2.3.5 What price trends are anticipated after an average, above average, and below
average harvests?
The normal price behavior of a commodity
4
 within a marketing season follows a fairly
predictable pattern (Figure 2.1).  At harvest time prices fall to a seasonal low.  There are
two reasons for this that mutually support each other.  First, at harvest more of the
commodity is sold on the market.  Even households that are not surplus households tend
to sell during this period to meet their cash needs (e.g., to repay a debt or pay a bill such
as school fees).  Also, it is at this time of the year that some rural assemblers of
commodities are particularly active in more remote areas, providing an easy market
outlet. The other factor that depresses prices at harvest time is that the amount demanded
decreases.  At this time almost all households (even households that do not produce
enough to meet their food needs for the entire year) have enough food, and therefore do
not demand the same amount in the market as other times of the year.  As time passes
after the harvest, the price of a commodity tends to rise.  During this period the amount of
a commodity offered on the market (supply) tends to decrease; and the amount of a
commodity demanded (from deficit producing households) tends to increase.  During this
period commodity sellers sell prices that reflect the original cost of the commodity, the
cost of storage, and some profit margin. This pattern continues until the harvest prospects
of the current agricultural season becoming increasingly known.  At one point (the peak
in the graph) the harvest prospects are know with sufficient certainty (in this example that
it will be a normal year) the price begins to fall in expectation of the coming harvest.
Sellers with a surplus will begin selling their stocks, depressing the price.  When the
harvest begins and more of the commodity is sold in the market, the price begins a rapid
decline.
Figure 2.1: Seasonal price patterns with different harvest outcomes
Below Average
PRICE
Average
Above average
TIME
Quality of
Harvest
harvest
known
                                                
4
 For the purposes of this section, we will assume that little or no inflation and a competitive market
structure.
8
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