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Economic analysis of marketing grain sorghum in the Philippines
Abstract
This study addresses the failure of sorghum to compete in Philippine feedgrain markets in spite of its seeming logic in certain cropping systems. Philippine sorghum production declined from 36.29 thousand MT in 1979 to only 260 MT in 1985. The study first examines the structure of feedgrains markets, seeking clues to market behavior and performance. Quantitative analysis focuses directly on efficiency, a key performance variable. Market structure analysis suggests potential market inefficiencies. Feedgrain markets are characterized by oligopsonistic buyers (traders) and atomistic sellers (farmers). Bilateral oligopolies dominate local trader-feedmill markets and traders often collude. There is a general lack of scientific grading of grains. Sorghum produced in Mindanao is often of low quality owing to the harvest of immature grain. A high resulting incidence of tannin leads to poor feeding efficiency. A positive cross price elasticity of demand suggests the substitutability of sorghum and corn. Regressing prices of corn against prices of sorghum reveals that sorghum prices are 88 to 92 percent those of corn, a result commensurate with nutritional differences between the two crops. Price analysis indicates a generally close integration of markets for both corn and sorghum across time, space and form. Analysis of price margins for corn and sorghum shows that, except at the wholesale level, prices are justified by costs of transportation, storage and processing. Wholesale price anomalies may stem from the market power of a few traders controlling large volumes of grains. Aside from somewhat higher costs associated with marketing low volumes of sorghum (threshing, storage, re-labelling of feed components), marketing costs are generally similar to those of corn. Sorghum price is the primary determinant of quantity of sorghum demanded. Lower sorghum prices, however, are a producer disincentive, aggravating what may be sorghum's main drawback, the undependability of its supply. Thus, in order to compete successfully with corn, at least in the short term, sorghum prices must be lower than those for corn. But low prices result in low production which in turn dampens demand for sorghum as a feedgrain. The unreliability of supply is a concern that emphasizes the inseparability of production and marketing aspects of sorghum's competitiveness in the Philippines.
Subject Area
Agricultural economics
Recommended Citation
Brion, Lillian Alcantara, "Economic analysis of marketing grain sorghum in the Philippines" (1990). ETD collection for University of Nebraska-Lincoln. AAI9108212.
https://digitalcommons.unl.edu/dissertations/AAI9108212