It is easy to forecast price spikes in commodities like onion and potatoes – Only one has to search for clues at the right place, at the right time for the right factor !

 

There is an old proverb saying A good understanding of history can help in predicting the future. With the world moving fast towards harnessing the hidden trends from the digital data available, Big Data and Analytics have become a key aspect of the Information Technology Industry. But, we got to admit that apart from the happenings around the world and technology disruption, what matters the most to majority of the common citizens of any country is the inflation and the deviation in the monthly household expenses. Sudden price spikes in the basic food commodities like Onion and Potatoes can have serious dents on the monthly food expenses for any household. The distress related to this has even ousted a ruling political party from power in the past.

Looking at the historical trends and gaining insights from the prices of these items can help in forecasting the price spikes. If you are not aware, there is an official government website AgMarknet which has historical data and trends related to agricultural products in the form commodity wise graph, market wise graph, daily market report and various price trends. You can also tweak the dashboards available there, using trying permutation and combination of various related parameters. Apart from these, there are also a lot of research studies published over there which can help in a better market understanding for you.

There are some statistical methods which have been in place for forecasting the prices like Auto Regressive Integrated Moving Average (ARIMA) model (Box-Jenkins models) and Moving average method. It may sound too technical or a research based subject, but it is in fact, a very basic observation for a person who understands this market. Some of the key considerations which affect the price of onion and potato are the fluctuations in area, weather production and yield, irrigation facilities, demand-supply ratio, cultivation cost, labour and transportation charges, stocking and storage facilities. Noting down the peak prices period during the past few years and understanding the reasons for the same, can give you a quick forecast of when the prices will go up again.

Sometimes, due to illegal and purposely fabricated shortage of products in the market, the prices soar. Similarly, sometimes unfavourable weather causes damage to these items while a sudden global increase in the oil prices increases the transportation costs and ultimately the price. It is notable to see that the onion prices spiked heavily during the years of 2011, 2012 and 2013. The reason can be attributed to unseasonal rains, shortage in production and inadequate storage facilities.

There are a lot of inferences that can be derived from the above points for stabilising the prices of commodities like Onions and Potatoes. Firstly, there has to be reliable data on the state of production, monitoring a reliable supply chain and the build-up of the stocks. Secondly, we should try to bridge the gap between the agricultural scientists, farmers and other stakeholders of the industry to facilitate a better co-ordination between the demand and supply. Lastly, we need to take pro-active measures to forecast the spike in prices and devise corrective measures in advance.

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