SPATIAL INTEGRATION AND PRICE BEHAVIOUR ANALYSIS OF MAJOR POTATO WHOLESALE MARKETS IN GUJARAT

Abstract

In this age of market information and intelligence, price behaviour analysis of agricultural commodities is crucial for optimizing returns of farmers and to hedge them from associated price fluctuations. Unintegrated markets are the precursors of market failures leading to discrepancies in both supply and demand. The purpose of this study is to examine market integration and price transmission mechanism under a unified testing strategy for potato in four major wholesale consumption markets of Gujarat viz. Ahmedabad, Bharuch, Rajkot, and Surat. Monthly wholesale prices (Rs/quintal) for fourteen years (2007-08 to 2020-21), yielding a total of 168 observations, were analyzed. The findings revealed the highest elasticity of price transmission between Rajkot and Surat (0.96), while the lowest between Ahmedabad and Rajkot markets (0.84). Besides, error correction model confirmed that on average 27 per cent to 44 per cent of the short-run price fluctuations in the markets get corrected within a month. Granger causality further confirmed bidirectional price influence in all the market pairs except for Ahmedabad-Rajkot pair. As significant improvements in transportation and storage infrastructure in Gujarat might have led to high price integration in the markets, the study opines the need for taking price integration advocacy to the farmers' end directly through calibrated training programmes for enabling them to take improved planting, storage and marketing decisions.