SPATIAL MARKET INTEGRATION OF RICE IN THE WORLD

Abstract

Time series data (1966 to 2017) that covered prices of six selected major exporting rice markets in the world were used to determine the integration of rice markets in the world. The collected data were analyzed using both descriptive and inferential statistics. In spite of the long-run price association among the selected six markets, the poor extent of market co-integration made the law of one price (LOP) not to hold i.e. elusive in these markets. Except for Pakistan and China markets, all the remaining markets were quite competitive as they have a high degree of market integration- stable equilibrium that absolved any short-run shocks that generate discontinuity and asymmetric price responses. Pakistan market has a dominant role in price formation of all its contemporary five markets while China market viz. leverage effect (inventory accumulation) is not affected by any local shock that emanated from the five markets. However, the local shock generated from China market is felt by all the selected markets. Furthermore, it was observed that international trade in rice marketing is very useful in Cambodian; USA, and China markets as volatility of their respective current prices was quite persistent. Based on the forecast, it can be inferred that the rice prices of the selected markets will adjust according to supply and demand. Therefore, for the development of a single integrated economic rice market in the world, there is a need to strengthen the linkages and interconnectedness among the major exporting rice markets for faster transmission of price and commodity management for efficient allocation. This can be achieved by enhancing the development of market infrastructure viz. assaying, grading, sorting, standardization, quality assurance, physio-sanitary standardization; use of e-trade and e-commerce, value addition, transportation, and other back-end supply chain.