Introduction: In the current world, supply chains play a critical role in the functioning of various markets, particularly in agriculture. Fresh agricultural products, such as fruits and vegetables, are highly perishable, i.e. they have a limited shelf life. Furthermore, unlike other products, their quality continuously deteriorates throughout the various activities of the supply chain. Consequently, managing the supply chain network for these products is highly complex rather than other products. Supply chain management refers to all activities involving the flow of commodities and information from manufacturing to consumption. These products are easily contaminated by environmental causes and spoil during distribution and movement along the supply chain. As a result, the supply chain for perishable agricultural products aims to transport the product from the farm to consumer in the shortest amount of time, at the lowest cost, and in the best possible condition and quality. Over recent years, the importance of fresh fruits and vegetables has grown significantly with the increasing demand from health-conscious consumers. This has made the quality and availability of fruits and vegetables throughout the year a major concern. Price variations and volatility are major issues in the agricultural supply chain, and they are driven by a variety of factors including meteorological conditions, government policies, domestic and overseas production and demand as well as transportation and storage costs. Potatoes are a vital product in Iran, playing an important role in providing food security and employment due to their nutritional and economic value. Iran is ranked thirteenth in the world for potato production, with about 5,500 thousand tons grown on more than 149 thousand hectares. Given the significance of this product, determining and analyzing the causation between different prices along its supply chain, from production to consumption, is a basic problem in agricultural economics. Since potatoes are a product with high consumer demand in the country, assessing the factors influencing the price changes might provide useful information to agricultural policy and decision makers. Overall, past research indicates that assessing the causality between prices in the agricultural supply chain, particularly potatoes in Iran, is a critical problem in the agricultural economics. Therefore, this study aimed at investigating the causal relationship between pricing differences in Iran's potato supply chain.
Materials and Methods: In this study, the causal relationship between prices in the potato supply chain was investigated using econometric techniques and to determine if changes in one price level would cause changes in others, the Granger causality test was specifically used to investigate the directionality and causation linkages between these price levels. Using the Vector Error Correction Model (VECM), the dynamic relationships and short- and long-term impacts were further examined. When examining cointegrated time series data, the VECM model is very helpful, since it sheds light on both the short-term dynamics and long-term equilibrium correlations between prices. Over a predetermined time period, data for the study was gathered from a variety of sources, including farm-gate pricing, wholesale prices, and retail prices. These econometric methods made it possible to thoroughly examine the mechanisms by which prices were transmitted, to pinpoint causal relationships as well as to evaluate the scope and velocity of the price changes at various supply chain stages.
Results and Discussion: The weekly potato price chart for Tehran (2016-2023) showed a large price discrepancy between the retail and farm-gate levels; as indicated, market margins were also inequitable, and in some circumstances, an increase in farm-gate prices reduced the market margins. Specifically, the prices in 2019 and 2022 were greater than those in the previous years. According to the Granger causality test, the farm-gate prices had a unidirectional causal relationship with all subsequent price levels. This suggests that the farm-gate price is the most important element in determining pricing for the remaining links in the supply chain. The VECM empirical model also revealed that the farm-gate price had the greatest impact on explaining the forecast inaccuracy of other price levels.
Conclusion and Suggestions: The study findings showed that the farm-gate prices were a crucial determinant of pricing across the potato supply chain, influencing all subsequent price levels (wholesale and retail); also, the farm-gate price had a one-way causal relationship with both retail and wholesale prices, whereas the changes in lower-level prices rarely had an impact on the farm-gate price. This indicates an imbalance in the market margins and increased bargaining power at lower levels of the supply chain, emphasizing the importance of effective monitoring and policymaking. Thus, the policymakers should prioritize cost reduction and price optimization at the point of origin (farm-gate) over final market prices. Furthermore, given the importance of the farm-gate pricing, creating favorable conditions to promote output and increase supply at this level can help reduce the price fluctuations and strengthen the supply chain. Although wholesalers' collaboration has allowed them to keep a portion of the consumer price, their effect is smaller than that of farm-gate prices. To increase the supply chain's efficiency and sustainability, proper farm-level supply and demand management policies must be developed. Identifying these causal links might help farmers and other stakeholders make better decisions to reduce the risks associated with the price changes.