aDepartment of Agricultural Economics, Tamil Nadu Agricultural University, Coimbatore-641003, Tamil Nadu
bDepartment of Economics and Sociology, Punjab Agricultural University, Ludhiana-141004, Punjab
Online published on 5 December, 2018.
The present paper has analyzed the factors affecting the price volatility and efficiency of potato markets in the country. The data on spot and future prices of potato were collected for a time frame of 2006 to 2014. Augmented Dickey-Fuller (ADF) test was applied to check the stationarity in future and spot prices which has given the results that both the prices are stationary in first differences. Johansen multiple co-integration procedure was used to confirm the long run equilibrium relationship between the future market and Agra market. A unidirectional causality between two-price series were established through Granger Causality technique. The vector error correction method suggested that spot price was influenced by its own one month lagged price and future prices and spot prices were not influenced by the lagged prices of each other in the long run. Thus, price discovery of potato is a complex process and number of factors affect the same as production, total arrivals, and lagged price. The prices of potato had a negative relation with the total arrivals in all the markets. It was also found that the potato prices in future market and price in the previous year affected the current year prices positively. There are also other factors like pest and disease attacks, weather irregularities, marketing aspects like transportation, storage, inadequate and costly cold chain facilities which affect the prices of potato. These factors are accounted by the traders in national commodity exchange (MCX) and reflected in the future trading of the potato. Future price signals intercepted by the main potato markets like Agra market which transmit these price signals to all other important potato markets of the country which are highly co-integrated among themselves as well as with main potato consuming markets like Delhi, Mumbai, Kolkata and Chennai etc. A cobweb type demand supply cycle is prevalent in potato production and marketing system in the country which brings violent fluctuations in potato prices.
