Distress sale
Topic: Agricultural Marketing, MSP, Buffer Stocks and PDS · NCERT: Class 10, Ch 2 "Sectors of the Indian Economy"; Class 10, Ch 3 "Money and Credit"
Meaning
A distress sale happens when a farmer sells produce right after harvest, when prices are at their lowest, because they cannot wait. The usual reasons are debt that must be repaid, no storage, and no information about better prices elsewhere. The debt is often interlocked: the trader is also the moneylender and lends only if the crop is sold to him. The farmer loses the higher price that might come a few months later.
Example
A small paddy farmer borrowed from the local trader at sowing time. At harvest, when mandi prices are low, they must sell the whole crop to that trader to repay the loan. Later in the year they may buy back grain for the family at a higher price.
Don't confuse with
- Marketed surplus: this is the amount actually sold. Distress sale is one reason marketed surplus can be larger than marketable surplus, because the family sells even what it needs to eat.
Related concepts
- Agricultural marketing
- Agri-value chain
- Middlemen
- Marketable surplus
- Marketed surplus
- Farm-gate price
- Farmer's share in consumer rupee