Abstract:
Onion is the third most important staple vegetable in South Africa, due to the gross
value of vegetable production and export revenues. Almost all of South Africa's
provinces grow onions, but the Western Cape (Ceres), Northern Cape, Free State,
North West, and Limpopo provinces are the main producers. Fresh Produce Markets
(FPMs) are the primary distribution channel for onions. Onion producers are
concerned about the high degree of onion price variations in the FPMs. Markets are
essential for the delivery of fresh goods as well as for price development and
discovery. The study aims to analyse onion market integration in Cape Town,
Bloemfontein, Durban and Johannesburg Fresh Produce Markets.
The study investigated spatial market integration among geographically separated
onion markets in South Africa using average monthly prices from January 2009 to
December 2019. The Augmented Engle-Granger Cointegration and Error Correction
Model (ECM) were employed to examine the presence of market integration among
the onion producing and onion consuming markets in the country. The time series
analysis revealed that average monthly onion prices in Johannesburg move in
together with those in Cape Town, Durban, and Bloemfontein over time, indicating the
existence of a cointegration relationship. The ECM findings show that after a shock
that causes disequilibrium, it takes economic agents around a month to get back to
equilibrium. Price signals are transmitted within a month, which suggests that certain
onion markets are well integrated.
