Modeling Spatial Markets Integration of Potatoes in South African Fresh Produce Markets

Spatial market integration provides signals about market interconnectedness and helps assess the overall market performance. This study investigated the spatial market integration of potatoes among selected National Fresh Produce Markets (NFPMs) in South Africa. The study used monthly time-series data from 1995 to 2020, acquired from the Department of Agriculture, Land Reform, and Rural Development (DALRRD). Price data were tested for unit roots using the Augmented Dickey-Fuller (ADF) test. The results showed that the data were stationary at levels (I (0)). Autoregressive Distributed Lag (ARDL) and Error Correction Model (ECM) were employed to test for spatial market integration and short-run dynamics. The ARDL model’s bounds tests identified a single cointegration relationship between the selected NFPMs and the central market, confirming a spatial market-price relationship in the potato trade amid marketing infrastructure challenges. The ARDL-ECM indicated long-term equilibrium relations across all markets, with an average price increase of 61%. Short-term dynamics revealed sharp increases in potato prices of over 100% in four markets, with an average rise of more than 90% across all markets. The market displayed the commodity’s price adjustment process toward the long-run equilibrium price, though at varying moderate and high speeds of correction. The study recommends that authorities should invest in market infrastructure and support facilities that meet international standards, develop value-added facilities, and review and enforce market bylaws to improve market access for all stakeholders. Additionally, markets should enhance their commodity price-monitoring systems to ensure transparent pricing, thereby aiding traders and strengthening spatial market integration.