Likely effects of agricultural price fluctuations

There may be income instability as revenue fluctuates.
Planning problems arise as the cost and returns become unpredictable.
The government revenue from agricultural products fluctuates. There will be fluctuation in incomes from taxes imposed on agricultural products.
May lead to rural -urban migration as farmers decide to go to towns where employment in industries ensures high and stable incomes.

High prices arising from shortages cause an increase in the cost of living and a decline in the standard of living.
The surplus production and the associated falling prices lead to unemployment which also results into underutilization of resources.
It may lead to fluctuation in the price of manufactured goods that are produced using agricultural inputs.
Savings are difficult to raise making it difficult to accumulate capital and undertake various investments.
It may lead to instability in balance of payment position, thereby making it difficult to stabilize.
It causes the terms of trade to deteriorate because price of exports reduce yet price of imports are rising.
It makes farmers get frustrated and reduce the level of output.
It leads to instability in foreign exchange rates following the price changes.

Upward fluctuation in prices increases the income of the farmers.