From Farm Gate to Market: Integration, Price Dynamics and Policy Impact on Paddy in Chhattisgarh (2004–2010)

Abstract

This empirical study examines the market integration, price dynamics, and policy impacts on paddy marketing in Chhattisgarh from 2004 to 2010, covering the critical period of agricultural market reforms and price support mechanisms. Using monthly price data from 12 major markets across the state, the research employs cointegration analysis, vector error correction models, and price transmission elasticity measures to assess market efficiency and integration levels. The study reveals significant spatial and temporal variations in market integration, with coefficient of variation ranging from 0.23 to 0.87 across different market pairs. Policy interventions, particularly the Minimum Support Price (MSP) mechanism and public procurement systems, demonstrated substantial impact on price stabilization, reducing price volatility by 34% during the study period. The analysis indicates that while farm gate prices showed strong correlation with terminal market prices (correlation coefficient 0.78), the price transmission efficiency varied considerably across seasons and regions. Marketing margins ranged from 12% to 28%, with higher margins observed in remote rural markets. The findings suggest that despite policy interventions, market integration remains incomplete, particularly for smallholder farmers, necessitating targeted policy measures to enhance market access and reduce transaction costs. This research contributes to understanding agricultural market dynamics in developing economies and provides empirical evidence for policy formulation in agricultural marketing systems.