Tomato challenge: Hoarding is not as bad as it sounds

Source– The post is based on the article “Tomato challenge: Hoarding is not as bad as it sounds” published in the “mint” on 10th July 2023.

Syllabus: GS3- Economy – Pricing and inflation

Relevance: Issues related to inflation

News- The ministry of consumer affairs announced a ‘Tomato Grand Challenge’ with the objective to ensure the availability of tomatoes at fair prices.

What is the popular perception about hoarding?

There is perception is that holding back supply causes the price to rise. People form an opinion based on what is visible today and ignore what is likely to happen tomorrow.

People cannot make much sense of year- on-year price changes. They tend to have a recency bias. People compare today’s prices with those of goods when last purchased.

What are impacts of high inflation on food items?

Relatively low-income families face the brunt of it in terms of household expenditure when these prices shoot up, and without notice.

In contrast, farmers face distress when prices collapse suddenly, resulting in severe losses.

Why hoarding is essential for producers?

Farmers have destroyed excess produce to avoid a price collapse. They should have an option to stock the extra produce.

The demand for food products is relatively stable. Variations in supply cause dramatic changes in these prices. Hoarding tends to reduce price volatility.

The release of hoarded produce also lowers tomorrow’s prices when tomorrow comes. This is called ‘invisible’ trade-offs because what happens tomorrow cannot be seen today.

What is the way forward?

There is need to develop cold storage options for cultivators. These should be accessible at reasonable prices. Cultivators should be allowed to decide when to bring their supply to the market.

There is ned for creative ideas for developing integrated supply chain. Innovative solutions to achieve low-cost cold storage of farm produce and develop an efficient food processing sector can be helpful.