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

ICAR-IISR, Indore

Introduction

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• 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

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• 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

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• 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

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• 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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Rs.

/qt

WPGrD

WPGdD

RPGdD

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Per c

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Gr_WgD_WP Gr_D_WPRP Gr_WgWP_DRP

ICAR-IISR, Indore

Plot of prices and price wedge: Pigeonpea

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WPTwD

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Tu_WgD_WP Tu_D_WPRP Tu_WgWP_DRP

ICAR-IISR, Indore

Results of stationarity test for chickpea and pigeonpea prices

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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.

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Multivariate Johansen cointegration test for pulses value chain

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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

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Pairwise Granger Causality Tests of pulses in Delhi

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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

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Dependent → Retail Price Dal Wholesale price Dal Wholesale price

whole grain

Independent ↓ Chi-sq Prob Chi-sq Prob Chi-sq Prob

Chickpea

WPGrW 24.6695 0.000 15.2423 0.0005 - -

WPGrD 4.0331 0.1331 - - 0.0838 0.9590

RPGrD - - 0.1285 0.9377 0.6619 0.7184

All 32.2764 0.000 17.2354 0.0017 1.5658 0.8149

Pigeonpea

WPTuW 0.4999 0.7788 0.3994 0.8190 - -

WPTuD 29.0725 0.000 - - 0.7239 0.6963

RPTuD - - 1.2670 0.5307 3.9872 0.1362

All 31.5898 0.000 1.7595 0.7799 12.1894 0.0160

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Autoregressive distributed lag model estimates

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Variables

Chickpea (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

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• 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

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• 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…….

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