Spatial integration of corn markets in the Philippines

The Cointegration Frame was used to evaluate the presence of market integration relative to pricing and among domestic corn markets. The Ravallion Model was used to examine the effects of rainfall and transport infrastructures on price formation. The Johansen cointegration test indicates that the farm and wholesale markets exhibit long-run vertical relationships in 7 out of 9 (78%) major yellow corn producing provinces and in all (100%) the major white corn producing provinces. VECM estimates of long-run vertical integration revealed that adjustments in farm and wholesale prices were generally sluggish. The VECM estimates of short-run vertical integration revealed that 43% of yellow corn and 70% of white corn markets were vertically integrated in the short-run. The Granger causality statistics reveals that the wholesale market is the driving market in the marketing of yellow and white corn in the long-run. The Johansen cointegration test among pairwise wholesale prices of yellow corn showed that 94% of the pairwise wholesale markets were horizontally integrated in the long-run while 6% were not. For white corn, 72% of the pairwise whole markets were horizontally integrated in the long-run while 28% were not. VECM estimates of long-run vertically integration revealed that adjustments in pairwise wholesale prices were generally slow. The VECM estimates of short-run horizontal integrated in the short-run. The Granger causality test showed that uni-directional and bi-directional relationships emerged in 13 and 2 pairwise wholesale markets of yellow corn, respectively. For white-corn, uni-directional, bi-directional and no causality appeared in 14, 6, and 1 pairwise wholesale market(s), respectively. The Ravallion Model corroborated the above results and revealed the non-significant effects of rainfall and road networks on price formation. The non-significant effects of rainfall may be attributed to the corn traders' practice of differentiating prices based on moisture content and the purity of corn grains. The non-significant effect of road networks may be attributed to differences on the frequency of data used. The result does not discount the importance of transport infrastructures in increasing integration among markets. The above findings suggests that spatial integration within and among yellow and white corn markets in the Philippines were largely imperfect and may be attributed to inefficiencies in the distribution systems, inadequate postharvest facilities, and the lack of relevant and timely market information. These problems must therefore be addressed in order to foster integration in the domestic markets of corn.