Assessing the Intensity of Market Competition in the U.S. Papaya Import Market

Papaya is the third most traded tropical fruit, after pineapples and mangoes, respectively. World imports of fresh papayas exceeded 261,000 metric tonnes (t) in 2011, with an import value of $250.82 million. Globally, the United States is the number one papaya importer, and in 2011, accounted for 53.43 percent of the trade, valued at around $79.82 million. The US fresh papaya import market may be characterized as oligopolistic (imperfect competition), whereas Mexico, Belize, and Brazil are the main import suppliers. Mexico plays a dominant role in the US papaya import market; however, market share per se does not necessarily prove Mexican papaya exporters exercise market power for papaya exports in the United States. For instance, Brazil, which exports the Solo cultivar (considered to be of higher quality and a slightly differentiated product), commands a higher price for its produce and, in fact, could be the one exercising the market power.

The United States, although not currently a major player in the papaya market, is considering becoming more active within the market, with anticipated increases in supplies coming mainly from Florida. This potential development stems from ongoing research to eradicate the papaya ringspot virus (PRSV) that has severely curtailed production supplies coming from this source. Since success in the market will depend on the extent to which US growers can compete in the market, an understanding of the level of competition that exists in the market is of paramount importance. Hence, the primary objective of this study is to investigate the intensity of the competition that currently exists in this market among the major players. An inverse residual demand model for the three main competitors (Mexico, Belize, and Brazil) is specified and estimated. Results of this analysis offer an interesting insight into the competitive behavior of the three main fresh papaya exporters in the US market. The empirical estimates indicate that over the sample period, imperfect competition was not an issue for the three main fresh papaya exporters to the US market. The findings suggest that the US papaya market is very competitive and is driven by price competition and cultivar characteristics. Because there are no major barriers to entry, Florida growers can do reasonably well in the market as long as they can compete on a price basis.