Abstract:-
Across developing countries, smallholders tend to sell their produce immediately after harvest, when prices are low and in the case of foodgrains, buy them in the market when prices are higher. Policy makers have grappled with interventions to encourage smallholder farmers to hold on to harvests for a better price. In this paper we focus on an intriguing and opposite problem, recently apparent for cash crops such as soyabean and cotton in India, that farmers may be storing for longer than is optimal. Using a survey of 4500 soyabean farmers in Marathwada in 2022-23, we use a behavioural economics approach to understand storage decisions of farmers and the returns to storage. In this ongoing work with colleagues, we attempt to answer three questions: (1) what does our survey reveal about our conventional notion that farmers sell immediately after harvest? (2) To what extent do farmers’ expectations of future prices drive storage decisions? (3) Do soyabean farmers in our sample face negative returns to storage on account of their expectations? This work is potentially important in uncovering hitherto underrecognized in factors that prevent farmers from benefitting fully from commercialization.