Precision Forecasting in Onion Prices in major markets of Maharashtra

for Research Review Committee

Dr. S.V. Warade

Assistant ProfessorSchool of Agri-Business Management, Nagpur

Dr. PDKV, Akola

Importance

•Onion production = 14.56 million tons

•Second largest producer in the world after china•. •Kharif production is 40-50 % and Rabi production is 50-60 %. •Area = 10 lakh hectares

•Productivity is 15.00 ton per hectare

Importance

•Major onion producing state = Maharashtra, Andhra Pradesh, Karnataka and Gujrat.

•Maharashtras’ shares 30-40 %.

•India exports = since 1952 with 5000 tonnes.

•India export onion 1.16 million tons to Gulf and Europe countries, Malaysia, Japan, Bangladesh and Shri-Lanka. (12.86% in total export)

Importance

•Well known varieties: N-53, Baswant -780, N2-4-1, N-257-9-1, phule safed, phule suvrna, FDR, AFLR.

•India has pushed production through onion and garlic research centres and export through NAFED and different cooperatives. •. •Price of onion has been always a news•.•The price change in onion has major influenced the food inflation rate.

•The price raise in overall vegetables was 58.58 % last year.•Prices of onion ranges from Rs.100(Min) to Rs. 8000 per quintal(Max).

Objectives

1.To estimate the effect of volatility in onion prices.

2. To forecast onion prices with best suitable methods

Methodology

Data : Daily recorded Period January 2002 to Feb 2012

Source: from the government published website i.e. www.agmarknet.com.Data is collected for minimum price, maximum price and model price. The data is collected for 44 major marketsThe 14 markets data is finalized for analysis

MethodologySelected markets

S.No.

MarketNumber of additional

sub-market1 Ahmednagar2 Chandvad(Nasik)

3 Junnar (Ahmednagar)Junnar(Otur) and Junnar(alphata)

4 Lasalgaon(Nasik) Lasalgaon (Niphad)5 Malegaon(Nasik)6 Malegaon(Nasik) Malegaon(Umarane)7 Mumbai8 Nagpur9 Newasa (Ahmednagar) Newasa(Ghodegaon)

10 Pimpalgaon(Nasik)Pimpalgaon

Baswant(Saykheda) (Nasik)11 Pune12 Rahuri(Ahmednagar) Rahuri(vambhori)13 Solapur14 Yeola(Nasik)

Methodology 1) To estimate the effect of volatility in onion prices.

To achieve the objective i.e. to estimate the volatility in onion prices, GARCH i.e. (Generalized Autoregressive Condition Heteroscedasticity) model is fitted as follows. Estimation of error term

Pt = a + bt + uWhere,

P = Price of commoditiesa = Constant bt = Regression coefficient t = Time (daily data)u = residual term / error term

Methodology GARCH Model

σ2 = + u2 (t-1) + σ2(t-1)

Where, = constant = Coefficient of u2 = Coefficient of variance of u2σ2 = variance u2 (t-1) = lag value of squared error term at time (t-1)σ2 (t-1) = lag value of variance at time (t-1)

Volatility : Standard deviation (SD) = √σ2

Methodology To forecast onion prices with best suitable methods

To know the best forecasting method suitable for onion price, most recognized ARIMA and Exponential smoothing models with seasonality effects are tried and compared with really obtained prices.

The linear trend: horizontal and vertical as well as decomposition forecasting methods are also tried but it could not give effective results  

Methodology2.1) The Auto-regressive Integrated Moving Average model(ARIMA model) is fitted considering the significant lags from Auto-correlations(ACF) and Partial Autocorrelations(PACF).ARIMA Model

Pt = a+ b1Pt-1 + b2Pt-2……bnPt-n + ut + c1ut-1 + c2ut-2…..cnut-n _____AR_____________ ________MA___________

Pt, = Price at current traded day

Pt-1 = Price at previous traded day(lag term)/season

a, b1, b2: Coefficients of lag price term

ut = Error term on current traded day /seasonal price

ut-1 = Error term of previous day(lag term)/ seasonal price

Coefficients: c1, cn of lag error term The function is fitted on the basis of knowing stationary of the series. If the series is non-stationery, then it is integrated by differencing and made it stationery.

Methodology 2.2) Exponential Smoothing model with multiplicative seasonally Season -1 includes March, April, May and June. (prices goes down)Season -2 includes July , Aug, Sept and Oct(prices start increasing) and Season-3 includes Nov, Dec, Jan and Feb(prices take top)

Lasalgaon Monthly Onion Price Graph

Methodology 2.2) Exponential Smoothing model with multiplicative seasonally Level Lt = (Yt/S t-s )+ (1- )(L t-1 + b t-1)Trend bt = (Lt - Lt-1) + (1-)b t-1

Seasonal St = Yt/Lt + (1-) S t-s

Forecast F t+m = (Lt + btm) S t-s+m

Yt = Price St = seasonal componentLt = Level of the seriesBt = trend,F t+m = Forecast for m period, and = weights 

 

Results: Volatility in Onion Prices

Table 2: Volatility in Daily Onion Prices of Mixed Onions in Major Markets of Maharashtra State

Sr. No Market Volatility     Overall Max Min1 Ahmednagar 15.74 57.92 10.012 Chandvad 16.68 69.98 14.443 Junnar 18.50 42.12 15.514 Junnar(Alephata) 10.87 17.90 10.045 Junnar(Otur) 24.72 36.34 10.206 Lasalgaon 13.42 55.11 9.817 Lasalgaon(Niphad) 13.49 52.56 8.378 Malegaon 17.50 70.46 12.219 Malegaon(Umarane) 16.22 93.72 0.49

10 Mumbai 10.09 85.93 0.5411 Nagpur 10.11 48.20 9.1712 Newasa 25.26 25.83 21.7413 Newasa(Ghodegaon) 18.74 83.46 1.1214 Pimpalgaon 13.96 80.94 0.2715 Pimpalgaon Baswant(Saykheda) 20.21 69.31 18.3816 Pune 15.83 Not consistent17 Rahuri 18.19 44.59 17.0218 Rahuri(Vambori) 17.66 29.67 12.7519 Solapur 16.84 65.81 12.7620 Vashi New Mumbai 10.47 67.03 4.0821 Yeola 13.35 70.92 2.26

Results: Volatility in Onion Prices

Table No 3: Volatility in Daily Onion Prices for Red Onions in Major Markets of Maharashtra State

Sr. No Market Volatility

    Overall Max Min

1 Ahmednagar 32.12 78.82 3.24

2 Chandvad 28.30 30.50 15.49

3 Lasalgaon 21.07 55.18 14.02

4 Lasalgaon(Niphad) 20.49 24.98 12.69

5 Malegaon 23.88 147.06 1.14

6 Malegaon(Umarane) 28.16 36.41 21.00

7 Nagpur 9.83 23.85 9.03

8 Newasa(Ghodegaon) 30.96 77.67 25.83

9 Rahuri 27.26 28.85 20.05

10 Yeola 17.32 36.31 16.78

Results: Volatility in Onion PricesTable No.4: Volatility in Monthly Onion Prices of Mixed and Red Onions in Major

Markets of Maharashtra State Sr. No Market Volatility

A) Mixed Onions  1 Ahmednagar 32.572 Chandvad 39.153 Junnar 34.394 Junnar(Otur) 43.355 Lasalgaon 82.606 Lasalgaon(Niphad) 39.517 Malegaon 38.438 Malegaon(Umarane) 45.709 Mumbai 26.79

10 Nagpur 27.6711 Newasa 57.9412 Newasa(Ghodegaon) 31.9613 Pimpalgaon 34.2714 Pimpalgaon Baswant(Saykheda) 36.6215 Pune 27.7516 Rahuri 32.2917 Rahuri(Vambori) 39.6218 Solapur 39.9319 Vashi New Mumbai 29.1820 Yeola 50.31B) Red Onions  1 Lasalgaon 60.152 Lasalgaon(Niphad) 58.393 Malegaon 39.304 Nagpur 28.46

ResultsForecasting of Onion Prices

Autocorrelations Function Partial Autocorrelations Function

ACF and PACF for Lasalgaon Mixed Onions

ResultsForecasting of Onion Prices: Model Fitting

Table no. 5 : Fitting of Auto-regression, differencing and Moving averages(ARIMA) for daily prices of Onions

S.No Market Mixed Red1 Ahmednagar 2.1.4 1.1.02 Chandvad 3.1.3 1.1.13 Junner 4.1.3 NA4 Junner Alephata 1.1.1 NA5 Junner Otur 3.1.2 NA6 Lasalgaon 3.1.4 2.1.27 Lasalgaon Niphad 4.1.5 1.1.18 Malegaon 1.1.1 2.1.19 Malegaon Umrane 2.1.1 3.1.1

10 Mumbai 5.1.3 NA11 Nagpur 2.1.3 5.1.512 Newasa 2.1.1 NA13 Newasa Ghodegaon 2.1.1 2.1.214 Pimpalgaon 2.1.3 NA15 Pimpalgaon Basaawant 4.1.7 NA16 Pune 5.1.5 NA17 Rahuri 3.1.2 1.1.218 Rahuri Vambori 2.1.1 NA19 Solapur 2.1.2 NA20 Vashi 5.1.2 NA21 Yeola 1.1.1 3.1.3

ResultsForecasting of Onion Prices: Model Fitting

Table no. 6 : Fitting of Auto-regression, differencing and Moving averages(ARIMA ) for Monthly prices of OnionsS.No Market Mixed Red

1 Ahmednagar 2.1.1 NA2 Chandvad 1.1.0 NA3 Junner 2.1.3 NA4 Junner Otur 3.1.2 NA5 Lasalgaon 4.1.3 3.1.36 Lasalgaon Niphad 1.1.0 1.1.17 Malegaon 1.1.0 1.1.18 Malegaon Umrane 1.1.1 NA9 Mumbai 5.1.4 NA

10 Nagpur 5.1.4 5.1.511 Newasa Ghodegaon 0.1.0 NA12 Pimpalgaon 5.1.4 NA13 Pune 5.1.5 NA14 Rahuri 2.1.2 NA15 Rahuri Vambori 1.1.0 NA16 Solapur 2.1.1 NA17 Vashi 2.1.1 NA18 Yeola 2.1.0 2.1.2

Results: Forecasting of Onion Prices: Forecasted Price

Table No. 7: Forecasted Price of Mixed Onions for next trading days

Market Forecasted Price for Trading DaysActual Price of next trading

daysR sqr

  1 2 3 4 5 1 2 3 4 5  Ahmednagar 446.03 486.46 511.94 538.71 557.62 NA NA NA NA NA 0.925

Chandvad 489.43 468.73 492.85 500.81 469.44 NA NA NA NA NA 0.878

Junner 574.35 562.34 555.16 546.17 537.64 500 400 550 400 450 0.902

Junner Otur 788.72 782.69 846.81 703.62 764.78 NA NA NA NA NA 0.799

Lasalgaon 265.62 261.85 251.63 261.22 247.18 316 300 286 231 301 0.929

Lasalgaon Niphad 270.57 260.51 244.58 254.68 245.18 NA NA NA NA NA 0.855

Malegaon 229.91 227.88 225.85 223.85 221.86 310 350 NA NA NA 0.866

Malegaon Umrane 377.65 376.10 374.32 372.52 370.74 NA NA NA NA NA 0.692

Mumbai 1019.75 1050.95 1055.76 1064.49 1045.31 NA NA NA NA NA 0.960

Nagpur 776.38 777.11 769.39 771.47 764.52 825 825 825 700 712 0.966

Newasa 882.16 862.51 843.07 824.05 805.45 NA NA NA NA NA 0.426Newasa Ghodegaon

436.42 434.82 432.20 429.56 426.95 NA NA NA NA NA 0.698

Pimpalgaon 277.35 273.06 271.00 265.86 263.68 210 410 241 251 171 0.908Pimpalgaon Basaawant

498.87 462.70 495.56 483.02 429.94 400 222 203 350 315 0.776

Pune 553.84 563.93 556.43 566.46 564.17 520 450 475 475 450 0.907

Rahuri 417.00 426.42 419.70 416.50 411.29 355 330 315 300 277 0.712

Rahuri Vambori 395.15 390.26 385.43 380.66 375.94 375 350 NA NA NA 0.915

Solapur 461.01 478.31 471.21 470.84 468.62 NA NA NA NA NA 0.926

Vashi 593.08 584.95 576.51 569.38 564.55 600 550 600 500 500 0.930

Yeola 432.49 428.17 423.90 419.67 415.48 NA NA NA NA NA 0.932

Results: Forecasting of Onion Prices: Forecasted Price

Table No. 8: Forecasted Price of Red Onions for next trading days

Market Forecasted Price for Trading DaysActual Price of next trading

daysR

sqr

  1 2 3 4 5 1 2 3 4 5  

Ahmednagar 1543.92 1589.12 1635.64 1683.53 1732.82 NA NA NA NA NA 0.64

Chandvad 391.62 374.62 358.36 342.81 327.93 400 400 380 380 310 0.77

Lasalgaon 466.35 463.48 456.84 452.52 446.93 425 390 425 375 380 0.88

Lasalgaon Niphad 489.53 479.19 469.08 459.17 449.48 400 410 380 350 325 0.84

Malegaon 460.32 454.88 448.44 442.02 435.68 390 390 380 375 370 0.73

Malegaon Umrane 564.96 555.17 530.35 516.41 496.38 350 400 400 360 325 0.73

Nagpur 517.55 515.91 523.41 524.30 521.50 500 500 500 437 437 0.96

Newasa Ghodegaon

441.41 445.33 431.58 416.21 401.13 350 400 400 350 NA 0.81

Rahuri 317.41 309.51 301.88 294.43 287.17 NA NA NA NA NA 0.76

Yeola 435.68 433.48 434.63 430.02 430.10 415 375 360 340 375 0.87

Results: Forecasting of Onion Prices: Forecasted PriceTable No.9: Forecasted Price of Mixed Onions for next trading months

Market Forecasted Price for Trading monthsActual Price of

next trading months

R Sqr

  1 2 3 4 5 Jan 12 Feb 12  

Ahmednagar 322.86 297.43 255.77 223.34 194.35 NA NA 0.59

Chandvad 486.24 438.31 395.10 356.15 321.04 NA NA 0.31

Junner 1252.91 1216.81 1194.66 1200.88 1212.44 481.25 437.5 0.68

Junner Otur 1020.90 911.23 865.60 860.91 866.23 NA NA 0.53

Lasalgaon 560.23 708.76 967.25 1003.56 1062.24 298.45 334.00 0.62

Lasalgaon Niphad 318.16 292.28 268.51 246.67 226.61 NA NA 0.12

Malegaon 443.81 401.45 363.14 328.48 297.13 NA NA 0.30

Malegaon Umrane 940.42 945.47 950.54 955.64 960.77 NA NA -0.02

Mumbai 1093.10 1308.84 1490.54 1571.49 1623.80 NA NA 0.84

Nagpur 858.88 1046.29 1109.42 1255.52 1373.60 714.47 759.80 0.80

Pimpalgaon 747.51 1126.83 1411.54 1508.71 1571.32 322.53 318.73 0.75

Pune 658.51 848.16 1018.90 1069.88 1137.16 423.96 345.22 0.78

Rahuri 331.59 222.73 196.45 171.33 149.48 315.40 297.57 0.50

Rahuri Vambori 437.55 400.72 366.99 336.10 307.81 362.50 NA 0.36

Solapur 361.86 381.34 319.26 324.91 280.06 NA NA 0.37

Vashi 448.15 313.08 242.82 198.36 165.80 542.86 507.14 0.72

Yeola 563.36 511.60 462.98 419.23 379.58 NA NA 0.14

Results: Forecasting of Onion Prices: Forecasted Price

Table No. 10: Forecasted Price of Red Onions for next Trading Months

Market Forecasted Price for Trading monthsActual Price of

next trading months

R sqr

  1 2 3 4 5 Jan 12 Feb 12  

Lasalgaon 707.48 903.18 951.26 961.66 975.94 378.26 339.75 0.36

Lasalgaon Niphad

526.68 439.13 366.13 305.27 254.52 361.56 309.60 0.29

Malegaon 471.06 436.71 404.86 375.33 347.96 340.00 316.60 0.50

Nagpur 654.09 848.01 980.67 1096.71 1164.98 453.35 481.00 0.76

Yeola 532.22 808.26 892.86 925.86 945.08 347.00 295.23 0.43

Results: Forecasting of Onion Prices: Forecasted Price

Table No. 11 Forecasted Price of Mixed and Red Onions for next seasons

Market Forecasted Price of Trading Seasons Pseudo R-Squared

1 2 3 4 5 6

Mixed Onions

Ahmednagar 552.13 850.22 1004.50 614.32 952.31 1127.53 0.38

Chandvad 691.12 1342.10 1120.60 779.58 1531.26 1273.34 0.34

Lasalgaon 731.12 1391.99 1289.68 833.87 1606.61 1484.90 0.36

Malegaon 361.48 593.81 578.77 395.80 654.87 637.72 0.29

Mumbai 858.34 1585.15 1698.61 976.27 1822.53 1953.82 0.60

Nagpur 575.08 1113.86 1141.97 603.08 1173.74 1203.42 0.50

Pimpalgaon 761.62 1493.39 1438.41 879.38 1747.64 1680.07 0.50

Pune 775.29 1385.27 1497.55 898.81 1624.90 1757.55 0.44

Yeola 528.20 1117.78 1201.86 565.32 1205.76 1297.13 0.36

Red Onions

Lasalgaon 461.25 1433.01 908.72 478.77 1497.60 946.98 0.38

Malegaon 579.55 1197.06 1201.35 646.30 1350.68 1354.68 0.63

Nagpur 692.71 1321.83 1328.18 773.10 1490.33 1496.62 0.54

CONCLUSION• The forecasted onion prices for trading days have shown better results than monthly forecasted prices.

•Therefore the price forecasting for onions should be made for daily trading prices with ARIMA model based on significant correlogram rather than monthly or seasonally.

http://krassota.com/angels.htm