Spatial Analysis of Cereal Market Prices:
Effects of Remoteness on Market Price

                                   Emily ...
Overview

  •    Introduction
  •    Methodology
  •    Results
  •    Policy options
  •    Conclusions




INTERNATIONAL...
Introduction
An important determinant of household food security
      is the market price of key cereal grains.
 • Given ...
Introduction

       Effects of location on grain prices
 We test the hypothesis:
 • Highest prices of cereal grains are i...
Methodology
               Each market is categorized by:
• Net Cereal Supply:
  • Surplus: Net production is greater than...
Methodology
                                                                     Net Wheat Supply
Cereal markets and net s...
Methodology

          Market Access and Remoteness
• Euclidean distance does not take into account
  biophysical features...
Methodology
Travel Time calculation incorporates:
   • Road types and classes:
      • Paved, all weather / dry weather
  ...
Results
Market centers and travel time
to a city of at least 50,000 people
                                               ...
Results
 Markets disaggregated by production, remoteness,
          and urban / rural classifications
                    ...
Results
                             Average Grain Price by Location and Cereal (birr/kg, 2006/07)
When aggregated by     ...
Results
    Average Teff Price by Location and Variety (birr/kg, 2006/07)
                                    White Teff  ...
Results
     Average Wheat Price by Location and Variety (birr/kg, 2006/07)
                                        White ...
Results
Population (thousands) in Surplus or Deficit                               • More than 33 million people
Producing...
Results
                                                                      Woredas that are deficit , remote and
High p...
Possible policy interventions for further exploration
In the short term:
• Currently 7.5 million people receive from
  PSN...
Conclusions

• Analyzing grain prices across geographic space in Ethiopia at an
  aggregate level illustrates that most ma...
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Spatial Analysis of Cereal Market Prices: Effects of Remoteness on Market Price

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The 4th ESRI-Eastearn Africa Conference, Addis Ababa, 25 September, 2009

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Spatial Analysis of Cereal Market Prices: Effects of Remoteness on Market Price

  1. 1. Spatial Analysis of Cereal Market Prices: Effects of Remoteness on Market Price Emily Schmidt and Hailu Shiferaw The 4th ESRI-EA Conference 24 -25 September 2009 Addis Ababa, Ethiopia INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE • ETHIOPIAN DEVELOPMENT RESEARCH INSTITUTE INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE – ETHIOPIA STRATEGY SUPPORT PROGRAM
  2. 2. Overview • Introduction • Methodology • Results • Policy options • Conclusions INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE • ETHIOPIAN DEVELOPMENT RESEARCH INSTITUTE INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE – ETHIOPIA STRATEGY SUPPORT PROGRAM
  3. 3. Introduction An important determinant of household food security is the market price of key cereal grains. • Given Ethiopia’s unique biophysical landscape, and spatial placement of key infrastructures, cereal prices vary across geographic areas. • We analyze price variations over space for four major cereals • Teff • Maize • Wheat • Sorghum • Taking into account: • Geographic location of 120 cereal markets • Travel time from cereal markets to large cities • Whether a market center is in a region that is classified as surplus or deficit INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE • ETHIOPIAN DEVELOPMENT RESEARCH INSTITUTE INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE – ETHIOPIA STRATEGY SUPPORT PROGRAM
  4. 4. Introduction Effects of location on grain prices We test the hypothesis: • Highest prices of cereal grains are in the rural-remote, deficit producing areas • High transportation costs to remote areas, with local deficit production accounts for higher prices in these areas in order to account for transaction costs • Lowest prices are in the rural-remote, surplus grain producing areas • Rural, remote areas which are growing a surplus amount of grain, but do not have access to larger markets (or cities) forced to sell excess supply at low prices INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE • ETHIOPIAN DEVELOPMENT RESEARCH INSTITUTE INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE – ETHIOPIA STRATEGY SUPPORT PROGRAM
  5. 5. Methodology Each market is categorized by: • Net Cereal Supply: • Surplus: Net production is greater than 10% reported consumption • Autarky (Balanced): Net production is between 10% above and below reported consumption • Deficit: Net production is below 10% of consumption • Travel Time: • Remote (greater than 5 hours travel time from a major city) • Non remote (less than 5 hours travel time from a major city) • Rural/Urban: • Rural towns (markets within a town less than 20,000 people) • Small towns (markets within a town with at least 20,000 people) • Large city (Addis Ababa and Dire Dawa) INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE • ETHIOPIAN DEVELOPMENT RESEARCH INSTITUTE INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE – ETHIOPIA STRATEGY SUPPORT PROGRAM
  6. 6. Methodology Net Wheat Supply Cereal markets and net supply for all grains Net Teff Supply INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE • ETHIOPIAN DEVELOPMENT RESEARCH INSTITUTE INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE – ETHIOPIA STRATEGY SUPPORT PROGRAM
  7. 7. Methodology Market Access and Remoteness • Euclidean distance does not take into account biophysical features such as mountains and rivers, nor does it assess road quality and travel speed • The shortest route in kilometers may not always be the fastest route • By calculating a travel time from each market, to an urban hub (city of 50,000 people), we are able to classify our study markets into: • Remote: more than 5 hours travel time to a city • Non – remote: less than 5 hours travel time to a city INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE • ETHIOPIAN DEVELOPMENT RESEARCH INSTITUTE INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE – ETHIOPIA STRATEGY SUPPORT PROGRAM
  8. 8. Methodology Travel Time calculation incorporates: • Road types and classes: • Paved, all weather / dry weather • Gravel, all weather / dry weather • Earth • Landcover – walking speed • Rivers • Waterbodies • Slope (calculated using DEM) • These layers are then reclassified and combined into a friction layer that reflects the time in minutes to cross a single 1km. cell (pixel). • This friction layer is then used as input data to calculate a cost Travel time to cities of at least 50,000 people distance (travel time) to a given target INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE • ETHIOPIAN DEVELOPMENT RESEARCH INSTITUTE INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE – ETHIOPIA STRATEGY SUPPORT PROGRAM
  9. 9. Results Market centers and travel time to a city of at least 50,000 people • Several markets in Benishangul – Gumuz have surplus grain production, but remain further than 5 hours travel time to a large city • Areas in SNNP region show deficit production levels and are not connected to a major road network nor are they within 5 hours of a city •Afar region also has population in deficit, distant areas INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE • ETHIOPIAN DEVELOPMENT RESEARCH INSTITUTE INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE – ETHIOPIA STRATEGY SUPPORT PROGRAM
  10. 10. Results Markets disaggregated by production, remoteness, and urban / rural classifications • A majority of sorghum production is found in the Northwest of Ethiopia, Surplus – distant markets are found in Benishangul – Gumuz • Maize, wheat and teff are grown primarily in the highlands of Oromia and Amhara regions • Some surplus area maize is grown in Afar region, as well as selected regions in Benishangul - Gumuz and west Oromia INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE • ETHIOPIAN DEVELOPMENT RESEARCH INSTITUTE INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE – ETHIOPIA STRATEGY SUPPORT PROGRAM
  11. 11. Results Average Grain Price by Location and Cereal (birr/kg, 2006/07) When aggregated by Location Teff Wheat Maize Sorghum all grains, our hypothesis holds true. Rural 3.99 2.97 1.53 2.03 Large cities and small Small Town 3.98 3.10 1.62 2.27 towns (expected to be Large Cities 4.44 3.41 1.89 3.40 deficit producers) experience higher Addis Ababa 4.46 3.42 1.88 3.40 grain prices. Distant 3.89 3.02 1.35 1.73 Markets in areas with Connected 4.01 3.06 1.63 2.28 surplus production Surplus 3.81 2.93 1.56 2.04 have lower prices than deficit markets Autarky 4.06 3.19 1.52 2.26 Deficit 4.13 3.09 1.59 2.19 INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE • ETHIOPIAN DEVELOPMENT RESEARCH INSTITUTE INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE – ETHIOPIA STRATEGY SUPPORT PROGRAM
  12. 12. Results Average Teff Price by Location and Variety (birr/kg, 2006/07) White Teff Black Teff Mixed Teff Location Distant Connected Distant Connected Distant Connected Rural Surplus 3.68 4.16 3.25 3.22 3.50 3.82 Rural Autarky 4.52 4.15 4.00 4.00 4.00 4.00 Rural Deficit 4.27 4.68 3.71 3.58 4.00 4.38 Large cities - 4.99 - 4.00 - 4.33 Addis Ababa - 5.01 - 4.00 - 4.36 • Compared to rural distant deficit markets, the rural distant surplus markets have generally lower prices for all teff varietals • Rural markets that are distant and have deficit production have teff values that cost roughly 50 cents more per quintile, but urban prices remain the highest for white and black teff • Rural deficit prices in connected markets are higher by up to 12 percent for white and mixed teff. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE • ETHIOPIAN DEVELOPMENT RESEARCH INSTITUTE INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE – ETHIOPIA STRATEGY SUPPORT PROGRAM
  13. 13. Results Average Wheat Price by Location and Variety (birr/kg, 2006/07) White Wheat Mixed Wheat Location Distant Connected Distant Connected Rural Surplus _ 3.04 _ 2.86 Rural Autarky 3.07 2.95 3.34 _ Rural Deficit 3.22 3.07 3.08 3.02 Large cities 3.22 3.00 Addis Ababa _ 3.23 _ 3.06 • Unlike teff, urban prices for white and mixed wheat are not substantially higher than rural prices • In distant, deficit areas, white wheat is 15 cents per kilogram higher than in deficit connected producing areas • Mixed teff in rural deficit areas is more expensive than in Addis Ababa • We hypothesize that Ethiopia imports a larger percentage of wheat in comparison to other grains, and imports of wheat in urban markets may be depressing prices INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE • ETHIOPIAN DEVELOPMENT RESEARCH INSTITUTE INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE – ETHIOPIA STRATEGY SUPPORT PROGRAM
  14. 14. Results Population (thousands) in Surplus or Deficit • More than 33 million people Producing Areas and Connected or Distant live in areas that experience Regions surplus grain production and are within 5 hours of a city of 50,000 people 4,278 9,202 1,855 • Almost 22 million people Deficit Distant live in deficit producing areas, Surplus Distant but are able to access a large 33,119 21,772 Deficit Connected city within 5 hours travel time Surplus Connected • Over 9 million people live in Autarky Connected distant, deficit producing areas and half are from SNNP region (4.6 million) •Almost 2 million people have surplus production, but limited access to a large market INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE • ETHIOPIAN DEVELOPMENT RESEARCH INSTITUTE INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE – ETHIOPIA STRATEGY SUPPORT PROGRAM
  15. 15. Results Woredas that are deficit , remote and High price, Distant Markets outside of the experience high market prices Productive Safety Net Areas Teff: • Selamago (SNNP) • Asayita (Afar) • Dubti (Afar) • Moyale (Somali) Wheat: • Bambasi (Benshangul-Gumuz) • Shambo (Oromia) • Asayita (Afar) • Dubti (Afar) • Dahana (Amhara) Maize: • Dahana (Amhara) Sorghum: • Dubti (Afar) • Moyale (Somali) • Dahana (Amhara) • Basketo (SNNP) INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE • ETHIOPIAN DEVELOPMENT RESEARCH INSTITUTE INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE – ETHIOPIA STRATEGY SUPPORT PROGRAM
  16. 16. Possible policy interventions for further exploration In the short term: • Currently 7.5 million people receive from PSNP program • Remote, deficit areas facing high grain prices could benefit from PSNP assistance in-kind In the long term: • The Road Sector Development Plan initiated in 1997, built and/or improved roughly 15,000km. of trunk and regional roads. • A future RSDP could assess road investments in order to increase connectivity along specified transportation networks between deficit producing areas and surplus grain markets. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE • ETHIOPIAN DEVELOPMENT RESEARCH INSTITUTE INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE – ETHIOPIA STRATEGY SUPPORT PROGRAM
  17. 17. Conclusions • Analyzing grain prices across geographic space in Ethiopia at an aggregate level illustrates that most markets are well-connected (in terms of transport networks) and transaction costs (as reflected in the gross margins) between rural and urban areas are generally reflected in the higher prices reported in cities. • When comparing distant, deficit areas with PSNP receiving woredas, several woredas emerged that may benefit from PSNP assistance in-kind . • In the long run, further improvements to transportation infrastructure between deficit and surplus areas would improve access to key goods and services, as well as decrease transaction costs between markets. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE • ETHIOPIAN DEVELOPMENT RESEARCH INSTITUTE INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE – ETHIOPIA STRATEGY SUPPORT PROGRAM

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