Exploring the Cobweb Cycle in Agricultural Economics

What is the Cobweb Cycle in Agriculture?

The cobweb cycle is an economic theory that illustrates how prices and production quantities of agricultural commodities fluctuate over time. This occurs due to a time lag between farmers' sowing decisions and market supply.

How Does the Cobweb Cycle Work?

• Step 1: High Prices - When the price of a crop, such as pulses, is elevated in one season, farmers anticipate profits and increase their sowing in the next cycle.
• Step 2: Oversupply - The following season often experiences a surplus in supply, leading to a decline in prices.
• Step 3: Low Prices - Disheartened by the reduced prices, farmers decrease their sowing in the subsequent cycle.
• Step 4: Undersupply - This reduction in sowing results in lower supply and a resurgence in prices. The cycle continues, resembling a cobweb on a graph when price and quantity are plotted.

Examples of the Cobweb Cycle

Pulses

For instance, if the price of tur dal (pigeon pea) surges due to adverse monsoon conditions, more farmers will plant tur in the following year. This leads to an oversupply, causing prices to plummet. In response to financial losses, farmers reduce sowing the next year, leading to a price spike due to scarcity.

Onions

In 2022, a crop failure caused onion prices to exceed ₹70/kg. Many farmers increased their onion plantations in 2023, resulting in market saturation and prices dropping below ₹10/kg in several states. Faced with losses, many farmers reduced their onion cultivation in 2024, leading to another shortage and subsequent price increase.

Potatoes

Potato farmers in Uttar Pradesh and West Bengal frequently experience this cycle. A season with strong prices encourages extensive sowing. Consequently, cold storage facilities become overcrowded, resulting in a drastic price fall and considerable waste. The following year, production decreases, creating scarcity and higher prices.

Why Does the Cobweb Cycle Persist?

• Lack of real-time market intelligence
• Delayed price signals
• Perishability of produce
• No guaranteed Minimum Support Price (MSP) for most vegetables
• Poor storage and processing infrastructure

Can the Cobweb Cycle Be Controlled?

Yes, the cobweb cycle can be managed through various strategies:

• Providing real-time advisories to farmers
• Utilizing better price forecasting tools
• Diversifying crops grown
• Encouraging agro-processing industries
• Implementing government procurement and MSP for selected pulses

Frequently Asked Questions (FAQs)

Q1. What is the primary cause of the cobweb cycle in agriculture?
Answer: The cobweb cycle is primarily caused by the time lag between farmers' sowing decisions and the market supply of agricultural commodities, leading to fluctuating prices.

Q2. How can farmers mitigate the effects of the cobweb cycle?
Answer: Farmers can mitigate the cobweb cycle's effects by using real-time market intelligence, adopting better price forecasting tools, and diversifying their crop production.

Q3. What role does market intelligence play in the cobweb cycle?
Answer: Market intelligence provides farmers with timely data on prices and demand, helping them make informed sowing decisions that can reduce the volatility caused by the cobweb cycle.

Q4. Are there examples of crops that frequently exhibit the cobweb cycle?
Answer: Yes, crops like onions and potatoes often demonstrate the cobweb cycle due to their high perishability and fluctuating market prices based on seasonal production.

Q5. Can government policies help control the cobweb cycle?
Answer: Yes, government policies such as Minimum Support Price (MSP) and procurement strategies can help stabilize prices and reduce the impact of the cobweb cycle on farmers.

UPSC Practice MCQs

Question 1: What is the cobweb cycle in agriculture?
A) A cycle of crop rotation
B) A theory explaining price fluctuations in agriculture
C) A method of irrigation
D) A type of pesticide
Correct Answer: B

Question 2: Which crop is often used as an example of the cobweb cycle?
A) Rice
B) Wheat
C) Onions
D) Maize
Correct Answer: C

Question 3: What is a major reason for the persistence of the cobweb cycle?
A) High demand
B) Real-time market intelligence
C) Perishability of produce
D) Government intervention
Correct Answer: C

Question 4: What can help farmers reduce the cobweb cycle's effects?
A) Increasing sowing
B) Better price forecasting tools
C) Growing only one crop
D) Reducing market information
Correct Answer: B