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Measuring Integration and Efficiency in Maize Grain Markets: The Case of South Africa and Mozambique

  • Traub, Lulama Ndibongo
  • Myers, Robert J.
  • Jayne, Thomas S.
  • Meyer, Ferdinand H.

Price transmission between the South African market and other regional markets is not as straightforward, despite South Africa’s role of a surplus producer for the region. There appears to be a host of local factors that must be taken into account in order to anticipate the likely level of regional food prices. This article assesses the degree of market integration and the speed of price adjustment to spatial price differentials between the SAFEX maize price in South Africa and maize grain and maize meal prices in Maputo, Mozambique. The findings of this study indicate that under certain trading regimes, there is no evidence of a long-run relationship between Mozambican and South African maize grain prices. This implies that any large deviations, within these regimes, which exceed transaction costs, could continue to grow with no tendency towards equilibrium. However, the trade volume data indicates maize grain exports from South Africa into Mozambique in every month except for three within the sample set. Hence, the empirical findings of this paper are unexpected given a simple arbitrage argument. Possible reasons for these findings are highlighted in the article. It is interesting to note that when the same empirical analysis is undertaken for the SAFEX maize prices and maize meal prices in Maputo then there is in fact evidence of a long-run relationship between these prices in a high import regime. These findings are not surprising and are what we would expect since two of the largest milling companies, located in Maputo are responsible for the majority of the volume of maize grain imported into the country from South Africa.

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File URL: http://purl.umn.edu/96644
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Paper provided by African Association of Agricultural Economists (AAAE) & Agricultural Economics Association of South Africa (AEASA) in its series 2010 AAAE Third Conference/AEASA 48th Conference, September 19-23, 2010, Cape Town, South Africa with number 96644.

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Date of creation: Sep 2010
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Handle: RePEc:ags:aaae10:96644
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  1. Gonzalo, J. & Pitarakis, J., 2005. "Threshold effects in cointegrating relationships," Discussion Paper Series In Economics And Econometrics 0506, Economics Division, School of Social Sciences, University of Southampton.
  2. Jochen Meyer & Stephan Cramon-Taubadel, 2004. "Asymmetric Price Transmission: A Survey," Journal of Agricultural Economics, Wiley Blackwell, vol. 55(3), pages 581-611.
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  4. Goodwin, Barry K. & Harper, Daniel C., 2000. "Price Transmission, Threshold Behavior, And Asymmetric Adjustment In The U.S. Pork Sector," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 32(03), December.
  5. Jayne, Thomas S. & Chapoto, Antony & Minde, Isaac J. & Donovan, Cynthia, 2008. "The 2008/09 Food Price and Food Security Situation in Eastern and Southern Africa: Implications for Immediate and Longer Run Responses," Food Security International Development Working Papers 54556, Michigan State University, Department of Agricultural, Food, and Resource Economics.
  6. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
  7. Balke, Nathan S & Fomby, Thomas B, 1997. "Threshold Cointegration," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(3), pages 627-45, August.
  8. Hansen, Bruce E. & Seo, Byeongseon, 2002. "Testing for two-regime threshold cointegration in vector error-correction models," Journal of Econometrics, Elsevier, vol. 110(2), pages 293-318, October.
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  10. von Cramon-Taubadel, Stephan, 1998. "Estimating Asymmetric Price Transmission with the Error Correction Representation: An application to the German Pork Market," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 25(1), pages 1-18.
  11. Abdulai, Awudu, 2000. "Spatial price transmission and asymmetry in the Ghanaian maize market," Journal of Development Economics, Elsevier, vol. 63(2), pages 327-349, December.
  12. 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).
  13. Goodwin, Barry K. & Piggott, Nicholas E., 1999. "Spatial Market Integration In The Presence Of Threshold Effects," 1999 Annual meeting, August 8-11, Nashville, TN 21489, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
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