Market integration and efficiency in the Philippine coconut industry
2007
Rivera, S.M., Philippines Univ. Los Banos, College, Laguna (Philippines)
The study ascertained the market integration and efficiency in the Philippine coconut industry through analysis of the domestic and international market conditions. The Sims test using seasonal ARIMA pre-filtered copra mill gate price series was used because of its superiority in whitening the series to determine the inter-regional causal relationships of ten Philippine regions. The Ravallion model described the dynamics in the copra miller-dealer-farmer markets and provided alternative interpretation of the oligopoly price formation process. The study further elucidated the price formation of oils in the world market and of selected coconut products using cointegration and error correction model (ECM). The price of Philippine coconut oil was examined with those of other Asian countries and integration between the copra farm gate and world prices was evaluated. The tests revealed an improvement in pricing efficiency in the mill copra markets. FOB competitive pricing and bidirectional relationships were observed but unidirectional causation was noted in some market points. To improve market integration and efficiency, coconut production and productivity should be increased through planting and replanting of improved coconut varieties, coconut-based farming system, and promotion of high-value coconut products. Investment to improve market infrastructure and facilities should focus on farm-to-market roads and port infrastructure and facilities. Strict implementation and monitoring of copra moisture standards and conduct of stakeholders' forum on copra pricing and quality improvement issues are imperative for efficient price transmission among market levels. Strengthening of coconut farmers' associations would also open more opportunities for increasing their income.
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