Policy Imperatives: Stabilisation of Production and Price Swings of Potato and Onion Crops in Pakistan

Potatoes and onions are bracketed “,ith other minor crops, but are consumed as a table food in almost every household. Thus both commodities are listed as sensitive food items. Production instability and erratic price behaviour of these crops adversely affect both producers and consumers. This leads to excess supply/demand situation with resultant price swings. These fluctuations are studied for the period 1972 to 1990-91. The demand for potatoes and onions is highly price inelastic (-0.07 and -.13 for potatoes) and (-0.10 and -0.17 for onions) in rural and urban areas, respectively [Najmi (1991), p. 193J. The year-to-year swings in supply coupled “ith an inelastic demand causes wide fluctuations in prices. Given a change in price, the change in quantity supplied is lagged and or distributed through time. Thus, a one-time increase in price would result in observed increases in quantity supplied over two or even more years. For both the crops, higher prices lead growers to increase production in a following period, which adversely affect prices and this in tum reduces acreage/production in the subsequent years and so on.