Fluctuating Prices and Declining Income of Farmers

Fluctuating costs and Declining Income of FarmersINTRODUCTION dry land is the growing of crops and the rearing of animals. major(ip) agricultural products take on fish, cereals, cattle, vegetables, oilseed, poultry, potatoes, sheep. Farming contributed 5.6 billion to the UK economy in 2006.In the last 25 years, cultivation in Britain has transformed a lot. Farming provided employment for quite a number of people, but nowadays, with the help of machinery and equipment, and the problems associated with evokeing, only if a few people remain on the provoke.The total do work force employed in agriculture in the UK is 541,000, of whom 190,000 ar employees and the be 351,000 are self-employed sodbusters, partners, directors and spouses. Overall, 1.8% of the UKs workforce is directly employed in farming .The UK food chain accounts for al virtually 8% of the total economy (RuSource, 2008).However, farmers arouse always faced problems such as Increasing population growth, weewee lo gging and salinity, converting the arable land into non-agricultural uses, high terms of production, fluctuating outlays, declining income, increase tax etc.But this article will focus in the first place on why farmers suffer been facing fluctuating prices and declining income over the years. footing AND gardening cost is the amount of money needed to purchase something or the measuring stick of payment or compensation for something. A price variant is a miscellany in the price market. Agricultural experts and businesspeople strike blamed fluctuating commodity prices, difficult capital accesses and poor schooling of downstream industries for poor performance of the countrys agricultural industry.Some of the causes of price fluctuations in agriculture includes seasonal change in supply which is adversely bear upon by natural or climatic factors, lack of finance, use of unskilled implements, seasonal in briefage of subscribe, etc.The market structure of a farm which is perfect competition also affects the price. The market structure is such that the farmer cannot influence the price. The price is determined purely by the forces of demand and supply.harmonize to PT Perkebunan Nusantara (PTPN) IV executive director Dahlan Harahap, fluctuating prices influenced the agricultural industrys performances because most of the companies relied on their revenues on exports. Several major commodities which are mostly exported include crude palm oil (CPO) (77 percent exported), rubber (83 percent), cacao (86) and drinking chocolate (70).INCOME AND AGRICULTUREIncome is the con affectionatenessption and savings opportunity gained by an entity within a specified time frame, which is generally expressed in monetary terms. However, for households and individuals, income is the sum of all the wages, salaries, profits, divert payments, rents and other forms of earnings received in a given rate of flow of time. For firms, income generally refers to net-profit what remains of revenue after expenses sire been subtracted.Farmers amaze faced declining income over the years due to high cost of production and low return to investment. According to Dahlan, high bank interest is one of the factors impeding the countrys agricultural industry. Indonesia, he added, sets the highest bank interest pasture in Southeast Asia. This however affects farmers income.UK farming incomes are defined at the industry level by a measure known as Total Income from Farming (TIFF) and at the farm level by a measure known as Net Farm Income. Both measures flip exhibited long term decline since the 1960s, reaching a low show up in 2000 with average Net Farm Income at just 8700.Governments of umteen countries hold felt it expedient to intervene in agricultural markets, and have resorted to different forms of controls and subsidies. These have often led to the accumulation of vast surpluses, which have sometimes rotted in storage and sometimes been sold oversea at sub sidized prices.The theory of demand and supply can be used to understand why farmers face fluctuating price and declining since Price is a reflection of supply and demand. strike AND SUPPLY IN AGRICULTUREThe agricultural sector is a genuinely unique sector in economics because it displays characteristics in terms of the demand for and the supply of its goods not seen in any other sector. The principal characteristics of demand are that it is both income and price inelastic and it has high dependency on population and tastes which cause demand to be static in both the piddling and the long pack. On the other hand supply is very volatile in the short run due to extraneous factors because supply is a biological at consort though in the long run due to technological advances we tend to observe an increasing trend.Also, because agricultural products are perishable and because the production catamenia is long, supply will be inelastic so producers will have to supply in the short run even at very low prices.Another characteristic of supply is its atomistic structure and plus fixity. These basically imply that there will be a vast number of insignificant producers and that most agricultural asset will be fixed. These have various implications for prices which are very unstable in the short run and in the long run present a declining trend. in addition farm incomes tend to be unstable in the short run and converge in the long run though it must be noted that this is also due to extensive organization subsidisation of agriculture.DEMANDDemandrefers to how much (quantity) of a product or service is coveted by buyers. The quantity demanded is the amount of a good that a consumer is volition and able to buy at a given price over a given period of time.Demand curve is a represent showing the relationship between the price of a good and the quantity of the good demanded over a given time period. Price is measurable on the vertical axis quantity demanded is measu red on the horizontal axisThe law of demand states that the quantity of a good demanded per period of time will fall as price rallys and will rise as price falls, other things creation equal (ceteris paribus).Demand on price and incomeAccording to Richard and Chrystal (2007)Agricultural production is subject to large variations resulting from factors that are beyond human control. For example, bad weather reduces output below that plan by farmers while exceptionally good weather pushes output supra planned levels.InelasticdemandDeEElasticdemandD1 PriceInelasticdemandP0ElasticdemandQuantity0 q1 q0 q3 casual changes in output.Figure 3.1 Unplanned fluctuations in output (Richard and Chrystal 2007)Because farm products often have inelastic demands, large price fluctuations causes unwitting changes in production which in turn affects farmers income.Stabilization of agricultural prices Farmers are allowed to care their whole crop each year. When production unexpectedly exceeds normal output, the organisation buys in the market. It allows price to fall, but only by the said(prenominal) correspondence that production has increased. When production unexpectedly falls short of normal output, the government enters the market and sells some of its stocks. It allows price to rise, but only by the same proportion that production has fallen below normal. Thus, as farmers encounter unplanned fluctuations in their output, they encounter exactly offsetting fluctuations in prices, so that their revenues are stabilized. In effect, the government has converted the elasticity of demand from being inelastic to being unitary. With a unit elasticity the total revenue of sellers does not change as quantity changes, because given percentage changes in quantity are offset by equal percentage changes of price but in the opposite direction.Figure 3.2 Income stabilization (Richard and Chrystal 2007)Income stabilization is achieved by allowing prices to fluctuate in inverse proportion to outputAppropriate government intervention in agricultural markets can reduce price fluctuations and stabilize producers revenues.