Price transmission in pulse to split (dal) value chain in delhi, india
1. ICAR-IISR, Indore
Price transmission in pulse to split (dal) value chain
in Delhi, India
Dr. Purushottam Sharma
Sr. Scientist (Agril. Econ.)
ICAR- Indian Institute of Soybean Research
Khandwa Road, Indore- 452 001 (M.P.)
purushottamji@gmail.com
2. ICAR-IISR, Indore
Introduction
2
• Pulses are an important source of protein for vegetarian
people in India,
• Low per capita availability,
• Increasing demand- supply gap,
• Increasing import dependence,
• Spike in prices along the value chain, higher volatility,
• High prices affect the buying ability of the consumers,
• Protein malnutrition.
3. ICAR-IISR, Indore
Importance
3
• Prices are the primary mechanism through which various
levels in the value chain are linked,
• Pattern of price transmission provides an insight into the
structure of the supply chain and the conduct of the market
participants at different stages,
• Important in the context of changing market structure,
increasing concentration of processing and retail, and
existence of market power within the commodity verticals,
• The paper aims to analyze the direction and extent of price
transmission along the value chain of major pulses in Delhi.
4. ICAR-IISR, Indore
Data and Methodology
4
• Monthly wholesale price of two major pulses, chickpea
(Gram) and pigeonpea (Tur) whole and dal (split) and retail
price of chickpea and pigeonpea dal in Delhi were used in
the analysis,
• Monthly data for the period of 87 months from January
1999 to March 2016 were used for analysis,
• The data were sourced from published sources/ website of
Directorate of Economics and Statistics, Ministry of
Agriculture and Farmers Welfare, GOI.
5. ICAR-IISR, Indore
Data and Methodology
5
• Unit root tests are conducted using the augmented Dickey-
Fuller (ADF) test and Phillips and Perron (PP) test to
identify whether the data are stationary or non-stationary,
• Johansen multivariate approach used to identify the number
of co-integrating vectors in the system,
• Granger causality test applied to evaluate the possible
direction of the price transmission,
• The autoregressive distributed-lags (ADL) model specified
to estimate immediate and dynamic effects of one price on
another.
8. ICAR-IISR, Indore
Results of stationarity test for chickpea and pigeonpea
prices
8
Pulses Price
variable
Model ADF Test PP Test
Level 1st Diff. Level 1st Diff.
Gram Whole
WP
Intercept -1.1438 -8.4034* -1.3237 -8.4545*
Intercept &Trend -1.8953 -8.3568* -2.2020 -8.3839*
Dal WP Intercept -1.2462 -6.0644* -1.1509 -6.1013*
Intercept &Trend -2.0503 -6.0330* -1.8396 -6.0712*
Dal RP Intercept -1.2578 -5.6954* -0.9131 -5.5298*
Intercept &Trend -2.3361 -5.6330* -1.9037 -5.4950*
Tur Whole
WP
Intercept -1.7828 -6.3599* -1.8121 -9.4930*
Intercept &Trend -2.2729 -6.3447* -2.3985 -9.4524*
Dal WP Intercept -0.8858 -4.7366* -1.1081 -6.1712*
Intercept &Trend -1.8239 -4.7499* -1.7954 -6.1363*
Dal RP Intercept -1.2786 -5.8819* -0.9898 -5.8890*
Intercept &Trend -1.9311 -5.8514* -1.6110 -5.8577*
WP- Wholesale Price, RP- Retail Price. Test critical values for significance are -3.509 at 1%, -2.895 at 5% for
ADF test with intercept, -4.068 at 1%, -3.463 at 5% for ADF and PP test with intercept and trend, respectively.
9. ICAR-IISR, Indore
Multivariate Johansen cointegration test for pulses
value chain
9
H0 rank=p Trace Statistics 5% critical
value
Max-Eigen
Statistics
5% critical
value
Chickpea
0 24.7203 29.797 17.6428 21.1316
1 7.0775 15.495 5.5129 14.2646
2 1.5645 3.841 1.5645 3.841
Pigeonpea
0 23.905 29.797 12.5398 21.1316
1 11.3651 15.4947 8.8232 14.2646
2 2.5419 3.8415 2.5419 3.8415
Trace test indicates no cointegration at the 0.05 level, Max-eigenvalue test indicates
no cointegration at the 0.05 level
10. ICAR-IISR, Indore
Pairwise Granger Causality Tests of pulses in Delhi
10
Pulses Null Hypothesis: N F-Stat Prob. Direction
Chickpea
WPGrD does not Granger Cause WPGrW 85 0.4598 0.6331 No Causality
WPGrW does not Granger Cause WPGrD 8.7583 0.0004 Unidirectional
RPGrD does not Granger Cause WPGrW 85 0.7592 0.4714 No Causality
WPGrW does not Granger Cause RPGrD 13.772 7.E-06 Unidirectional
RPGrD does not Granger Cause WPGrD 85 0.8550 0.4291 No Causality
WPGrD does not Granger Cause RPGrD 2.9636 0.0573 Unidirectional
Pigeon
pea
WPTuD does not Granger Cause WPTuW 85 5.8257 0.0043 Unidirectional
WPTuW does not Granger Cause WPTuD 0.2485 0.7806 No Causality
RPTuD does not Granger Cause WPTuW 85 4.0017 0.0221 Unidirectional
WPTuW does not Granger Cause RPTuD 0.9404 0.3947 No Causality
RPTuD does not Granger Cause WPTuD 85 0.6939 0.5026 No Causality
WPTuD does not Granger Cause RPTuD 15.8420 2.E-06 Unidirectional
13. ICAR-IISR, Indore
Conclusions
13
• Prices of selected pulses along the value chain in Delhi market
behave independent of each other in the short-run
• Casualty analysis established unidirectional casualty from whole
grain wholesale to dal wholesale and retail in case of chickpea
value chain, while from dal wholesale to grain wholesale, and dal
retail in case of pigeon pea value chain,
• Wholesale price of chickpea grain and dal and pigeonpea dal
seemed to be exogenous which was validated using the Wald test
for weak exogenity
• Wholesale price of chickpea whole and pigeonpea dal follow an
autoregressive pattern
14. ICAR-IISR, Indore
Conclusions
14
• There is positive and significant relationship in the retail
price and wholesale price of chickpea dal as well as
pigeonpea dal.
• But no significant relationship was found in wholesale price
of whole chickpea and pigeon pea with wholesale price and
retail price of dal.
• Pulses markets are characterized with imperfect competition
and large traders with oligopoly (Rahman, 2015).