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Integration of wholesale prices of groundnut complex

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Relation http://oar.icrisat.org/5364/
 
Title Integration of wholesale prices of groundnut complex
 
Creator Reddy, A A
Reddy, G P
 
Subject Groundnut
Agriculture-Farming, Production, Technology, Economics
 
Description 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.
 
Date 2011
 
Type Article
PeerReviewed
 
Format application/pdf
 
Language en
 
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Identifier http://oar.icrisat.org/5364/1/ijam_amarender_reddy.pdf
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.