Marketing of the selected upland crops between Chiang Mai and Bangkok markets

Abstract

This study investigates the pricing and operational efficiency of the Chiang Mai central crop market for soybeans, peanuts and garlic. It is based in part on the surveys of the Chiang Mai regional market and the Bangkok central terminal market conducted in 1972 and 1973 to 1974, and in part on price information for Chiang Mai and Bangkok obtained from the Chiang Mai Provincial Economist, and the Ministry of Economic Affairs respectively. It is proposed that pricing efficiency would be improved if competition in the Chiang Mai market could be increased. It is also proposed that operational efficiency could be improved by a movement towards large scale operation if large firms could operate at lower cost structures than small firms. The possibility of conflict between pricing efficiency and operational efficiency in achieving overall marketing efficiency is recognised. The effects of some of the factors influencing price levels in Chiang Mai merchants are determined by regression analysis with autoregressive techniques. The results show that the Bangkok price is the major factor involved. The other important factor is the change in Bangkok price. The dummy variables representing the buying season and the selling season are not important. In most cases, the price in Bangkok positively accounts for more than 50 percent of the level of the price in Chiang Mai. The extent of this influence is shown by the value of the regression coefficient of the Bangkok price, which varies from crop to crop and from year to year. An inverse relationship is obtained between the regression coefficient of the Bangkok price and the absolute (and percentage) margin. The annual average price in Bangkok and the total supply from Chiang Mai are the major factors affecting the relationships between prices in Chiang Mai and Bangkok, though the effect of the former dominates that of the latter. It was not possible to test rigorously the hypothesis that Chiang Mai merchants receive constant levels of profit. An attempt is made to explore the proposition that Chiang Mai firms operate at least cost. Inadequate information enable only the handling cost components to be quantified; administrative costs are not estimated. The cost components are the costs of the commission charged to the Bangkok brokers, transportation, prepacking and grading. They are determined by the competitive input market and are beyond the merchants' control. Lastly, the study highlights the difficulties and discusses the problems of estimating economies of size and, consequently, operational efficiency in the Chiang Mai market. An outline for a more comprehensive study of operational efficiency in the Chiang Mai market is proposed. Show more