IJERD – International Journal of Environmental and Rural Development (2012) 3-2

Research article
erd

Structure and Conduct of the Purple Rice Market inNorthern Thailand
PATTANA JIERWIRIYAPANT*
Faculty of Agriculture, Chiang Mai University, Chiang Mai , Thailand
Email: pattanaj@chiangmai.ac.th

ONG-ART LIANGPHANSAKUL
Faculty of Agriculture, Chiang Mai University, Chiang Mai, Thailand

WANWILAI CHULAPHUN
National Pingtung University of Science and Technology, Pingtun, Taiwan R.O.C.
Received 14 December 2011

Accepted 18 April 2012(*: Corresponding Autor)

Abstract In recent years, health issues are a major concern for consumers. Northern Thai
farmers are seeking alternative crops with high nutritional value and market potential. Recent studies show that purple rice (or Thai black rice) is rich in nutrients, such as gammaoryzanol and natural antioxidants, and therefore, could be potential crop. The main purpose of this study is to investigate market structure and market conduct of purple rice innorthern  Thailand.  Porter’s  five  forces  analysis  was  used  to  evaluate  the  competitiveness  and relative attractiveness of growing purple rice. The surveying method was used to study
market conduct. The result from the estimated Concentration Ratio indicated that market
structure of purple rice differ in all three provinces. It was also found that the five competitive forces influence the collectors the most and the farmers the least. Even though thecompetitive  forces  aren’t  very  high,  survey  data  indicates  that  the  purple  rice  market  hasn’t  been found attractive by farmers, collectors or retailers.This study concludes that despite
purple rice being a high-nutrient product, its market is still very small in northern
Thailand. However, purple rice as a serious commercial crop is still not that attractive tothe farmers.
Keywords structure, conduct, purple rice, Northern Thailand

INTRODUCTION
As good health is a growing issue for consumers, many studies have been focusing on finding nutritious foods that can be used as a sort of alternative medicine. Northern Thai farmers are looking
for crops with both high nutritional value and high marketability. Research by Boonsit, Kaladeeand Phongpiachan in 2006 shows that purple rice (or Thai black rice) has a mean of 55.58 mg ofgamma-oryzanol per 100 g, compared to white rice that has a mean of only 30.67 mg per 100 g.
Additionally, purple rice contains big amount of natural antioxidants and its  extract’s  antioxidants
can be used as a natural preservative in meat products (Min, Chen & Green, 2009).
Due to these nutritional advantages, demand for purple rice may increase; creating an opportunity for farmers in northern Thailand. However, the factors  that  influence  the  farmers’  decisionmaking process need to be understood in order to convince farmers to start growing purple rice instead  of  white  rice.    The  farmers’  decision  to  adopt  a  new  crop  is  not  solely  led  by  economic  factors,
but socio-economic and psychological factors as well. Purple rice has been grown in Thailand forquite some time and is perceived as a crop for local consumption which hinders its attractiveness as
a commercial crop by farmers.
As it is important to understand the production  and  market  of  purple  rice,  this  study’s  purpose  is   to   investigate   the   current   marketing   situation   and   better   understand   the   market’s   structure   and  conduct  of  this  crop  in  northern  Thailand.  Porter’s  five  forces  analysis  was  used  to  evaluate  the  relⒸISERD146

IJERD – International Journal of Environmental and Rural Development (2012) 3-2

ative competitiveness and the attractiveness of growing purple rice. The surveying method wasused to study market conduct. Additionally, in order to successfully promote purple rice, this study
aims   to   find   the   factors   that   could   influence   the   farmers’   adoption of this healthy alternative towhite rice.
MATERIALS AND METHODSThis   study’s   primary   data   was   collected   from   all   players   in   the   supply   chain;;   farmers   who   grow  purple rice in Chiang Mai, Chiang Rai and Phayao Provinces, local collectors, wholesalers and retailers over the course of the 2010-2011 production. Questionnaires and personal interviews wereconducted  in  order  to  analyze  the  market’s  structure  and  conduct, and  Porter’s  five  force  analysis  was applied to examine the competitiveness and to analyze the attractiveness and profitability ofthe industry.
Porter’s   analysis   is   used   to   determine   the   degree   of   competition   and   the   attractiveness   of   a  market environment by looking at five forces; threat of new entrants, competitive rivalry, bargaining power of suppliers, bargaining power of consumers and the threat of substitute products (Porter,2008). Factors of each force were identified and analyzed in order to gain understanding of thesupply   chain’s   key   players   and   the  influence   each   force   has   on them. The questionnaire was designed using the Likert scale that allows participants to measure the influence of each force by selecting a number between 1 and 5; 5 represents the highest level of influence while 1 represents theleast influence (Likert, 1932).
The concentration ratio (CR) of the market structure was used to assess the monopoly power
or degree of concentration in the system, if any. The CR is a partial index that measures the shareof the industry that is made of a few large firms or groups. It is calculated as follows;CRn  =  ∑  Xn /  ∑  Xi
CRn denotes the share of the industry accounted for n larger firms in the market, ∑  X   n is thevolume of product produced by n firms and ∑  Xi is the volume of product produced by all firms inthe market. The estimated value of CR for any given n should be between 0 and 1 - the higher theCR indicated, the greater the market concentration or monopoly power.
Market structure can be classified based on the size of the market share in the hands of the topfirms (Bain, 1968). For example, if the top four firms control more than 70 percent of the market,
it’s  revealed  to  be  a  highly  concentrated oligopolistic market. Other factors such as barriers to entry,entry conditions and exit conditions are also evaluated. Production and marketing strategies, pricing behavior and policies of purple rice were examined during the personal interviews and surveys.
Also, secondary data related to marketing purple rice in northern Thailand was collected from various sources and is listed in the references section of this paper.
RESULTS AND DISCUSSION
Competitiveness of the industry
The threat of new entrants is high for both collectors and retailers, while farmers have a medium
level as most purple rice farmers belong to agricultural groups and usually produce under contractual  agreement.    Since  this  is  the  case,  the  farmer’s  suppliers  of  inputs  and  buyers  of  outputs  are  typically the same person - thus reducing their bargaining power as suppliers. The rivalry among
competitors  is  low  as  there  isn’t  much  product  differentiation  with  the  same  variety  of  purple  rice.    
Threat of substitutes is also low due to the uniqueness of the product.
The   results   from   the   study’s   Porter’s   five   forces   analysis   of   the   competiveness of northern
Thailand’s  purple  rice  industry  can  be  seen  in  Table 1. These results indicate that the competitiveforces influence the collectors the most (3.2) and the farmers the least (2.4) as shown in Fig. 1.
Even though the competitive forces aren’t  very  high,  survey  data  indicates  that  the  purple  rice  ⒸISERD147

IJERD – International Journal of Environmental and Rural Development (2012) 3-2

market  hasn’t  been  found  attractive  by  farmers,  collectors  or  retailers.
Table 1 Influence level of competitive forces of marketing environment for purple rice
Competitive Five Forces
1. Threat of new entrants
2 .Rivalry among competitors
3. Bargaining power of suppliers
4. Bargaining power of buyers
5. Threat of substitutes
Average Mean

Mean (Likert Scale Rating)
Farmers
Collectors
Retailers
2.9(medium)2.7(medium)2.0(low)
2.9(medium)1.5(low)
2.4(low)

3.8(high)
3.1(medium)3.4(medium)2.2(low)
3.6(high)
3.2(medium)3.7(high)
3.0(medium)1.9(low)
2.4(low)
2.8(medium)2.7(medium)Fig. 1 Weighted score of marketing competitive forces
Market structure for purple rice
After using the CR to measure the purple rice market, it was found that each of the three selected
provinces’  market  concentration  differs.    However,  pricing  is  set  by  buyers  either  through  contract
farming  or  the  buyers’  bargaining  power in each market.
In Phayao Province, only one agricultural group, consisting of 33 farmers, exists. The member farmers obtain the seed from the group leader who also serves as the collector, miller and retailer. The Phayao market is monopolistic with the market share of this group accounting for 25.3
percent of northern Thailand.
Two major purple rice producers exist amongst over 100 very small scale farmers in Chiang
Rai Province with an estimated CR2 of 0.08. Despite the low CR, the two major farms run theirown rice mills and have an outlet for selling the final product. Purple rice from the rest of othersmall farmers is sold to four large collectors with an estimated CR4 of 0.73 which indicates a higholigopolistic market.
Chiang  Mai  Province’s purple rice market is very small scale that allows for perfect competition.
CONCLUSION
This study concludes that despite purple rice being a high-nutrient product, its market is still verysmall in northern Thailand. However, there are signs of market growth in some areas. Even thoughⒸISERD148

IJERD – International Journal of Environmental and Rural Development (2012) 3-2

the market structures vary among the three provinces, the bargaining powers of both the buyers andsuppliers are quite high for the farmers. It was also found that the concentration ratio was higher atthe  collectors’  level and  the  pricing  is  still  under  the  intermediary  buyers’  power.    Purple rice needs
to be promoted in order to make it an attractive alternative crop for farmers.
ACKNOWLEDGEMENTS
We are grateful to the National Research Universities Program of the Office of the Commission on
Higher Education, Ministry of Education, Thailand, whose funding made this study possible.
REFERENCES
Bain, J.S. 1968. Industrial organization. New York : John Wiley and Sons.
Boonsit, P., Kaladee, D and Phongpiachan, P. 2006. Gamma oryzanol content in purple rice Thailand local
genotypes. Prosperity and poverty in a globalized world - challenges for agricultural research, Bonn,
Germany.
Likert, R. 1932. A technique for the measurement of attitudes. Archives of Psychology. 22 (140), 55.
Min, B., Chen, M.H. and Green, B.W. 2009. Antioxidant activities of purple rice bran extract and its effecton the quality of low-NaCl, phosphate-free patties made from channel catfish (Ictalurus punctatus) belly
flap meat. Journal of Food Science, 74, C268-C277.
Porter, M.E. 2008. The five competitive forces that shape strategy, Harvard Business Review, January, 86104.

ⒸISERD149