Fabricating Forecasts: Leveraging ARIMA for Predicting Cotton Prices in India

Description

Page: 577-580

Sarishma Sharma (School of Business Studies, PAU, Ludhiana, Punjab)

The research paper presents the ARIMA model for forecasting the price of cotton from January 2016 to December 2023. The objective of the research paper is to evaluate the most suitable model for estimating the price of cotton. On the basis of historical data collected for the period, the ARIMA model provides a prediction, in which the data has been applied by first order difference to remove the random walk hypothesis problems. It has been observed that ARIMA (4,1,3) is the most appropriate method for anticipating the price of cotton. The MAPE and RMSE are 15.10 and 6902.831. The results also revealed that the price of cotton is forecastable. Moreover, investors could also multiply their returns by capitalizing on these commodities. The suggested model could help the farmers to forecast the price of cotton and fix the price of cotton thereby ensuring price stability. The stakeholders associated with the cotton industry specifically spinning mills can plan their materials procurement as per forecasted prices of cotton. Furthermore, the prediction of the cotton prices will help the government in setting up the minimum support price to serve as a safety net for farmers and ensure that farmers receive a fair price for their cotton production.