Bananas and Food Security - Bioversity International

462 Les productions bananières / Bananas and food security – Session 2
The coefficient a3 measures the extent to which the general economic conditions
affecting the wholesale market in Metro Manila are transmitted to the local market. If
a3 = 1, then the wholesale price changes are fully transmitted to the local markets in
Mindoro in absolute terms. The coefficients a2 and a4 reflect the relative contribution of
the local and the reference market price history to the formation of current price levels,
respectively. The structure of the market therefore is competitive if prices in the
geographically separated markets move in unison which means that market conditions
in the reference market are communicated effectively to local markets.
In order to describe the influence of the two effects, the Timmer’s Index of Market
Connection (IMC) was used, defined as the ratio of a2 to a4 (Timmer 1984). If IMC = 0,
there is a large degree of market integration; while if less than one, it indicates a high
degree of short-term integration. This index simply indicates the degree to which local
markets are connected to reference markets in the short term.
Table 12 presents the results of this analysis. It is clear from the table that the
banana marketing system generally shows a pronounced lack of market integration. All
the a3 coefficients showed levels significantly different from 1, indicating that changes in
the economic conditions in Metro Manila are only partially transmitted to the farm level
for all banana types. These results are further confirmed by the IMC values obtained,
which range from 0.30 for Latundan to 0.31 for Lakatan. Although Mindoro is relatively
close to Metro Manila, the speed at which price information is transmitted to the farm is
not instantaneous due to delays in the delivery of information. The inefficiency with
which prices are transmitted to local markets can provide opportunities for middlemen
to make a profit.
Table 12. Integration of rural banana markets by type with Metro Manila market.
1998.
Type Long-run market integration (a2) Short-run market connection (IMC)
Saba 0.001* 2.00
Lakatan 0.012* 1.01
Latundan 0.164* 0.92
* Significantly different from 1.0.
IMC: Index of market connection.
Conclusion
While impressive growth performance has been achieved in banana production, much is
still to be desired in its marketing. In the export market, new opportunities for
expansion exist but production of Cavendish has been restricted by government policies
on area limitations. The repeal of this government policy will eventually help to broaden
the export market to include new product forms like banana chips and flour.
Considering the high growth potential of these products, government support in terms of
creating the necessary infrastructure and marketing policies will be crucial to the
development of this market.