Pricing Efficiency in Agricultural Markets: Evidence from the Sugarcane Sector in Laos
Xomphouthep Phimthong
College of Economics and Management, Jilin Agricultural University, Changchun, Jilin Province, China.
Yohana James Mgale
College of Economics and Management, Jilin Agricultural University, Changchun, Jilin Province, China.
Ray Munachoonga Sikamwaya
College of Economics and Management, Jilin Agricultural University, Changchun, Jilin Province, China.
Zhao Guiyu *
College of Economics and Management, Jilin Agricultural University, Changchun, Jilin Province, China.
*Author to whom correspondence should be addressed.
Abstract
This study aims to analyse the relationship between farm gate prices and export prices in the sugarcane sector in Laos. The Johansen cointegration test, Granger-causality test, and the Error Correction Model (ECM) were used to investigate the causality and asymmetry of price transmission between the two market levels. The coefficient of variation values shows that farm gate prices were more volatile than prices at the exporter level. Granger’s causality tests show two-way causality between farm and export markets. Further, estimates of the price adjustment process suggest an asymmetric adjustment between producer and exporter prices, in short and long-run. This implies that there is a non-competitive market structure. It is therefore recommended that policies be put in place to ensure the efficient marketing of sugarcane in Laos.
Keywords: Price transmission, price volatility, error correction modelling, sugarcane, Laos