Market Timing, Farmer Expectations, and Liquidity Constraints
48 Pages Posted: 8 Jun 2021 Last revised: 29 Oct 2022
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Market Timing, Farmer Expectations, and Liquidity Constraints
Market Timing, Farmer Expectations, and Liquidity Constraints
Date Written: October 28, 2022
Abstract
We use data on price expectations from a survey of randomly sampled smallholder farmers in Mozambique. Across all crops, farmers expect higher prices in the lean season. Yet, farmers report selling mostly within two weeks of harvest at significantly lower prices with liquidity constrained farmers selling their harvest 50% faster than unconstrained farmers. Further, liquidity constrained farmers respond more to future price expectations than unconstrained farmers. We address causality using a regression discontinuity design exploiting abnormal rainfall from cyclones Idai and Kenneth. We develop a model on market timing and its relation to price expectations and liquidity constraints.
Keywords: Liquidity constraints, household expectations, market timing, storage, household finance, developing economies
JEL Classification: D14, D15, G51, O13, O16, Q11, Q12, Q14
Suggested Citation: Suggested Citation