We analyze the role of farm storage on price volatility in the context of a developing country where seasonality permeates agricultural markets. Whereas speculative behaviors by stockholders are known to reduce price volatility, seasonal liquidity constraints on farmers’ behaviors with regard to stock management modify this general result. Like any stockholders, most farmers stock out grain if they expect a price drop in a close future, but unlike stockholders, they often also sell grain even though they expect a price increase in the next period, for liquidity reasons. As a result, farm stock management does not have the same stabilizing nature as speculative stock management, and notably fails to mitigate price drops.
