Research Reports
A Study on Determinants of Seasonal Supply and Price of Produce in Korea: With Special Emphasis on Weather
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AuthorLee, Yongsun
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Publication Date2005.12.01
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Original
Production and price of fruits and vegetables not only fluctuate between years but also vary considerably between seasons. The purpose of this study is to investigate the reasons of agricultural production and price fluctuation in Korea and the role of weather in the fluctuation. The study estimates yield function, acreage response function, supply function, and price function, which include a weather variable as well as economic variables like price and income. Estimation is conducted by pooling time-series and cross-sectional data, and fixed effects model was adopted so as to consider differences in level between regions or months. Spring type (which is distributed mainly in spring) Chinese cabbage and radish can be divided into wintering type and field-growing type (in spring), while the cropping type of fruit-bearing vegetables can be classified according to the major type of each region. Statistical data of regional production for each cropping type were utilized for the period from 1980 to 2004, and the monthly trade data of Garak Wholesale Market were used for the period from 1987 to 2005.
The main results of the study can be summarized as follows: Weather conditions were found to be crucial in explaining the yield of each cropping type. While temperature of the seeding period positively affects the yields of the spring and summer cropping type, temperature of the harvest period negatively influences the yield of the same cropping type. Regional effect of yield function is greater in the southern area than in the northern area, and in western part than the eastern part. Cultivation acreage and supply positively respond to the prices of the same crop and its substitutes during the seeding season, which implies that farmers utilize the most recent data upon making a decision on acreage and seeding.
Temperature and solar radiation were found to be determinants of the yield function for fruit-bearing vegetables. Acreage of cucumber and mini-tomato in winter negatively and proportionally respond to oil price, whereas pumpkin supply in spring positively reacts to it, which suggests their mutual substitutability.
Weather conditions of a metropolitan area were found to affect the summer price of fruit-bearing vegetables. Prices of cucumber and watermelon positively respond to the level of temperature, while pumpkin price moves in the same direction to the amount of precipitation. This finding reflects that demand for produce is influenced not only by physiological factor but also by dietary habits.
The price of fruit like grape is affected by weather conditions as well. Precipitation in May and solar radiation in July positively influence the grape price. Especially the elasticity of radiation to grape price is estimated to be 0.7, which means that demand for grape depends heavily on the quality and thus on the amount of solar radiation.
Researchers: Lee Yong-Sun, Jeong Hak-Kyun, Sim Song-Bo
Email address: yslee@krei.re.kr
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