Are fruits and vegetables market efficient? Vertical price integration of selected crops in southern Philippines

Transcription

1 Are fruits and vegetables market efficient? Vertical price integration of selected crops in southern Philippines Jon Marx P. Sarmiento* Glory Dee A. Romo Roxanne T. Aguinaldo Nikko L. Laorden Leanne Orr Anthea McClintock Kirrily Pollock Larry N. Digal UNIVERSITY OF THE PHILIPPINES MINDANAO SCHOOL OF MANAGEMENT

2 Introduction

3 Introduction

4 Introduction Objective Measure the extent of vertical price integration of the top producing areas. Limitation Nodes with different level of stationarity were not analyzed, i.e., I(0) and I(1) pairs.

5 Review of Literature Fossati et al. (2007) the law of one price Mukhtar and Javed (2007) identified three types of market integration; (1) intertemporal, (2) vertical, and (3) spatial. Rufino (2011) made use of Augmented Dickey- Fuller and Philips Peron tests, Engle-Granger and Johansen tests, for non-stationary variables Granger Causality.

6 Review of Literature Fossati et al. (2007) introduced the use of weak Exogeneity test for cointegrated variables and Half-life persistence indicators. Koumkwa and Susmel (2008) further discussed the use of Half-life indicator. Sanogo (2008) used Ravallion and Error correction model. Hossain and Verbeke (2010) highlighted the use of Vector Auto Regression (VAR) model.

7 Methodology Farmgate Production Trade Logistics Policies Wholesale Vertical Price Integration Retail Market Efficiency

8 Methodology Data preparation Supplemental analysis Necessary analysis I (1) Unit root test Lag order selection I (0) Not Cointegrated Half-life indicators Cointegration test Cointegrated No long run equilibrium for prices Lag order selection Vector Error Correction Model VAR Granger causality test Granger caused Assess market integration Not Granger caused No relationship between prices

9 Methodology Table 1. Top producing areas of selected fruits and vegetables in Southern Philippines, volume in metric tons, Mango carabao Papaya Hawaiian Cabbage Eggplant Tomato Potato Volume Rank Volume Rank Volume Rank Volume Rank Volume Rank Volume Rank Western Visayas Iloilo Central Visayas Cebu Negros Oriental Zamboanga Peninsula Zamboanga del Norte Northern Mindanao Bukidnon Misamis Occidental Misamis Oriental Davao Region Davao del Sur Davao City SOCCSKSARGEN North Cotabato Sarangani South Cotabato Sultan Kudarat 103 9

10 Table 2. Data Information Methodology Data/Period/Sample Areas Mango Carabao Farm Gate Prices Wholesale prices - ripe Retail Prices January 2001 to March 2011 Misamis Occidental Northern Mindanao Misamis Occidental 123 Northern Mindanao Northern Mindanao Iloilo Iloilo Western Visayas Western Visayas Cebu Cebu Central Visayas Central Visayas Zamboanga Peninsula Zamboanga Peninsula Davao del Sur Davao del Sur Davao Region Davao Region SOCCSKSARGEN SOCCSKSARGEN Papaya Hawaiian Farm Gate Prices Wholesale prices Retail Prices April 2001 to April 2011 Northern Mindanao Northern Mindanao Northern Mindanao 120 Davao Region Davao Region North Cotabato North Cotabato SOCCSKSARGEN SOCCSKSARGEN Cabbage Farm Gate Prices Wholesale prices Retail Prices March 1993 to March 2011 Cebu Cebu Cebu 217 Negros Oriental Central Visayas Negros Oriental Central Visayas Northern Mindanao Central Visayas Bukidnon Davao del Sur Bukidnon Northern Mindanao Davao Region Northern Mindanao Davao del Sur Davao del Sur Davao City Davao City Davao Region Davao Region North Cotabato North Cotabato SOCCSKSARGEN SOCCSKSARGEN

11 Table 2. Cont Data Information Data/Period/Sample Methodology Areas Eggplant Farm Gate Prices Wholesale prices Retail Prices January 1996 to March 2011 Iloilo Western Visayas Iloilo 183 Western Visayas Western Visayas SOCCSKSARGEN SOCCSKSARGEN Tomato Farm Gate Prices Wholesale prices Retail Prices January 1995 to March 2011 Misamis Oriental Northern Mindanao Northern Mindanao 195 Northern Mindanao Iloilo Western Visayas Potato Farm Gate Prices Wholesale prices Retail Prices January 1993 to April 2010 Davao del Sur Northern Mindanao Northern Mindanao 208 Davao Region Davao del Sur Davao Region Davao Region

12 RESULTS AND DISCUSSION

13 Farmgate POTATO Wholesale Retail Davao Region Davao Region Not Cointegrated Unidirectional Bidirectional Northern Mindanao

14 POTATO F_DavReg W_DavReg W_ R_ W_NorMin R_

15 PAPAYA Farmgate Wholesale Retail SOCCSKS ARGEN Northern Mindanao Northern Mindanao Not Cointegrated

16 PAPAYA F_SOCCSK W_ W_NorMin R_NorMin W_NorMin R_ W_ R_

17 EGGPLANT Farmgate Western Visayas Wholesale Retail Western Visayas Western Visayas SOCCSKS ARGEN Not Granger Caused Unidirectional Bidirectional SOCCSKS ARGEN

18 EGGPLANT F_WesVis W_WesVis W_WesVis R_WesVis F_SOCCSK W_ F_SOCCSK R_SOCCSK

19 TOMATO Farmgate Wholesale Retail Northern Mindanao Northern Mindanao Northern Mindanao Western Visayas Not Granger Caused Unidirectional Bidirectional

20 TOMATO F_NorMin W_NorMin F_NorMin W_ F_WesVis W_ F_WesVis R_

21 Farmgate MANGO Wholesale Retail Zamboanga Peninsula Central Visayas Northern Mindanao Davao Region Unidirectional Bidirectional

22 MANGO W_NorMin R_ F_ZamPen R_ F_CenVis R_ F_DavReg R_

23 Farmgate Cebu Negros Oriental Bukidnon Davao del Sur North Cotabato Not Granger Caused Unidirectional Bidirectional CABBAGE Wholesale Cebu Davao del Sur Retail Cebu Negros Oriental Bukidnon Davao del Sur North Cotabato

24 CABBAGE F_Cebu W_Cebu F_NegOr R_NegOr F_Bukid W_ F_DavSur R_DavSur

25 SUMMARY Crops Potato Papaya Market Integration Inconclusive Segmented Eggplant R is segmented; Regional <--, --> Tomato Mango Cabbage W-->F R<--> F R --> F; W-->F

26 CONCLUSION 1. For cabbage and tomato, retail and wholesale prices are influencing the farm gate prices -> farmers do not have a command in pricing -> less incentive to farming -> less production. 2. For mango, farmgate and retail prices are influencing each other -> farmers may have a command in pricing -> there is an incentive to farming -> more production.

27 CONCLUSION 3. Eggplant, retail market is segmented -> has its own price behavior -> Regional surplus might be limited -> possible dominance of Luzon regional markets 4. Papaya, market is segmented -> each node behaves differently -> price information is limited -> possible presence of market distortion

28 RECOMMENDATION 1. Efforts on farm productivity improvement should be focused on the more efficient markets; cabbage, mango and tomato. 2. Eggplant and Papaya market distribution may be needing policy intervention. 3. Value chain analysis on the areas identified in this study is recommended to validate the results.

29 Thank you for your attention