The Asymmetric Vertical Price Volatility Spillover in the Citrus Market

Abstract

The current study aims to elicit the vertical price uncertainty spillover between producer and wholesaler or trader prices in the citrus market, which has important implications for citrus producers, wholesalers, and consumers in terms of food security and affordability in the world in general and in Turkey in particular. In this study, daily data for the period between January 2009 and May 2020 were analyzed using the asymmetric VAR (1)-BEKK GARCH-M (1,1) method. The sample of this study was composed of local producer stock market prices and wholesale or trader stock market prices in Turkey, which may differ from the findings obtained from studies conducted in other countries due to the differentiation of country dynamics. All applied statistical tests confirm the chosen model and there is also Granger causality from producer prices to wholesale prices or vice versa. Uncertainty in producer prices for each citrus product leads to propagation risks in wholesale prices or vice versa, especially for lemon, which is on the table in all seasons, compared to other citrus products. We also found that uncertainties arising from the producer and wholesale market reduce citrus returns, indicating persistent uncertainties of risks such as alienating producers from production and consumers paying high prices.