SPATIAL INTEGRATION AND PRICE TRANSMISSION ANALYSIS OF DOMESTIC AND INTERNATIONAL COTTON MARKETS 3764
Loading...
Files
Date
2023-09
Authors
BHOPALA UPASANA DEVAYATBHAI
Journal Title
Journal ISSN
Volume Title
Publisher
jau junagadh
Abstract
Cotton is one of the most important fiber crops playing essential role in the
history of mankind and civilization. The Indian economy is influenced by cotton through
its export performances, textile industry and processing sectors. The nature and extent of
price fluctuations provides necessary guidance to farmers for marketing the products
efficiently. Looking this importance of cotton price behaviour, the present study entitled
“Spatial Integration and Price Transmission Analysis of Domestic and International
Cotton Markets” was undertaken with the main objectives to assess the price growth
dimensions, price variability and interrelation among the major national and international
cotton markets.
The study was carried out using the secondary data from various public sources.
The monthly time series data of cotton wholesale prices of six selected national and two
international markets were collected from January 2001 to December 2021. Besides, the
data on area, production, and productivity of cotton in eight major producing states of
India and two overseas countries were collected for the period from 2001-02 to 2020-21
for this study purpose. The data was analyzed using techniques of compound growth rate,
linear and quadratic trends, seasonal and cyclical variations, and inter-relationship by
correlations co-efficient and co-integration analysis.
The investigation revealed that, during last two decades, only India has achieved
positively higher growth rate in cotton area, production and productivity, but USA, China
and Egypt shown declining trend, and at world level, it remained almost stagnant, with
lower growth in production and yield. In India from 2001-02 to 2020-21, Andhra Pradesh
achieved the highest growth in area, Rajasthan in production and Madhya Pradesh in
yield. Besides, on an average, Gujarat contributed the highest in mean cotton production
and Maharashtra in mean area.
Linear nominal and real price trend was found more or less similar in USA and
Egypt markets. Among the selected markets, the annual rate of real price increase was the
highest i.e. 5.24 per cent in USA market followed by Parbhani and Budalada markets
(2.58 %) and the lowest was 1.47 per cent in India S-6 market. A considerable amount of
variation in the real price could be explained by the linear trend.
The co-efficient of quadratic term (i.e., T
2
) in nominal prices, found to be
significant in Adoni, Sendhawa, Rajkot, and Gondal markets had increasing growth
pattern in 2001 to 2021 indicating the rise in raw cotton price was not only due to
inflation, but it was real and benefitted to farmers to some extent. The nominal prices of
cotton in Indian markets increased at the compound growth rate of 6 to 7 per cent per
annum during last two decades, but its real prices increased at lower growth rate of
around 2 per cent and in USA it was slight more (3.22 %).
The seasonal indices indicated the maximum cotton prices in months of July August and minimum in September to December. Fourier analysis indicated that the USA
and India S-6 cotton lint markets followed generally 7 to 8 years cyclical variation. The
cotton prices found to be non-stationary in their levels for all the markets, but become
stationary in the first differences i.e. I(1). The cotton prices in domestic markets had co integrated with each other and it transmitted from one market to the other, and moving
together in the long-run equilibrium. SARIMA/ARIMA model found the best fit to
respective markets for cotton price forecasting giving minimum error, compared to
ARCH-GARCH and VAR model.
This study suggest that there is large scope for achieving higher production of
cotton in India by developing new high yielding varieties replacing Bt. cotton. As cotton
price are highly volatile, the Government should take immediate action to enhance
export, when price falls drastically and allow the import, when price increase beyond
certain level. The short-run price distortions, needs to be corrected by improving market
conducts. As all markets are co-integrated, farmers may sell cotton in nearby market