Why price volatility matters? Case of onion and tomato markets in Karnataka

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 onion and tomato in selected centres of Karnataka one of the largest producing States in the country. Major districts and then market centres in each were identified. Prices from AGMARKNET were examined for these centres for the last five years, 2013 to 2017. The study showed high variability in prices across months, centres, and years. The variation in prices across the centres was analysed using the average modal price for the agricultural year as a whole. There were more or less similar year to year variation across the centres in both 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 and the intra month coefficient of variation was also calculated and revealed very high coefficient of variation of more than twenty per cent over the five years. Decomposition of onion and tomato prices into seasonal, trend and cyclical and irregular factors was undertaken. Improved storage and processing infrastructure and implementation of Market Intervention Scheme consistently can help reduce price fluctuations in onion and tomato and stabilize farmer's incomes.