ICAR-IISR, Indore

Price transmission in pulse to split (dal) value chain in Delhi, India

Dr. Purushottam SharmaSr. Scientist (Agril. Econ.)

ICAR- Indian Institute of Soybean ResearchKhandwa Road, Indore- 452 001 (M.P.)

purushottamji@gmail.com

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Introduction

• 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.

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Importance

• 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.

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Data and Methodology

• 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.

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Data and Methodology

• 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.

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Plot of prices and price wedge: Chickpea

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Plot of prices and price wedge: Pigeonpea

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Results of stationarity test for chickpea and pigeonpea prices

Pulses Price variable

Model ADF Test PP TestLevel 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.

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Multivariate Johansen cointegration test for pulses value chain

H0 rank=p Trace Statistics 5% critical value

Max-Eigen Statistics

5% critical value

Chickpea0 24.7203 29.797 17.6428 21.13161 7.0775 15.495 5.5129 14.26462 1.5645 3.841 1.5645 3.841Pigeonpea0 23.905 29.797 12.5398 21.13161 11.3651 15.4947 8.8232 14.26462 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

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Pairwise Granger Causality Tests of pulses in Delhi

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

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Wald test for block exogeneity test

Dependent → Retail Price Dal Wholesale price Dal Wholesale price whole grain

Independent ↓ Chi-sq Prob Chi-sq Prob Chi-sq ProbChickpeaWPGrW 24.6695 0.000 15.2423 0.0005 - -WPGrD 4.0331 0.1331 - - 0.0838 0.9590RPGrD - - 0.1285 0.9377 0.6619 0.7184All 32.2764 0.000 17.2354 0.0017 1.5658 0.8149PigeonpeaWPTuW 0.4999 0.7788 0.3994 0.8190 - -WPTuD 29.0725 0.000 - - 0.7239 0.6963RPTuD - - 1.2670 0.5307 3.9872 0.1362All 31.5898 0.000 1.7595 0.7799 12.1894 0.0160

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Autoregressive distributed lag model estimates

VariablesChickpea (Gram) Pigeon pea (Tur)

∆WPGrW ∆WPGrD ∆RPGrD ∆WPTuW ∆WPTuD ∆RPTuD

∆WP_Whole grain -0.0865

(1.7659) 0.0128 (0.334) -

0.0500(1.433)

0.0044(0.1458)

∆WP_Whole grain (-1) 0.9596(33.9494)

-0.092(-1.6844)

 0.1451 (3.6827)

-0.137(-1.2202)

-0.0064(-0.1833)

0.0241(0.8033)

∆WP_Dal 0.4641(1.928) -

 0.6319(12.9035)

0.5071(1.433) -

0.6908(12.5714)

∆WP_Dal (-1) -0.0966(-0.3898)

-0.0628(-0.5620)

 0.1239(1.4625)

-0.3764(0.9504)

-0.2684(-2.2124)

0.4238(4.4885)

∆RP_Dal 0.0459(0.1522)

1.0733 (12.9035) -

0.0618(0.1458)

0.9651(12.572) -

∆RP_Dal (-1) 0.0423(0.1527)

0.0341(0.2715)

-0.0142(-0.1471)

-0.1288(-0.3634)

0.0785(0.7075)

-0.1484(-1.6002)

Constant 0.3306(1.4443)

-0.0022 (-0.7147)

 0.0026(1.1171)

0.0008(0.0764)

0.0005(0.1674)

0.0016(0.6207)

 R-squared 0.9399 0.7833 0.8233 0.1558 0.7417 0.8058 Adj. R-squared 0.9362 0.7696 0.8121 0.1024 0.7254 0.7935

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Conclusions

• 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

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Conclusions

• 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).

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Thank you for your kind attention…….