Price Dynamics and Integration in India’s Staple Food Commodities—Evidence from Wholesale and Retail Rice and Wheat Markets

Sendhil Ramadas, Kashish Arora, Sunny Kumar, Priyanka Lal, Arnab Roy, Ramalingam Jayakumara Varadan, Sivasankar Vedi and Anandan Pouchepparadjou
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Kashish Arora: Department of Economics and Sociology, Punjab Agricultural University, Ludhiana 141027, Punjab, India
Sunny Kumar: Department of Economics and Sociology, Punjab Agricultural University, Ludhiana 141027, Punjab, India
Priyanka Lal: Department of Agricultural Economics & Extension, Lovely Professional University, Phagwara 144001, Punjab, India
Arnab Roy: Department of Social Science, Birsa Agricultural University, Ranchi 834006, Jharkhand, India
Ramalingam Jayakumara Varadan: ICAR-Central Island Agricultural Research Institute, Port Blair 744101, Andaman & Nicobar Islands, India
Sivasankar Vedi: Department of Economics, Pondicherry University (A Central University), Kalapet 605014, Puducherry, India
Anandan Pouchepparadjou: Pandit Jawaharlal Nehru College of Agriculture and Research Institute, Karaikal 609603, Puducherry, India

Commodities, 2023, vol. 2, issue 1, 1-21

Abstract: Uncertain price movement in staple food commodities puts agrarian economies at risk if not monitored and managed consistently. Hence, an attempt has been made to analyze the price behavior and integration across major wholesale and retail markets for rice and wheat in India. Monthly data (July 2000 to June 2022) on prices viz. wholesale and retail were sourced from the Food and Agriculture Organization and analyzed using growth rate, instability index, seasonal price index, Bai-Perron’s test for structural breaks, Johansen’s test on cointegration, Granger causality test, and impulse response function. Findings indicated strong evidence of price dynamics in the selected markets in terms of spatial and temporal variation, clear-cut seasonality linking to production, and price divergence between wholesale and retail markets. Johansen’s test indicated a strong cointegration between wholesale and retail prices after accounting for structural breaks, exhibiting unidirectional-, bidirectional- and no causality. Impulse response analysis revealed that the selected wheat and rice markets are efficient in terms of ‘price discovery’ which takes place initially in the wholesale market, and is then transmitted to the retail market. The study advocates decision-making information to the producers, traders, and consumers who are interested in taking advantage of the price movement. It is concluded that strengthening the market intelligence and reducing the distortion in markets will improve the existing overall performance.

Keywords: commodity market; price integration; seasonal price index; structural breaks; cointegration; rice and wheat; impulse response function; wholesale and retail; Bai and Perron (search for similar items in EconPapers)
JEL-codes: C0 C1 C2 C3 C4 C5 C6 C7 C8 C9 D4 E3 E6 F0 F1 F3 F4 F5 F6 G1 O1 O5 Q1 Q2 Q4 (search for similar items in EconPapers)
Date: 2023
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