Integration of wholesale prices of groundnut complex

Reddy, A A and Reddy, G P (2011) Integration of wholesale prices of groundnut complex. Indian Journal of Agricultural Marketing, 25 (2). pp. 89-108.

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Groundnut oil is one of the major edible oils produced and consumed in India. This paper tries to examine the cointegration of wholesale prices of groundnut pod, oil and cake (groundnut complex) in major markets of India. All-major groundnat markets have been covered. Totally 11 markets were considered for groundnut pods, 10 markets for oil and 5 markets for cake for the study from May 1996 to January 2003. Month-end wholesale price data have been used for the study. There are four terminal markets namely Mumbai, Delhi, Chennai and Calcutta. The major producing centres are Rajkot (Gujarat) and Nandhyal (Andhra Pradesh). Out of 11 groundnut pod and 10 oil wholesale price series, only 4 series are co-integrated, while in case of groundnut cake only two markets are co-integrated out of 5 major markets. In case of groundnut oil and cake, price information flows from major import/export centres like Mumbai and Chennai to major producing centres, as price of groundnut oil and other edible oils (like palm oil, soyaoil) are interrelated and being freely traded internationally, edible oil price discovery takes place in these centres and are linked to border prices. About 50% of domestic edible oil consumption is met by imports and India is a major exporter of groundnut cake. While in case of groundnut pods price information flows from major production centres (Nandyal and Rajkot) to terminal markets such as Mumbai, Chennai and Delhi, there is no large scale imports/exports of groundnut pods from India. Overall price discovery in oil and cake takes place in terminal markets like Mumbai (international trade centres), while for pods price discovery takes place in major producing centres. We have also analysed vertical cointegration among pod, oil and cake markets in the short and long run for testing of co-integration along supply chain. Only in few markets, prices of GN pods and GN oil are vertically integrated in the long run, while in most markets wholesale prices of cake are not integrated either with GN pod or oil wholesale prices in the long run. That too, the vertical integration is strong between wholesale prices of major producing centre (Rajkot) and prices in major consuming centres (Mumbai, Chennai and Hyderabad). Further low margins of processing sector confirms of vertical integration of GN pod and oil/cake wholesale prices at least in GN producing centres.

Item Type: Article
Subjects: Mandate crops > Groundnut
Others > Agriculture-Farming, Production, Technology, Economics
Depositing User: Users 6 not found.
Date Deposited: 24 Jan 2012 06:28
Last Modified: 24 Jan 2012 06:30
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Acknowledgement: UNSPECIFIED
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