IDEAS home Printed from https://ideas.repec.org/a/spr/agfoec/v8y2020i1d10.1186_s40100-020-0153-5.html
   My bibliography  Save this article

The impact of production shocks on maize markets in Ethiopia: implications for regional trade and food security

Author

Listed:
  • Mesay Yami

    (University of Pretoria)

  • Ferdi Meyer

    (University of Pretoria)

  • Rashid Hassan

    (University of Pretoria)

Abstract

In this article, we demonstrated the dynamic impact of a bumper harvest and drought shocks on the maize market and on the trade regime in Ethiopia. Regional market integration of Ethiopia’s white maize market with the South Sudan and Kenyan maize markets was also examined using cointegration analysis. Despite the renewed conflict in South Sudan, Addis Ababa maize market is cointegrated with Juba’s maize market. The simulation analysis indicated that a 20% increase in maize yield could reduce the maize price by 81%. This implies a decrease in the maize price level of 70% (110 USD/t) below the export parity price. This makes maize exports profitable and shifts the trade regime from autarky to an export parity regime. On the other hand, the effect of a drought could increase maize prices by 61% in the short run (within the year). At the current market price, the domestic maize price is wandering between the border prices and it is unprofitable to export maize. Therefore, lifting the export ban, even during normal harvest seasons, would not do any harm to the domestic maize price.

Suggested Citation

  • Mesay Yami & Ferdi Meyer & Rashid Hassan, 2020. "The impact of production shocks on maize markets in Ethiopia: implications for regional trade and food security," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 8(1), pages 1-25, December.
    • Handle: RePEc:spr:agfoec:v:8:y:2020:i:1:d:10.1186_s40100-020-0153-5
    DOI: 10.1186/s40100-020-0153-5
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1186/s40100-020-0153-5
    File Function: Abstract
    Download Restriction: no
    File URL: https://libkey.io/10.1186/s40100-020-0153-5?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Rashid, Shahidur & Minot, Nicholas, 2010. "Are Staple Food Markets in Africa Efficient? Spatial Price Analyses and Beyond," Food Security Collaborative Working Papers 58562, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    2. Minot, Nicholas, 2014. "Food price volatility in sub-Saharan Africa: Has it really increased?," Food Policy, Elsevier, vol. 45(C), pages 45-56.
    3. Dercon, Stefan, 2004. "Growth and shocks: evidence from rural Ethiopia," Journal of Development Economics, Elsevier, vol. 74(2), pages 309-329, August.
    4. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    5. Thiele, Rainer, 2000. "Estimating the aggregate agricultural supply response: a survey of techniques and results for developing countries," Kiel Working Papers 1016, Kiel Institute for the World Economy (IfW Kiel).
    6. Andrew McKay & Oliver Morrissey & Charlotte Vaillant, 1998. "Aggregate Export and Food Crop Supply Response in Tanzania," Discussion Papers 98/4, University of Nottingham, CREDIT.
    7. Lütkepohl,Helmut & Krätzig,Markus (ed.), 2004. "Applied Time Series Econometrics," Cambridge Books, Cambridge University Press, number 9780521547871.
    8. Stephens, Emma C. & Mabaya, Edward T., 2008. "Spatial Price Adjustment with and without Trade," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6538, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    9. Hill, Ruth Vargas & Porter, Catherine, 2017. "Vulnerability to Drought and Food Price Shocks: Evidence from Ethiopia," World Development, Elsevier, vol. 96(C), pages 65-77.
    10. Mesay Yami & Ferdi Meyer & Rashid Hassan, 2017. "Testing price leadership in major regional maize markets in Ethiopia: implications for targeted market intervention," Agrekon, Taylor & Francis Journals, vol. 56(2), pages 97-109, April.
    11. Rashid, Shahidur, 2011. "Intercommodity price transmission and food price policies: An analysis of Ethiopian cereal markets," IFPRI discussion papers 1079, International Food Policy Research Institute (IFPRI).
    12. Kindie Getnet, 2009. "Optimising the policy cost of market stabilisation: Which commodity matters most in Ethiopia?," Journal of International Development, John Wiley & Sons, Ltd., vol. 21(3), pages 362-378.
    13. Meyer, Ferdinand H. & Westhoff, Patrick C. & Binfield, Julian C.R. & Kirsten, Johann F., 2006. "Model closure and price formation under switching grain market regimes in South Africa," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 45(4), pages 1-12, December.
    14. Kotevska, Ana & Dimitrievski, Dragi & Erjavec, Emil, 2013. "Partial Equilibrium Model As A Tool For Policy Analysis In Agriculture: An Empirical Evidence Of Macedonia," 50th Anniversary Seminar, Agriculture and Rural Development -Challenges of Transition and Integration Processes, September 27, 2013 161772, University of Belgrade, Department of Agricultural Economics, Faculty of Agriculture.
    15. Tsedeke Abate & Bekele Shiferaw & Abebe Menkir & Dagne Wegary & Yilma Kebede & Kindie Tesfaye & Menale Kassie & Gezahegn Bogale & Berhanu Tadesse & Tolera Keno, 2015. "Factors that transformed maize productivity in Ethiopia," Food Security: The Science, Sociology and Economics of Food Production and Access to Food, Springer;The International Society for Plant Pathology, vol. 7(5), pages 965-981, October.
    16. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July.
    17. Catherine Porter, 2012. "Shocks, Consumption and Income Diversification in Rural Ethiopia," Journal of Development Studies, Taylor & Francis Journals, vol. 48(9), pages 1209-1222, September.
    18. Dorosh, Paul A. & Dradri, Simon & Haggblade, Steven, 2009. "Regional trade, government policy and food security: Recent evidence from Zambia," Food Policy, Elsevier, vol. 34(4), pages 350-366, August.
    19. Paul A. Dorosh & Shahidur Rashid & Joanna Asselt, 2016. "Enhancing food security in South Sudan: the role of markets and regional trade," Agricultural Economics, International Association of Agricultural Economists, vol. 47(6), pages 697-707, November.
    20. Alemu, Zerihun Gudeta & Oosterhuizen, K. & van Schalkwyk, Herman D., 2003. "Grain-supply response in Ethiopia: An error-correction approach," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 42(4), pages 1-16, December.
    21. Stefan Dercon & Pramila Krishnan, 2000. "Vulnerability, seasonality and poverty in Ethiopia," Journal of Development Studies, Taylor & Francis Journals, vol. 36(6), pages 25-53.
    22. Thiede, Brian C., 2014. "Rainfall Shocks and Within-Community Wealth Inequality: Evidence from Rural Ethiopia," World Development, Elsevier, vol. 64(C), pages 181-193.
    23. Lütkepohl,Helmut & Krätzig,Markus (ed.), 2004. "Applied Time Series Econometrics," Cambridge Books, Cambridge University Press, number 9780521839198.
    24. Chapoto, Antony & Jayne, Thomas S., 2009. "The Impacts of Trade Barriers and Market Interventions on Maize Price Predictability: Evidence from Eastern and Southern Africa," Food Security International Development Working Papers 56798, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Thomas Pave Sohnesen, 2020. "Two Sides to Same Drought: Measurement and Impact of Ethiopia’s 2015 Historical Drought," Economics of Disasters and Climate Change, Springer, vol. 4(1), pages 83-101, April.
    2. Kaminski, Jermain & Hopp, Christian & Tykvová, Tereza, 2019. "New technology assessment in entrepreneurial financing – Does crowdfunding predict venture capital investments?," Technological Forecasting and Social Change, Elsevier, vol. 139(C), pages 287-302.
    3. MAMOUDOU Ba & Mazhar Mughal, 2022. "Weather Shocks, Coping Strategies and Household Well-being: Evidence from Rural Mauritania," Journal of Development Studies, Taylor & Francis Journals, vol. 58(3), pages 482-502, March.
    4. Rosa, Franco & Vasciaveo, Michela & Weaver, Robert D., 2014. "Agricultural and oil commodities: price transmission and market integration between US and Italy," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 3(2), pages 1-25, August.
    5. Kunze, Frederik, 2017. "Predicting exchange rates in Asia: New insights on the accuracy of survey forecasts," University of Göttingen Working Papers in Economics 326, University of Goettingen, Department of Economics.
    6. Piroli, Giuseppe & Rajcaniova, Miroslava & Ciaian, Pavel & Kancs, d׳Artis, 2015. "From a rise in B to a fall in C? SVAR analysis of environmental impact of biofuels," Renewable and Sustainable Energy Reviews, Elsevier, vol. 49(C), pages 921-930.
    7. Ijambo, Bertha Deshimona, 2017. "An econometric analysis of spatial market integration and price formation in the Namibian sheep industry," Research Theses 334744, Collaborative Masters Program in Agricultural and Applied Economics.
    8. Elżbieta Szaruga & Elżbieta Załoga, 2022. "Environmental Management from the Point of View of the Energy Intensity of Road Freight Transport and Shocks," IJERPH, MDPI, vol. 19(21), pages 1-22, November.
    9. Yonas Alem & Mathilde Maurel & Katrin Millock, 2016. "Migration as an Adaptation Strategy to Weather Variability: An Instrumental Variables Probit Analysis," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01955941, HAL.
    10. Afsin Sahin, 2019. "Loom of Symmetric Pass-Through," Economies, MDPI, vol. 7(1), pages 1-25, February.
    11. Robert Socha & Piotr Wdowiński, 2018. "Tendencje zmian cen na światowym rynku ropy naftowej po 2000 roku," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 1, pages 103-135.
    12. Fahmida Khatun & Syed Yusuf Saadat & Md. Kamruzzaman, 2019. "FINANCE FOR SDGs: Addressing Governance Challenge of Aid Utilisation in Bangladesh," CPD Working Paper 125, Centre for Policy Dialogue (CPD).
    13. Pavel Ciaian & Miroslava Rajcaniova & d’Artis Kancs, 2016. "The economics of BitCoin price formation," Applied Economics, Taylor & Francis Journals, vol. 48(19), pages 1799-1815, April.
    14. Fahmida Khatun & Syed Yusuf Saadat, 2020. "Fourth Industrial Revolution, Technological Advancement and Youth Employment: A South Asian Perspective," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 21(1), pages 58-75, March.
    15. Hill, Ruth Vargas & Porter, Catherine, 2017. "Vulnerability to Drought and Food Price Shocks: Evidence from Ethiopia," World Development, Elsevier, vol. 96(C), pages 65-77.
    16. Hulsewig, Oliver & Mayer, Eric & Wollmershauser, Timo, 2006. "Bank loan supply and monetary policy transmission in Germany: An assessment based on matching impulse responses," Journal of Banking & Finance, Elsevier, vol. 30(10), pages 2893-2910, October.
    17. Bunn, Derek W. & Fezzi, Carlo, 2007. "Interaction of European Carbon Trading and Energy Prices," Climate Change Modelling and Policy Working Papers 9092, Fondazione Eni Enrico Mattei (FEEM).
    18. Helmut Lütkepohl, 2006. "Structural vector autoregressive analysis for cointegrated variables," AStA Advances in Statistical Analysis, Springer;German Statistical Society, vol. 90(1), pages 75-88, March.
    19. Ihle, Rico & Amikuzuno, Joseph, 2009. "The Integration of Tomato Markets in Ghana with and without Direct Trade Flows," 2009 Conference, August 16-22, 2009, Beijing, China 51402, International Association of Agricultural Economists.
    20. Robert Socha & Piotr Wdowiński, 2018. "Crude oil price and speculative activity: a cointegration analysis," Central European Journal of Economic Modelling and Econometrics, Central European Journal of Economic Modelling and Econometrics, vol. 10(3), pages 263-304, September.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:agfoec:v:8:y:2020:i:1:d:10.1186_s40100-020-0153-5. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.