DP16220 Market timing, farmer expectations, and liquidity constraints

Author(s): Rui Albuquerque, Luis Brandão-Marques, Bruno De Araujo, Pippy De Vletter, Geravásia Mosse, Helder Zavale
Publication Date: June 2021
Keyword(s): developing economies, household expectations, liquidity constraints, market timing, Pricing, Storage
JEL(s): D14, D15, G51, O13, O16, Q11, Q12, Q14
Programme Areas: Financial Economics, Development Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=16220

This paper uses data on farmers' price expectations from a randomized survey of smallholder farmers in Mozambique. Survey data show that across all crops most interviewed farmers expect prices to be higher in the lean season. Yet, farmers report selling most of their output shortly after harvest when prices are lower. We find that higher expected prices and lower current sale prices are associated with increased storage for liquidity constrained farmers versus unconstrained farmers. We develop an intertemporal model of market timing in the presence of liquidity constraints that is consistent with these findings and discuss other model predictions.