The purpose of this study is to explore policy implications to promote competition in the wholesale market for fruits and vegetables by analyzing their wholesale market structures and their impacts on wholesale market prices. For this purpose, this s...
The purpose of this study is to explore policy implications to promote competition in the wholesale market for fruits and vegetables by analyzing their wholesale market structures and their impacts on wholesale market prices. For this purpose, this study chooses a wholesale market located at Garak-dong in Seoul. This study (1) examines the roles of jobber-wholesalers and their situations in agricultural marketing (2) calculates the concentrate ratio of jobber-wholesalers in the wholesale market (3) analyzes the effect of concentrate ratio on prices in the wholesale markets.
The amount traded in the Garak wholesale market is 2,268 tons and accounts for 43.5% in the total. 1,905 jobber-wholesaler participate in the wholesale market activities. Jobber-wholesalers whose age is 50th or 60th account for 74.0% in the Garak market, indicating old aging of the jobber-wholesalers.
This study calculate CR4 ratios to examine the competitive structure of jobber-wholesalers in the Garak market. CR4 is found to be less than 10% for most fruits--apples, pears, oranges, watermelons, melons, and tomatoes, implying almost perfect competition markets.For jujube, chestnut, and walnut, its CR4 is over 50%, indicating oligopoly marker structures. 32 items of vegetable in the total 66 items are found to have CR4 less than 33%, while other vegetables such as shallot onion, green onion, and ginger which consumer prefer as condiments are found to have CR4 over 50%.
Next, the impact of CR4 concentrate ratio of the jobber-wholesalers onwholesale market prices is estimated for five wholesale market companies-Agricultural Cooperative Market, Hankook Fruits and Vegetables Company, Chungang Fruits and Vegetables Company, Seoul Fruits and Vegetables Company, and Donghwa Fruits and Vegetables Company. Impacts of the CR4 ratios on wholesale market prices appear to be different by companies and items. CR4 ratios of jobber-wholesaler who deal with apples in Agricultural Cooperative Market and Chungang Company, and Hankook Company appear to have positive effects on their wholesale market prices. For pears, CR4 ratios have positive effects on the prices at all of five companies. For oranges, CR4 ratio has a positive effect on the price at Chungang Company, while for persimmon CR4 ratios have positive effects on the prices at Agricultural Cooperative Market and Hankook Company.
For watermelons and tomatoes, their CR4 ratios appear to have positive coefficients, but they are not significant.
For most vegetables except garlic, their CR4 ratios appear to have positive coefficients, but they are insignificant. CR4 ratio for garlic appears to have a positive effect on the prices at Seoul Company and Donghwa Company.
Estimation results above may be explained as follows.
First, fruits which have high price elasticities are under perfect competition, compared with markets for vegetables. Difference in prices across wholesale market companies may result from jobber-wholesalers' performances at the markets.
Second, demands for vegetables are inelastic with respect to price changes, while their supplies are elastic with respect to price changes. Therefore, temporary instability in demand and supply of vegetables may results in their prices instability with time lags.
Third, CR4 ratios do not appear to affect vegetables prices, even though high concentrate ratios of jobber-wholesalers in vegetable markets indicate that they are under oligopoly market.
In conclusion, it is necessary to develop the system for efficiently managing jobber-wholesalers in the Garak market, when considering its function as a main wholesale market for agricultural products in Korea and impact of its market structure on price formulation. To keep its function efficient and successful, we need to achieve economy of scale in marketing activities through inducing small jobber-wholesaler to exit out of the market and preventing the entry of old-aged jobber-wholesalers into the market.