In many developing countries, crop Minimum support price (MSP) is a subsidy scheme to: (i) improve farmer welfare by safeguarding farmers' incomes against vagaries in crop price, and (ii) improve consumer surplus by ensuring sufficient crop production. Among different mechanisms to ope-rationalize an MSP scheme, we focus on credit-based MSPs under which government will credit farmers should the prevailing market price be below the pre-specified MSP. By accounting for the implementation cost of MSP we examine the effectiveness of MSP in terms of net benefit (i.e., farmer's surplus minus the implementation cost) and net social value (i.e., sum of farmer's and consumer's surpluses minus the implementation cost) in a market that consists of risk-averse farmers with heterogeneous production costs. Also, farmers face two types of uncertainties: (1) market uncertainty and (2) production yield uncertainty.We find that a credit-based MSP can induce crop production, which is intuitive. However, we find some more interesting results: (i) offering a higher MSP may not improve farmer's surplus, (ii) the {net benefit of MSP can be negative: the cost of offering MSP can exceed farmer's surplus, and (iii) there exists an MSP that maximizes the {net social value. We extend our single crop model to the case of two crops to capture the inter-crop MSP interaction. We show that when one crop is more rewarding but riskier than the other crop, then it is sufficient to offer an appropriate MSP for one of the two crops, while offering no MSP to the other crop.

This book focuses on three essential elements of agricultural supply chains: Planting and Growing, Processing and Selling, and Government Interventions. For decades, most agricultural economists applied macro-economic theory in decisions pertaining to the optimization of food production and distribution. However, few researchers used micro-economic theory to examine how individual farmers respond to market information, incentive pricing mechanisms and different market structures in the trade of agricultural goods. Examining challenges in agricultural supply chain operations through the lens of micro-economic theory is imperative because it can enable policymakers and social enterprises to develop and design market information provision policy, incentive contracts and market structures for improving farmer and consumer welfare. In each chapter, contributing authors motivate their research questions by providing the context and articulating the importance of their questions. They present their analysis to examine the respective research questions and explain their results. At the end of each chapter, they provide a short list of future research questions.

In many developing countries, governments often use Minimum support prices (MSPs) as interventions to (i) safeguard farmers' income against crop price falls, and (ii) ensure sufficient and balanced production of different crops. In this paper, we examine two questions: (1) What is the impact of MSPs on the farmers' crop selection and production decisions, future crop availabilities, and farmers' expected profits? (2) What is the impact of strategic farmers on crop selection and production decisions, future crop availabilities, and farmers' expected profits? To explore these questions, we present a model in which the market consists of two types of farmers (with heterogeneous production costs): myopic farmers (who make their crop selection and production decisions based on recent market prices) and strategic farmers (who make their decisions by taking all other farmers' decisions into consideration). By examining the dynamic interactions among these farmers for the case when there are two (complementary or substitutable) crops for each farmer to select to grow, we obtain the following results. First, we show that, regardless of the values of the MSPs offered to the crops, the price disparity between the crops worsens as the complementarity between the crops increases. Second, we find that MSP is not always beneficial. In fact, offering MSP for a crop can hurt the profit of those farmers who grow that crop especially when the proportion of strategic farmers is sufficiently small. Third, a bad choice of MSPs can cause the expected quantity disparity between crops to worsen. By taking these two drawbacks of MSPs into consideration, we discuss ways to select effective MSPs that can improve farmers' expected profit and reduce quantity disparity between crops.

Governments of many developing countries offer minimum earnings to farmers through crop Minimum support price (MSP), which guarantees minimum revenue to farmers who cultivate the crop. The crop procured by a government through MSP is later distributed among poor consumers at subsidized prices through public distribution systems (PDS). Thus, governments combine MSP with the PDS scheme to simultaneously ensure farmers' welfare and tackle poor consumers' hunger and nutrition problems. However, improper implementation of the schemes causes burgeoning stockpiles in government warehouses, which eventually causes a substantial increase in operational costs and food wastage. In this paper, we characterize the optimal joint MSP and PDS policy over a finite horizon for two objectives: (i) minimize the total cost and (ii) maximize the net value after accounting for farmers' benefit.Using the data over 15 years, we show that the optimal policy can substantially reduce operational costs (by about 85 %) and improve the net value (by about 1.8 trillion INR). We use a linearly constrained quadratic stochastic dynamic program formulation to model the problem. We derive a simple and efficient joint MSP and PDS operational policy that provides the optimal quantity of crop that should be disbursed through PDS in the current period and the optimal MSP that should be announced for the subsequent period. Our policy is easy to compute and implement and can help policymakers efficiently implement MSP and PDS programs jointly. Our model provides a basic framework to solve the joint MSP and PDS problem and can be modified to incorporate other aspects through additional constraints.

Study of agricultural price and related price policies in developing countries, with partic. Reference to India - discusses trends (1954- 1980), objectives of price supports and administered prices, difference between pricing of agricultural products and industrial products, price-elasticity of agricultural production, calculation of price index numbers of wholesale price and retail price, seasonal price variations, importance of production cost in pricing, impact of terms of trade and agricultural markets, etc. Bibliographys and graphs.