The Impact of Logistics on Marketing Margin in the Philippine Agricultural Sector

Abstract

The logistics industry is a fundamental aspect of fulfilling the supply chain in agriculture. Agricultural farmers in the Philippines often use the services of middlemen to transact on their behalf since these intermediaries possess better information, and engaging in logistics affects the marketing margin in the process. Frequently, logistics costs cause marketing margin to increase, leading to high farm-retail prices of agricultural goods. This paper examines if the existence of middlemen improves farmers' wages even with the additional logistics costs incurred. The variables' secondary data were all gathered from the Philippine Statistics Authority, and its annual frequency spanned the period of 1995 to 2019. Using Ordinary Least Squares (OLS) regression analysis procedure and diagnostic tests prove that logistics cost negatively affects marketing margin while farmers' wages have a positive relationship. The findings of this study address the presence of a longer supply chain, asymmetric information, technology, storage and facilities, and added logistics costs in agricultural transactions. Although middlemen have greater market power than the farmers, these mediators are still affected by the changes in the logistics costs since it is unavoidable for them to reduce the price due to the need to competitively sell the commodities.