of instructions drawn
up for his guidance. The instructions should, inter alia, cover
the following:
- Definition of the term ”price received by farmers” (i.e. the
farm-gate price).
- How this price will be estimated by headquarters staff depending
on whether the market is a primary/secondary wholesale market
or retail market.
- Commodities, varieties, qualities for which price statistics
are to be collected.
- Price reporting days.
- Peak marketing hour when prices are to be collected.
- Need for the price reporter to obtain prices by actually visiting
the market and observing a few major transactions, besides making
oral enquiries.
- Unit of quotation; table of conversion coefficients.
- What to do if the selected variety goes off the market; or if
both old and new crop products are being sold simultaneously;
or if the price of a commodity is statutorily controlled; or if
the market is closed on the reporting day.
- An explanation of the columns of the price reporting form,
- Addresses to which the price reporting form should be despatched
after it has been completed.
- Instructions for collecting ancillary information (see: Ancillary
information).
- Instructions for updating the descriptive market schedules.
In the instructions to the price reporters, it should
be emphasized that the completed schedule should be despatched on
the reporting day itself so that it reaches the headquarters price
collection authority with the least delay. Sometimes the requirements
of the headquarters authority are so urgent that the price data
may have to be telegraphed, telexed or telephoned. This is particularly
the case when these data are to be broadcast to farmers over radio
or television to enable them to take informed marketing decisions.
Price spread
The descriptive schedules for each selected market
will enable the headquarters staff to ascertain the merchandising
charges, handling and transport charges, wholesaler's margin, etc.,
for each commodity which must be deducted from the wholesale market
price of that commodity in order to arrive at the price received
by the farmer at the farm-gate. These deductions will be extended
if the price received by the farmer at the farm-gate is to be worked
backwards from the retail market price. The example in Appendix
III illustrates the process of estimation of farm-gate price from
the secondary wholesale market price.
Sampling for price statistics
In the market approach, it is envisaged that markets
would be selected m the basis of sensitivity and representativity,
and that the price reporter would provide quotations on the basis
of oral enquiry in the selected market supplemented by physical
observation of a few major transactions on the reporting day. In
this context, it is worth considering whether, to achieve greater
objectivity in price collection, resort should not be had to sampling
techniques,
Probability sampling methods have been used extensively
in the estimation of area and yield of crops, but such methods have
been so little used in the collection of price statistics that it
is difficult to prescribe a standard methodology of general applicability
in this field. Even in statistically developed countries where sampling
techniques are used for the collection of agricultural prices, it
is admitted that there are many practical and theoretical difficulties
to be overcome. For example, it is not easy to define the sampling
unit and the problem of constructing a comprehensive and up-to-date
sampling frame is a difficult one. A market transaction where a
price is quoted is a complex event with many dimensions; a price
quotation is an attribute of a transaction, but it is hardly practical
to use a transaction as a sampling unit in a single or non-stratified
sampling design. Transactions take place over time and throughout
the length and breadth of a country but they cannot be listed in
advance. Naturally, therefore, recourse has to be had to area sampling
procedures if it is desired to use, sampling for collection of price
statistics; and preferably, this should involve at least a two-stage,
or better, a multi-stage, stratified random sampling design. Farmers,
farm-gate locations, wholesalers, wholesale markets, retailers,
and retail markets, stratified according to some suitable criterion
such as administrative or other locational characteristic, or volume
of transactions, or type of commodities marketed, or magnitude of
price variations, could serve as the first stage sampling units.
In each stratum, transactions over time and by commodities could
be the subsequent stages of sampling. The sample may be a fixed
one (which is generally suitable for temporal comparisons) or a
changing one with a fixed sub-sample (which may be suitable for
both comparison and valuation purposes). As experience accumulates,
further improvements may be effected in the sampling design. It
is, however, evident that owing to the skewness of the distribution
of sampling units in respect of various attributes, refinements
will have to aim at ensuring adequate stratification so that each
stratum is as homogenous as possible.
The difficulties of designing an efficient sample
for the collection of price statistics calls into question the reliability
of data collected through this approach it is a moot point whether
the hoped-for gain in objectivity of data is really commensurate
with the time and energy spent in evolving a suitable sampling technique.
Furthermore, in countries where fast computing facilities are inadequate,
the entire exercise of calculating average prices from data collected
by sampling may prove to be so time consuming that the results,
when available, are out of date, and hence of no use for quick decision
making. These factors go to explain why sampling is not yet the
general routine for regular price data collection.
Survey of farmers for collecting
prices received
So far, the discussion has presumed that prices data
would be collected through inquiries conducted by price reporters
in the selected markets. It may, however, be equally satisfactory
to make inquiries from the farmers themselves about the prices which
they have received instead of (or, perhaps in addition to) collecting
prices in the market. Under such a procedure, a sample of farmers
would report either directly (if they are literate and willing)
or through price-interviewers, the prices which they have received
for selected commodities, varieties and qualities. The sampling
procedure to be adopted would need to be such as would yield a sufficiently
representative and numerous sample of farmers to ensure reliable
averages.
Considering, however, the difficulties involved in
resorting to this procedure (e.g. the costs of travelling if interviewers
are employed) it is probable that the survey approach alone will
not be very satisfactory, U, m the other hand, this method is used
as a supplement to the market approach, it could serve as a useful
check on the farm-gate prices estimated from wholesale or retail
market prices. Where a survey of farmers has to be made as the sole
method of collecting prices received by farmers, the desirability
of a gradual shift to the market approach (as the marketing system
improves in the country) should always be kept in view, since the
market approach is able to give more representative data.
Other sources of price statistics
Apart from the collecting and disseminating of price
statistics by the public t authority, in most countries newspapers,
commercial journals, and agricultural and trade organizations also
publish market reports and/or price data. At first sight, such data
would appear to be useful, for example, as a corroborative check
on the price statistics flowing from the market reports in the national
price collection systems. But great caution needs to be exercised
in using such data. For one thing, bias cannot be ruled out altogether;
for another, definitions of the term ”price” and other concepts
used in the collection of these data may differ widely over time,
space, commodities, varieties and grades, thus preventing their
comparison with the price statistics gathered by the national price
collection authority.
Ancillary information
Price data in themselves do not throw sufficient light
on the process of price formation from day to day. Prices in a free
market economy are determined by the forces of supply and demand.
Supply is determined by the quantity offered for sale, that is the
closing stock of the previous day plus the fresh arrivals of the
day. Demand is represented by the off-take from the market, i.e.
the quantities sold for local resale and for shipment to other places.
Thus additional information m supply quantities goes a long way
to providing an insight into the price formation process why prices
are rising if they are rising, why falling if they are falling.
A comprehensive programme for the collection of price
data should therefore aim also at collecting the quantities of each
variety transacted at a quoted price. These details would be invaluable
in using price data Por valuation purposes and for assisting administrators
in the formulation and implementation of price support and price
stabilization policies.
Visits by price reporters to selected markets can
also be used for collecting market intelligence: why the price quoted
is high or low; is crop production likely to be higher or lower
than last year; is any demand-pull factor operating; is any dislocation
in transport likely to occur; is any Cornering of the commodity
by a producer or trader likely; is the magnitude of marketing
charges likely to undergo a change; is the quantity unloaded on
the market so large as to lead to storage bottlenecks, etc.? Equally
important would be information m market sentiment or 'future outlook:
is the market going to be bullish or bearish in the coming few days
and, if so, why?
Only the most experienced of price reporters could,
however, be expected to operate this way and only then with the
help of well-worded questionnaires. For the majority of reporters,
unfortunately, the work will be beyond their capabilities.
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