Department of Agricultural Economics, Agricultural College, Bapatla, Acharya NG Ranga Agricultural University (ANGRAU), Andhra Pradesh
*Corresponding author: drknrk@gmail.com
Online published on 22 February, 2021.
Market integration and prices in commercial crops like cotton (kapas) play an important role in determining the production decisions of the farmers and diversification to high value crops. In this context, the present study explores extent of market integration and price transmission in selected cotton (kapas) markets in southern states of India using Johansen co-integration, Vector Error Correction Model and Granger causality test. The study used monthly prices data of cotton (kapas) sourced from selected markets of Adoni, Bijapur, Warangal and Virudhunagar spanning January, 1990 to December, 2019. The results of the study strongly buttressed the existence of co-integration and interdependence of selected cotton (kapas) markets. However, the speed of adjustment of the prices found to be moderate in Adoni and Bijapur and quite weaker in Virudhunagar market and thereby prices correct a small percentage of the disequilibrium in these markets with the greatest percentage by the external and internal forces. So, it necessitates the need for future research, to investigate the influence of external and internal factors such as market infrastructure, Government policy and self-sufficient production, product characteristics and utilization towards market integration. There exists bidirectional causality between Adoni and Bijapur and between Virudhunagar and Warangal markets and unidirectional causality from Adoni to Virudhunagar, Bijapur to Warangal and Bijapur to Virudhunagar. Warangal market does not granger cause price formation in any of the other selected markets. It calls for strengthening the information technology for flow of market information regularly to help the farmers for increasing their income.
