Account for the failure to establish the prices of agricultural products
- Long gestation period of agricultural products. Agricultural products take long time to mature such that in case of high prices in short run, supply cannot be reduced in case of a predicted fall in price in long run.
- Natural factors. The occurrence of a factor such as bad weather, pest and disease, drought, floods affect the output causing high prices while disappearance of such factors increases output hence low price.
- Perishability and difficulty of storage. Agricultural products tend to go bad quickly and due to poor facilities, producers are forced to sell immediately at the existing price.
- Weak bargaining position on the world market. The price for agricultural products is only indicated by the developed countries and major buyers.
- Bulkiness of the products. Agricultural products are bulky which makes transportation from areas of low prices to areas of high prices difficult. Hence selling at existing prices.
- The poorly planned production. Most producers tend to relate the current output on the previous price and future output on the current prices (cobweb cycle) leading to price fluctuations.
- Growing competition from synthetic substitutes. Synthetic substitutes from developed economies have out competed the agricultural products from Uganda since they are of poor quality.
- Divergence between planned and actual output levels. Due to unavoidable factors, the actual output tends to vary from the planned output level causing price instability.
- Technological development in developed economies. The development in technology has promoted the raw material saving method of production, which require less of the raw material from LDCs, making planning output difficult hence price instability.
- Agricultural products are used as mere inputs of industrial products. They form a small part of final products making the absorption of excess supply difficult.
- Poor surplus disposal machinery. The poor infrastructure mostly in form of poor transport facilities make it difficult to get rid of surplus output from areas of low prices to those with high prices.
- The price inelastic demand for agricultural products. The demand for agricultural products tends to be inelastic such that a very wide change in price can cause a small change in quantity demanded.
- Limited levels of diversification because of the tendency to overspecialization in certain crops lead to fluctuation of prices of certain agricultural products.
- Weak international commodity agreements that have times failed to regulate quotas and prices of agricultural products from member countries.
- Changes in cost of production. When production costs increase, prices of agricultural product will increase.
CATEGORIES Economics
TAGS Dr. Bbosa Science
