Can market fragmentation explain the limited success of political attempts to promote grain legume cultivation in Germany?

Abstract

Grain legumes, such as field peas, field beans, sweet lupins and soybeans, are known to increase biodiversity within the appropriate crop rotation and are an important source of import-substituting feed protein. National and regional policy schemes have long tried to support the cultivation of grain legumes. Although many regions in Germany offer favourable conditions for grain legumes, previous subsidy schemes have failed to increase the area under cultivation and farmers report a lack of market incentives. Indeed, the available price data exhibit a substantial share of non-random missing values in weeks when grain legumes were not traded. We analyse these non-price periods using cointegration tests and single-hurdle Tobit models. The results indicate that regional price formation for grain legumes in German regions depends not only on a minimum quantity of the respective legume crop in supply but also on a favourable supra-regional soybean price: Regional grain legume markets are not integrated and show evidence of a fragmented market structure. This may explain why local grain legume value chains have failed to emerge in Germany, despite decades of policy attempts to support these crops.