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Decomposing Producer Price Risk: An Analysis Of Livestock Markets In Northern Kenya

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  • Barrett, Christopher B.
  • Luseno, Winnie K.

Abstract

This paper introduces a simple method of price risk decomposition that determines the extent to which producer price risk is attributable to volatile inter-market margins, intra-day variation, intra-week (day of week) variation, or seasonality. We apply the method to livestock markets in northern Kenya, a setting of dramatic price volatility where price stabilization is a live policy issue. Large, variable inter-market basis is the single most important factor in explaining producer price risk in animals typically traded between markets. Local market conditions explain most price risk in other markets, in which traded animals rarely exit the region. Seasonality accounts for relatively little price risk faced by pastoralists in the dry lands of northern Kenya.

Suggested Citation

  • Barrett, Christopher B. & Luseno, Winnie K., 2001. "Decomposing Producer Price Risk: An Analysis Of Livestock Markets In Northern Kenya," 2001 Annual Meeting, July 8-11, 2001, Logan, Utah 36154, Western Agricultural Economics Association.
    • Handle: RePEc:ags:waealo:36154
    DOI: 10.22004/ag.econ.36154
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    References listed on IDEAS

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    1. Fafchamps, Marcel & Gavian, Sarah, 1997. "The Determinants of Livestock Prices in Niger," Journal of African Economies, Centre for the Study of African Economies, vol. 6(2), pages 255-295, July.
    2. C. Barrett & K. Smith & P. Box, 2001. "Not Necessarily In The Same Boat: Heterogeneous Risk Assessment Among East African Pastoralists," Journal of Development Studies, Taylor & Francis Journals, vol. 37(5), pages 1-30.
    3. John G. McPeak & Christopher B. Barrett, 2001. "Differential Risk Exposure and Stochastic Poverty Traps Among East African Pastoralists," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(3), pages 674-679.
    4. Martin Ravallion, 1986. "Testing Market Integration," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(1), pages 102-109.
    5. Christopher B. Barrett & Francis Chabari & DeeVon Bailey & Peter D. Little & D. Layne Coppock, 2003. "Livestock Pricing in the Northern Kenyan Rangelands," Journal of African Economies, Centre for the Study of African Economies, vol. 12(2), pages 127-155, June.
    6. Smith, Kevin & Barrett, Christopher B. & Box, Paul W., 2000. "Participatory Risk Mapping for Targeting Research and Assistance: With an Example from East African Pastoralists," World Development, Elsevier, vol. 28(11), pages 1945-1959, November.
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    Cited by:

    1. Baldwin, Katherine L. & Foster, Ken & Jones, Keithly, 2011. "A stochastic approach to evaluating livestock marketing policy initiatives," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 6(2), pages 1-14, September.

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