Spatial price transmission and market integration in Senegal’s groundnut market
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.
|Date of creation:||2010|
|Contact details of provider:|| Postal: 1201 Eye Street, NW, Washington, DC 20005-3915|
Web page: http://www.ifpri.org/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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.
- 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).
- Masters, William A., 2007. "Distortions to Agricultural Incentives in Senegal," Agricultural Distortions Working Paper 48517, World Bank.
- Engle, Robert & Granger, Clive, 2015.
"Co-integration and error correction: Representation, estimation, and testing,"
Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
- Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-276, March.
- 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. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:fpr:ifprid:1014. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.