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Field
Abstract
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Before
It is often observed that smallholder farmers sell most—if not all—of their marketable surplus or cash crops immediately after the harvest to itinerant traders at the farm gate. Selling immediately after the harvest is not optimal. Thin and poorly integrated markets mean that immediately post harvest, prices in excess supply areas drop. Later, during the lean season when some of the farmers run out of stock, prices have recovered, or even increase further since farmers start to buy back. This leads to the “sell low buy high” puzzle (Stephens and Barrett, 2011; Burke et al., 2018). In addition to high supply immediately post harvest, agricultural commodities are often not yet in optimal condition. For instance, in the case of maize, fresh grains are generally not dry enough, requiring further processing and leading to increased risk of rot by the trader. Often, this is used by buyers as a reason to further drive down the price paid to the farmer. In this study, we zoom in on three potential behavioural explanations why farmers seemingly sell at sub-optimal time. One potential explanation is situated at the household expenditure side, and assumes that households face challenges in accurately predictive future expenditures. Such budget neglect leads farmer to sell more early on and save too little for later in the year. A second potential explanation is situates at the household income side. Here the assumption is that farmers face cognitive challenges in making inter-temporal cost benefit calculations (Drexler et al., 2014) and fail to commit to certain thresholds (Ashraf et al., 2006; Duflo et al., 2011). In a third potential explanation, we test if farmers are subject to recency bias—a cognitive bias that favors recent events and under-weight less salient data such as long-term averages.
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After
It is often observed that smallholder farmers sell most—if not all—of their marketable surplus or cash crops immediately after the harvest to itinerant traders at the farm gate. Selling immediately after the harvest is not optimal. Thin and poorly integrated markets mean that immediately post harvest, prices in excess supply areas drop. Later, during the lean season when some of the farmers run out of stock, prices have recovered, or even increase further since farmers start to buy back. This leads to the “sell low buy high” puzzle (Stephens and Barrett, 2011; Burke et al., 2018). In addition to high supply immediately post harvest, agricultural commodities are often not yet in optimal condition. For instance, in the case of maize, fresh grains are generally not dry enough, requiring further processing and leading to increased risk of rot by the trader. Often, this is used by buyers as a reason to further drive down the price paid to the farmer. In this study, we zoom in on three potential behavioural explanations why farmers seemingly sell at sub-optimal time. One potential explanation is situated at the household expenditure side, and assumes that households face challenges in accurately predictive future expenditures. Such budget neglect leads farmer to sell more early on and save too little for later in the year. A second potential explanation is situates at the household income side. Here the assumption is that farmers face cognitive challenges in making inter-temporal cost benefit calculations (Drexler et al., 2014) and fail to commit to certain thresholds (Ashraf et al., 2006; Duflo et al., 2011).
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