Impact of COVID-19 Pandemic on Vertical Price Transmission in the U.S. Fresh Banana Market

Solomon Odiase, Sayed H. Saghaian

Research output: Contribution to journalArticlepeer-review

2 Scopus citations

Abstract

The U.S. imports about two billion dollars of fresh bananas, accounting for over 99 percent of domestic banana consumption annually. The COVID-19 pandemic disrupted the fresh banana supply chain and caused unexpected price movements along the marketing channel. This research investigated the impact of the COVID-19 pandemic on price adjustments in the U.S. fresh banana market. A Vector Error Correction (VEC) model was employed to evaluate the speeds of price adjustments along the U.S. banana marketing channel at the import and retail levels, and historical decomposition graphs were used to investigate the magnitude of price adjustments caused by the COVID-19 shock. The results show that the deviation from the long-run equilibrium caused by the shock was corrected faster for the import prices than retail prices. Hence, the speeds of price adjustments were asymmetric in the period of the COVID-19 shock. Additionally, the magnitudes of price changes caused by the pandemic shock were different, leading to increased price margins. These results point to the inefficiency of the banana marketing channel with welfare, policy, and agribusiness implications.

Original languageEnglish
Article number6354
JournalSustainability (Switzerland)
Volume14
Issue number10
DOIs
StatePublished - May 1 2022

Bibliographical note

Publisher Copyright:
© 2022 by the authors. Licensee MDPI, Basel, Switzerland.

Funding

Acknowledgments: The authors would like to thank the editors and the reviewers for all their efforts. Sayed H. Saghaian acknowledges the support from the United States Department of Agriculture, National Institute of Food and Agriculture, Hatch project No. KY004052, under accession number 1012994.

FundersFunder number
U.S. Department of Agriculture
US Department of Agriculture National Institute of Food and Agriculture, Agriculture and Food Research Initiative1012994, KY004052

    Keywords

    • U.S. banana market
    • Vector Error Correction model
    • historical decomposition graphs
    • price transmission
    • structural breaks

    ASJC Scopus subject areas

    • Computer Science (miscellaneous)
    • Geography, Planning and Development
    • Renewable Energy, Sustainability and the Environment
    • Building and Construction
    • Environmental Science (miscellaneous)
    • Energy Engineering and Power Technology
    • Hardware and Architecture
    • Computer Networks and Communications
    • Management, Monitoring, Policy and Law

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