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Spatial price transmission and market integration in Senegal’s groundnut market


  • Badiane, Ousmane
  • Ulimwengu, John M.
  • Wouterse, Fleur


The groundnut sector is the largest of Senegal’s agricultural sectors. It has been subject to various degrees of intervention since the country’s independence. Some, including the determination of farm prices by the government have survived the wave of reforms of the 1980s. Groundnut pricing policies have been the source of major transfers from farmers to the groundnut milling industry, which until 2007, was dominated by SONACOS, a publicly owned parastatal. The state was thus a major beneficiary of the transfers. In 2007, the company was privatized and is now privately owned, raising even greater concerns about the distribution of implications of pricing policies for groundnuts. The paper examines the potential ramifications of liberalizing groundnut prices in terms of its impact on prices received by producers and paid by the milling industry. One fundamental question in the analysis is the extent to which local markets would respond to such a move. To answer this question, the paper presents a dynamic model of price formation that uses estimates of spatial integration across local markets to measure the response of local agricultural prices to policy changes. We then apply this model to simulate the impact of liberalizing groundnut prices to allow domestic prices to reflect their international levels. We find that doing so would change prices in the border city of Dakar, which happens to be the central market that determines prices in the local markets of the producing regions of Kaolack and Fatick. We also find that if markets had been fully liberalized when SONACOS was privatized in January 2007, then groundnut prices would have been higher and that the increase in prices would have been passed on almost entirely to producers in Kaolack and, to a lesser extent, to producers in Fatick. Such reforms would have reversed the longstanding discrimination of groundnut farmers. Prices received by farmers in Kaolack over a period of one year would have increased from 352 FCFA/kg to 494 FCFA/kg of shelled groundnuts. For farmers in the Fatick region, prices would increase from 389 FCFA/kg to 474 FCFA/kg.

Suggested Citation

  • Badiane, Ousmane & Ulimwengu, John M. & Wouterse, Fleur, 2010. "Spatial price transmission and market integration in Senegal’s groundnut market," IFPRI discussion papers 1014, International Food Policy Research Institute (IFPRI).
  • Handle: RePEc:fpr:ifprid:1014

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    References listed on IDEAS

    1. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
    2. Gloria González-Rivera & Steven M. Helfand, 2001. "The Extent, Pattern, and Degree of Market Integration: A Multivariate Approach for the Brazilian Rice Market," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(3), pages 576-592.
    3. Mendoza, Meyra Sebello & Farris, Paul L., 1992. "The impact of changes in government policies on economic performance (the ARCH model)," Journal of Policy Modeling, Elsevier, vol. 14(2), pages 209-220, April.
    4. Badiane, Ousmane, 1997. "Market integration and the long run adjustment of local markets to changes in trade and exchange rate regimes," MTID discussion papers 11, International Food Policy Research Institute (IFPRI).
    5. Masters, William A., 2007. "Distortions to Agricultural Incentives in Senegal," Agricultural Distortions Working Paper Series 48517, World Bank.
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    Cited by:

    1. Séne, Ligane Massamba, 2014. "Heterogeneous responses to heterogeneous food price shocks in Senegal: insights from a CGE," MPRA Paper 58835, University Library of Munich, Germany.
    2. Ankamah-Yeboah, Isaac, 2012. "Spatial Price Transmission in the Regional Maize Markets in Ghana," MPRA Paper 49720, University Library of Munich, Germany.
    3. Tankari, Mahamadou Roufahi, 2012. "Global price transmission in Senegal’s groundnut markets: can smallholders benefit from high international prices?," MPRA Paper 53395, University Library of Munich, Germany.

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    groundnuts; Liberalization; marketing integration; pricing policies; Privatization;

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