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