Agricultural produce can be highly variable in terms of supply due to fluctuations in weather that can affect crops. For some agricultural products such as fish, there may also be a finite resource which can be for a prolonged period where the resource needs recovery time from near depletion. Civil unrest in regions may also hinder the ability of crops or resources getting to market and presents an additional risk of supply shock.

Demand for agricultural products tends to be inelastic. This is because they are essential to other aspects of production. Given an inelastic demand curve and potential supply shocks, prices can rise and fall significantly.

Manufactured goods tend to be more elastic in supply. To increase production, firms can operate at a higher level of capacity, increasing labour, using more raw materials or increasing run time on machinery. This can be achieved more easily than expanding the productive capacity of a field for crops, due to the lead time on growing and harvest or needing new machinery to reach further into a mine.

Manufactured goods may have many alternatives and a more elastic demand curve as a result. Agricultural products may have more limited alternatives. These factors combined, a relatively more elastic supply and demand, means that changes in price are less significant relative to agricultural products.

Suitable interventions in the agricultural markets to reduce price volatility include:

• Price ceilings
• Direct provision
• Buffer stocks

The government could introduce a price ceiling to ensure that the price of essential products do not exceed what is deemed to be an appropriate level. A challenge of implementing such a strategy is setting the original price as it may viewed as arbitrary. The price could be set to reflect local conditions rather than at a national level where they may be considerable variation in conditions. The issue with setting a maximum price is that there may be excess demand if the price is lower than what would prevail in the market. This gives rise to black markets for underground trading and cause a secondary market to become established.

The government could implement a direct provision of certain agricultural products for particular groups of consumers at a reduced price or for free to protect the most vulnerable from price volatility. A challenge of this approach involves confirming the eligibility of a select group of consumers. To provide such provision for everyone could be financially prohibitive for the government.

The government could invest in a storage provision to store goods which do not perish quickly that could be released into the market in times of hardship. Increasing supply would put downward pressure on prices. A challenge of this approach is that there are storage costs. The country may not produce a sufficient amount to enable the system to be put in place. There may be reliance on overseas markets, which may be exposed to fluctuating prices.