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Market timing, farmer expectations, and liquidity constraints

Author

Listed:
  • Albuquerque, Rui
  • de Araujo, Bruno
  • Brandao-Marques, Luis
  • Mosse, Gerivasia
  • de Vletter, Pippy
  • Zavale, Helder

Abstract

We use data on price expectations from a survey of randomly sampled smallholder farmers in Mozambique. Across all crops, farmers report selling on average within three weeks of harvest, at lower prices than expected later in the season. Liquidity constrained farmers sell their harvest 50% faster than unconstrained farmers, but they increase their storage time in response to higher expected future prices. We address causality using an instrumental variables approach exploiting abnormal rainfall from cyclones Idai and Kenneth. We develop a model on market timing and its relation to price expectations and liquidity constraints.

Suggested Citation

  • Albuquerque, Rui & de Araujo, Bruno & Brandao-Marques, Luis & Mosse, Gerivasia & de Vletter, Pippy & Zavale, Helder, 2024. "Market timing, farmer expectations, and liquidity constraints," Journal of Development Economics, Elsevier, vol. 168(C).
    • Handle: RePEc:eee:deveco:v:168:y:2024:i:c:s0304387824000178
    DOI: 10.1016/j.jdeveco.2024.103268
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    More about this item

    Keywords

    Liquidity constraints; Price expectations; Product–market timing; Storage conditions;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance

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