Vertical price linkages in food markets: Evidence from the tomato value chain of Northern South Africa

Price transmission in agricultural fresh produce markets is a subject of considerable interest to policymakers given that improved market performance for agricultural commodities promotes market development and maximization of social welfare. In northern South Africa, where tomato production dominates the country, studies exist on the general production, marketing, and consumption of fresh produce. However, the literature lacks an analytical component that is pertinent to the mechanism of price transmission and vertical linkages among successive marketing stages of tomato. This study employs the Houck approach and Error Correction modeling technique in an attempt to examine price transmission in South Africa’s tomato markets. The results indicate a symmetric adjustment to price signals between farm and wholesale levels and an asymmetric adjustment between farm and retail levels. Even so, there is scope for ameliorating the effectiveness and efficiency of fresh produce markets in South Africa.