An econometric analysis of watermelon supply and demand in Turkey

According to world production records of FAO, Turkey ranks second in watermelon production after China, making about 18.0 percent of the world production. According to 1992-94 average data, annual watermelon production of Turkey is about 3.7 million metric tons. Watermelon produce is mostly consumed by the domestic market. A considerable instability in quantity of production and prices exist in the domestic market. Basically supply of watermelon in Turkey shows fluctuation as Cobweb theorem. In this study, recursive econometric market model for watermelon was specified and estimated. The data employed in this study are annual time series from 1973 to 1994. The results of the estimated model provide insight into the relationship between economic variables in the market. The results also present substantial information for rational producers as well as the manager in the agro-business companies. Naive expectation in the decision making process for watermelon production has been confirmed by this study. Also demand structure of watermelon has been clarified. It was calculated from the supply model that the price elasticity of watermelon supply with respect to lagged producer price is 0.22. In addition, from the growth model, annual average,growth rate of watermelon was calculated as 1.93. It was calculated from the demand model that own-price flexibility of watermelon is -0.46 and cross-price flexibility with respect to table grape is 0.63. Furthermore, the demand model estimation indicated that watermelon is an inferior commodity in Turkey.