The economic impact of agricultural development on poverty reduction and welf...Caroline Chenqi Zhou
This study employs quantitative and qualitative methods to identify the relationship between agricultural development, poverty reduction, and income inequality. Building upon the World Bank’s Enabling the Business of Agriculture study (2016) and data from the World Development Indicators (2015) for the years 2000 to 2014, we test two hypotheses. The first pertains to agricultural development and poverty reduction to assess to what extent agricultural development reduces poverty. The second, in a similar fashion, addresses the relationship between agricultural development and income inequality. To supplement our quantitative analysis of these questions, we include a case study of agricultural development, agricultural policy reforms, and their impact in Vietnam and Tanzania. We find evidence that agricultural development reduces poverty.
Demand-led market opportunities for farmers in the high value product sector ...Premier Publishers
Market information is indispensable in facilitating marketing of agricultural produce, particularly fresh produce given its high perishability. The purpose of this study was to estimate South African consumers’ demand for vegetables. Demand for six vegetables was analysed via a multi-stage budgeting system, using data from the Household Expenditure Survey and the 2010 edition of the Abstract of Agricultural Statistics. The estimated demand elasticities show that the demand for all vegetables increases with rising per capita income. Most of the vegetables were found to respond substantially to changes in their own prices and in the direction as expected with estimated negative own-price elasticities.
This study examined the effectiveness of agricultural protection policy and other macroeconomic variables on food supply, agricultural export, and farmers welfare in Nigeria, from 1980-2016 with a special interest in their relationship with the political economy. The specific objectives were to (i) estimate the degrees of agricultural protection, domestic agricultural food supply and economic welfare to farmers in Nigeria, (ii) determine the effectiveness of agricultural protection on food self-supply, agricultural export; and farmer-welfare. Data were obtained from secondary sources. Descriptive statistics and generalized method of moment (GMM) were used. Nigeria’s self-food supply was slightly above 50% while the rest of the consumption depended on importation. The welfare measure to farmers was relatively poor and not good enough to motivate them. There was a positive and significant relationship between export and agricultural protection. A significant and positive relationship also exists between farmer-welfare and protection in the sector.
The economic impact of agricultural development on poverty reduction and welf...Caroline Chenqi Zhou
This study employs quantitative and qualitative methods to identify the relationship between agricultural development, poverty reduction, and income inequality. Building upon the World Bank’s Enabling the Business of Agriculture study (2016) and data from the World Development Indicators (2015) for the years 2000 to 2014, we test two hypotheses. The first pertains to agricultural development and poverty reduction to assess to what extent agricultural development reduces poverty. The second, in a similar fashion, addresses the relationship between agricultural development and income inequality. To supplement our quantitative analysis of these questions, we include a case study of agricultural development, agricultural policy reforms, and their impact in Vietnam and Tanzania. We find evidence that agricultural development reduces poverty.
Demand-led market opportunities for farmers in the high value product sector ...Premier Publishers
Market information is indispensable in facilitating marketing of agricultural produce, particularly fresh produce given its high perishability. The purpose of this study was to estimate South African consumers’ demand for vegetables. Demand for six vegetables was analysed via a multi-stage budgeting system, using data from the Household Expenditure Survey and the 2010 edition of the Abstract of Agricultural Statistics. The estimated demand elasticities show that the demand for all vegetables increases with rising per capita income. Most of the vegetables were found to respond substantially to changes in their own prices and in the direction as expected with estimated negative own-price elasticities.
This study examined the effectiveness of agricultural protection policy and other macroeconomic variables on food supply, agricultural export, and farmers welfare in Nigeria, from 1980-2016 with a special interest in their relationship with the political economy. The specific objectives were to (i) estimate the degrees of agricultural protection, domestic agricultural food supply and economic welfare to farmers in Nigeria, (ii) determine the effectiveness of agricultural protection on food self-supply, agricultural export; and farmer-welfare. Data were obtained from secondary sources. Descriptive statistics and generalized method of moment (GMM) were used. Nigeria’s self-food supply was slightly above 50% while the rest of the consumption depended on importation. The welfare measure to farmers was relatively poor and not good enough to motivate them. There was a positive and significant relationship between export and agricultural protection. A significant and positive relationship also exists between farmer-welfare and protection in the sector.
Persistence of high food prices in Eastern Africa: What role for policy?ILRI
Presented by Joseph Karugia (ReSAKSS-ECA) at the 48th meeting of the Open Forum for Agricultural Biotechnology in Africa – Kenya Chapter, Nairobi, 30 June 2011
MTBiz is for you if you are looking for contemporary information on business, economy and especially on banking industry of Bangladesh. You would also find periodical information on Global Economy and Commodity Markets.
Signature content of MTBiz is its Article of the Month (AoM), as depicted on Cover Page of each issue, with featured focus on different issues that fall into the wide definition of Market, Business, Organization and Leadership. The AoM also covers areas on Innovation, Central Banking, Monetary Policy, National Budget, Economic Depression or Growth and Capital Market. Scale of coverage of the AoM both, global and local subject to each issue.
MTBiz is a monthly Market Review produced and distributed by Group R&D, MTB since 2009.
Presentation, ‘Persistence of high food prices in Eastern Africa: What role for policy’ gives reflections by Dr Joseph Karugia on the rising food prices and the need for proactive and timely policy response mechanisms in Kenya. Comparisons between the regional and global price trends of major food crops - maize, cassava, potatoes, bananas and sorghum - are given. Factors affecting supply and demand for food in East African region are discussed including policy interventions that are necessary to bring down or stabilise the escalating regional price increases and those that are likely to compound the already bad situation.
"Food security policy challenges in Central Asia: example of Tajikistan" presented by Kamiljon Akramov, IFPRI, at the ReSAKSS-Asia Conference, Nov 14-16, 2011, in Kathmandu, Nepal.
The primary purpose of this paper is comparing six common models, which were linear, quadratic, Cobb-Douglas, translog, logarithmic, and transcendental, to estimate the supply and demand functions for Saudi Arabian wheat. In addition to estimating the market equilibrium for price and quantity, that led to identifying consumer and producer surplus. Data cover 1990-2014 for all the variables that used to show the effect supply and demand of Wheat. After testing the models using Stepwise and Box-Cox, we came up with the fact that the linear and Cobb-Douglas methods were the best models to show the relationship between variables. On the supply side, we found using the linear model, that wheat price had a negative sign, which represents the impact of government policy number 335. However, in the Cobb-Douglas model, the wheat price had a positive sign. The elasticity coefficient of supply for the wheat price was inelastic. Moreover, the result also showed that all the elasticity coefficients in the supply and demand models were inelastic. The low-income elasticity of demand led the consumption of wheat to increase.
MSU/IFPRI conference on “Agricultural Public Investments, Policies, and Markets for Mozambique’s Food Security and Economic Transformation”, Maputo, Mozambique, 20 November 2014
Persistence of high food prices in Eastern Africa: What role for policy?ILRI
Presented by Joseph Karugia (ReSAKSS-ECA) at the 48th meeting of the Open Forum for Agricultural Biotechnology in Africa – Kenya Chapter, Nairobi, 30 June 2011
MTBiz is for you if you are looking for contemporary information on business, economy and especially on banking industry of Bangladesh. You would also find periodical information on Global Economy and Commodity Markets.
Signature content of MTBiz is its Article of the Month (AoM), as depicted on Cover Page of each issue, with featured focus on different issues that fall into the wide definition of Market, Business, Organization and Leadership. The AoM also covers areas on Innovation, Central Banking, Monetary Policy, National Budget, Economic Depression or Growth and Capital Market. Scale of coverage of the AoM both, global and local subject to each issue.
MTBiz is a monthly Market Review produced and distributed by Group R&D, MTB since 2009.
Presentation, ‘Persistence of high food prices in Eastern Africa: What role for policy’ gives reflections by Dr Joseph Karugia on the rising food prices and the need for proactive and timely policy response mechanisms in Kenya. Comparisons between the regional and global price trends of major food crops - maize, cassava, potatoes, bananas and sorghum - are given. Factors affecting supply and demand for food in East African region are discussed including policy interventions that are necessary to bring down or stabilise the escalating regional price increases and those that are likely to compound the already bad situation.
"Food security policy challenges in Central Asia: example of Tajikistan" presented by Kamiljon Akramov, IFPRI, at the ReSAKSS-Asia Conference, Nov 14-16, 2011, in Kathmandu, Nepal.
The primary purpose of this paper is comparing six common models, which were linear, quadratic, Cobb-Douglas, translog, logarithmic, and transcendental, to estimate the supply and demand functions for Saudi Arabian wheat. In addition to estimating the market equilibrium for price and quantity, that led to identifying consumer and producer surplus. Data cover 1990-2014 for all the variables that used to show the effect supply and demand of Wheat. After testing the models using Stepwise and Box-Cox, we came up with the fact that the linear and Cobb-Douglas methods were the best models to show the relationship between variables. On the supply side, we found using the linear model, that wheat price had a negative sign, which represents the impact of government policy number 335. However, in the Cobb-Douglas model, the wheat price had a positive sign. The elasticity coefficient of supply for the wheat price was inelastic. Moreover, the result also showed that all the elasticity coefficients in the supply and demand models were inelastic. The low-income elasticity of demand led the consumption of wheat to increase.
MSU/IFPRI conference on “Agricultural Public Investments, Policies, and Markets for Mozambique’s Food Security and Economic Transformation”, Maputo, Mozambique, 20 November 2014
Food is life and the global food sustainability is essential to human being survival. The global food system is highly
complex and is driven by various factors including environment, cultural, social and economic drive. It is vital to understand
these drivers and their interaction in order to help to improve the public food sustainability policies. Global polices and projects
desperately required in order improving the global food sustainability. Food sustainability is one of the unsolved global issues
and great commitment is required starting from global policy makers, national governments, and every individual home. This
research paper includes analysis and study of various elements such as global change science, policy, food crisis, factor affecting
and challenging food security, data on status and future projection and potential ways of solving problems. The goal of food
sustainability is to enable all people throughout the world to satisfy their basic needs and have a reasonable quality of life without
compromising the quality of life of future generations. Agriculture sustainability is the best solution which can feed the world
without compromising the environment or threatening human health. Scientific evidence that global environment has changed
is overwhelming and indisputable. These phenomena have a direct impact on agriculture which in turn affects food
sustainability. The food price is always toward upward trend which is validated by the periodic average global food price
monitoring report released by the Food and agricultural organizations. The factors affecting and challenging the food security
are many including increased food consumption due to population increase, uneven distribution, changes in living styles, limited
resources, environmental problems, economic problems and others. The potential ways to solve food sustainability need to be
established and implemented effectively across the world.
Prof. V. Okoruwa's presentation given the the Africa Agriculture Week.
The role of agriculture in an economy is a major factor in determining the economy‟s state of development (Hazell and Diano, 2005). Most African countries are mainly agrarian since agriculture contributes immensely to their economies. Agriculture‟s contribution to GDP in the Africa is between 30% and 40% on the average. The sector accounts for almost 60% of total export earnings in the continent, provides the dominant occupation for about 65% of Africa‟s population and has been growing on the average at about 3.3% each year since 2000 (IFPRI, 2009). Despite this impressive contribution of agriculture to Africa‟s economy, the sector remains largely under-developed. Most farmers are still at the subsistence level and small scale, having less than 2ha of land. The level of technology is also low, production remains weather-dependent and consequently, farmers‟ incomes are low. Poor market access, weak infrastructure and limited ability to influence government policy also characterize the sector (Quartey et al, 2012). Majority of Africa's agricultural population live in rural areas and the rural population comprises over 60% of the entire population. Further, over 600 million people in sub-Saharan Africa are youths under the age of 30 years and about 65% of this number, work in subsistence agriculture. Rural agricultural workers are among the poorest in Africa with poverty rate averaged at about 50% (UN/ECA, 2010).
Agriculture has the potential to serve as a strong
Prof Kym Anderson's talk from the Australian Agricultural & Resource Economics Society's event "Reframing the Food Agenda: Setting the Scene for Australia" held August 19, 2011
Assessing the determinants of agricultural commercialization and challenges c...Olutosin Ademola Otekunrin
This study assesses the agricultural commercialization levels, determinants, and challenges confronting smallholder cassava farmers in Oyo State, Nigeria. This study was conducted in Oyo State, Nigeria using cross-sectional data from 211 smallholder cassava farmers and employing multi-stage sampling procedures. Descriptive statistics, Crop Commercialization Index (CCI), and Ordered Logit Model (OLM) were used to analyze the data collected. The results revealed that 83.9% of the cassava farmers participated in the commercialization of their cassava roots while the remaining farmers were non-participants. The greatest challenge faced by the cassava farmers in the study area was the incessant attacks by the Fulani herdsmen (destroying growing cassava on the farm) while other challenges included cassava cyclical gluts and poor access road. Moreover, OLM revealed that age, farm size, cassava marketing experience and distance to market had significant influence on commercialization levels of cassava farmers. However, in order to enhance increased commercialization levels of cassava farmers and peaceful coexistence in the study area, policies and intervention programmes that will facilitate rural infrastructure development and proffer lasting solution to the farmers-herders crisis should be given upmost priority.
The long run impact of climate change on the productivity of major crops in the districts of Punjab is analyzed for the time period of 1970 to 2010. This study used deviations from average maximum annual temperature and deviations from average rainfall are used as indicators for climate change. While other variables include sale price, fertilizer use and number of tube wells. In order to incorporate long timer periods, this study used Panel ARDL model. The results show that cotton productivity is more positively sensitive to price changes; an increase in temperature, tube wells and fertilizers while wheat productivity is more positively sensitive to the rainfall in the long run. Consequently, in the short run, wheat productivity equilibrium is faster converging. Hence deviations from average rainfall are harmful to cotton crop in the long run and cotton & wheat in the short run, while deviations in maximum temperature is only harmful for cotton crop in the short run.
Impact of the Adoption of Improved Varieties of Household Income of Farmers i...BRNSS Publication Hub
In Benin, maize occupies a strategic place in the agricultural sector due to its growing importance in national
consumption and trade with neighboring countries. This study aims to analyze the impact of the adoption of
improved maize varieties on the income and expenditure of maize farmers in the South Atlantic Department
of Benin. The data used were collected from 144 maize growers in the Atlantic Department. Maize farmers
with or without improved varieties were selected randomly. The average treatment effect method with
propensity score matching was used to estimate the impact of the adoption of improved maize varieties
on household income and expenditure. Maize growers using four impact indicators: (i) Netincome; (ii)
school expenses; (iii) health expenditure; and (iv) food expenditures. The results showed that the adoption
of improved maize varieties led to an improvement in annual netincome (a relative effect of 8.78%), health
expenditure (a relative effect of 15.88%), and expenditure on education (a relative effect of 16.08%). On
the other hand, the adoption of improved varieties of maize has no significant influence on the expenditure
invested in the dietof household members. It shows that the adoption of improved varieties of maize by
which has a positive impact on the netincome, health expenditure, and household education expenditure.
Impact of the Adoption of Improved Varieties of Household Income of Farmers i...BRNSS Publication Hub
In Benin, maize occupies a strategic place in the agricultural sector due to its growing importance in national consumption and trade with neighboring countries. This study aims to analyze the impact of the adoption of improved maize varieties on the income and expenditure of maize farmers in the South Atlantic Department of Benin. The data used were collected from 144 maize growers in the Atlantic Department. Maize farmers with or without improved varieties were selected randomly. The average treatment effect method with propensity score matching was used to estimate the impact of the adoption of improved maize varieties on household income and expenditure. Maize growers using four impact indicators: (i) Netincome; (ii) school expenses; (iii) health expenditure; and (iv) food expenditures. The results showed that the adoption of improved maize varieties led to an improvement in annual netincome (a relative effect of 8.78%), health expenditure (a relative effect of 15.88%), and expenditure on education (a relative effect of 16.08%). On the other hand, the adoption of improved varieties of maize has no significant influence on the expenditure invested in the dietof household members. It shows that the adoption of improved varieties of maize by which has a positive impact on the netincome, health expenditure, and household education expenditure.
Pilot Course Opening Session. University of Girona, 8th May 2017.
Expert exploratory session 1: Planning and engaging communities for low-carbon development and climate change.
Fulvio Rizzo. Farmers Adaptations Strategies
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Analysis of price volatility and implications for price
1. European Journal of Business and Management www.iiste.org
ISSN 2222-1905 (Paper) ISSN 2222-2839 (Online)
Vol.6, No.22, 2014
160
Analysis of Price Volatility and Implications for Price
Stabilization Policies in Mozambique
*1
Lucy Ngare and 2
Franklin Simtowe, 3
Jaquelino Massingue
1
Kenyatta University, P. O Box 43844-00100, Nairobi Kenya
2
African Centre for Social Research and Economic Development (ACSRED), P. O Box 2713-00621 Nairobi,
Kenya
3
Michigan State University Food Security project in Mozambique, Av. FPLM No.2698, Edificio da
Biotecnologia 1o Andar, Maputo, Mozambique
* E-mail of the corresponding author: lwangare2002@yahoo.com
Abstract
High food price instability is one of the major risks facing agricultural households from developing countries.
Resulting from agronomic factors as well as the historically low levels of world grain stocks and climate change,
increased food price volatility has attracted renewed interest among policy experts in identifying appropriate
policy instruments to counter its effects. This paper applies the GARCH model to data from twelve maize
markets in Mozambique to estimate price seasonality and volatility. The results reveal the presence of
seasonality, and high volatility. There is scope for improving price stability through the use of both market and
non-market based price stabilization interventions that encourage investments in market infrastructure such as
roads, warehouses and a market information system; institutions such as warehouse receipt system, credit and
insurance; maintaining a strategic reserve and reduced tariffs and food-for-work programmes.
Key words: Price volatility, Maize, GARCH, Mozambique
Introduction
Agricultural households in developing countries are increasingly facing high food price instability which
negatively affects their consumption and investment patterns. Moreover, as expressed by Rashid (2007), in the
presence of credit and insurance market failure; commodity price instability can discourage investments and lead
to inefficient resource allocation. Poor consumers suffer more as they have to spend a large share of their income
on food, yet an unusual price increase forces them to cut down food intake, take their children out of school, or,
in extreme cases, simply to starve. Indeed while high commodity prices raise farm income and lower
government farm program costs, they also cause food price inflation by raising feed and input costs for livestock
producers and food processors. High and volatile food prices can be quite problematic particularly for import-
dependent, less developed nations. In worst cases, price instability has resulted in macroeconomic instability
and social unrest. For example, Lagi et al (2011) report that food prices are the precipitating condition for social
unrests in North Africa and the Middle East in the year 2011 as well as earlier riots in 2008 which coincided with
large peaks in global food prices. In Maputo there were violent demonstrations against price rise in staple foods
and general cost of living in the year 2010 (Hanlon, 2010). In a nutshell, extremely volatile prices increase the
risk associated with production and marketing eventually slowing down economic growth.
Literature largely classifies causes of price instability into four categories as follows; (1) agronomic factors such
as bad weather which affects the agronomy of the crop, (2) inadequate infrastructure and asymmetric
information, (3) incomplete or missing institutions, and (4) high volatility in the world market. Other studies
(Rashid, 2007; Gilbert, 2010) have identified the most common causes of food price volatility as climatic factors,
infrastructure, policy shocks and exchange rate uncertainty.
The motivation for this paper is that if seasonal fluctuations can be discerned and measured, it will be easier to
make predictions about prices and to understand their behaviour over the year. Furthermore, commodity
investment behaviour, farm income, policy, and food security are all impacted by agricultural price volatility.
Seasonal analysis of price data for food commodities is therefore an important part of food markets analysis.
2. European Journal of Business and Management www.iiste.org
ISSN 2222-1905 (Paper) ISSN 2222-2839 (Online)
Vol.6, No.22, 2014
161
Such an analysis should lead to the generation of evidence required for developing appropriate policies for price
stabilization.
Governments have in the past employed both market and non-market based price stabilization policies, yet such
interventions have yielded mixed results. In light of these mixed experiences with structural adjustment
programs as well as other global trends, it is being increasingly recognized that food price instability and risk are
important problems in many low-income countries, and finding appropriate policy responses for dealing with
these problems has re-emerged as a contemporary policy issue (Byerlee et al., 2006; World Bank, 2005). As
expressed by Rashid (2007) there are at least three reasons behind renewed interest in the subject. First, it is
becoming evident that food market reforms have been partial, and in the wake of increased price volatility, many
countries are reversing the policies they adopted under the structural adjustment programs. Second, world grain
stock is at historically low levels, and even a relatively small swing in exports or imports from large countries,
such as China and India, can send major shock waves through world grain markets. This vulnerability has
serious implications for developing countries, especially those that have food deficits and limited capacity to
import owing to low foreign currency reserves. Finally, there is growing concern that global climate change is
likely to expose poor countries to droughts, floods, and other extreme climatic events that can increase the risk of
food price shocks.
In Mozambique, output markets for staple foods are volatile. The cycles of crop surpluses and deficits commonly
follow crop price booms and busts, respectively (Benson et al 2012). Uncertain crop prices make it difficult for
farmers using high value inputs such as fertilizer and improved seed to be confident that they will obtain a
sufficient return from the sale of the additional harvest that they obtain from the use of fertilizer to pay for the
input. It is therefore, in the interest of government to establish policies that help stabilize food prices This study
aims at contributing to government policy efforts of identifying strategies for reducing price volatility. Against
this background, this paper analyses the volatility of maize prices in Mozambique and identifies potential
policies for price stabilization. The rest of the paper is structured as follows; section two discusses the
agricultural sector in Mozambique. Various policy responses to past food price volatility and their impacts are
discussed in section three. In section four sources of data and method of data analysis are explained while
empirical results are presented and discussed in section five. The conclusions are presented in section six.
Agriculture in Mozambique
Agriculture is the main economic activity in Mozambique, with about 80 per cent of the population dependent on
agriculture for their livelihoods (Cunguara and Hanlon 2010). Subsistence agriculture is predominant, and
smallholders account for 99 per cent of total rural households (Cunguara and Hanlon 2010; Donavan and Tostão,
2010). Donavan and Tostão (2010) reports that farmers in Mozambique are characterized by small land holdings
(0.9 ha), with low productivity which leaves most households as net buyers of food staples.
Poor access to good road networks and high transport costs fragments markets hindering both social
development and economic productivity. Infrastructural challenges limit farmers’ ability to access government
services, agricultural inputs and market agricultural and other products. Furthermore, the percentage of the
population with access to the road networks declines in the wet season due to poor road conditions. Moreover,
Cunguara (2011) links low productivity of the agricultural sector in Mozambique to the weak public investment
in agriculture.
Maize is an important staple food crop that is widely produced and consumed throughout the country and
provides income to households in rural areas. Although the country has a high agricultural potential, some
regions are still not self-sufficient in terms of production of maize. The country relies on imports to meet the
deficit, particularly that which occurs in the southern region of Mozambique (Traub et al., 2010). On the other
hand, maize produced in the central region is often exported to Malawi (Tschirley and Abdula, 2007).
In terms of food production, Mozambique is divided into three regions: South, Central and North. The southern
region is known as deficient as far as agricultural production is concerned and relies on the central and northern
regions for staple food supply. The central and northern on the other hand are regarded as areas of surplus
production because of their good agro-ecological conditions. About half of the total maize production comes
from the central region, 40 percent is produced in the north while the remaining is produced in the south
3. European Journal of Business and Management www.iiste.org
ISSN 2222-1905 (Paper) ISSN 2222-2839 (Online)
Vol.6, No.22, 2014
162
(WFP/FAO, 2010). Domestic food prices of most agriculture commodities vary from year-to-year, depending on
weather, yield, and imports (Fews Net, 2009).
Domestic maize consumption is expected to continue increasing due to population growth, urbanization and
increasing demand for animal feed. However, the flow of maize from surplus area in the north to deficit
provinces in the south is affected by inadequate access to roads, high transportation costs, the seasonal nature of
production, and market preferences of traders for low cost imports from South Africa. Given these factors, it
appears to be more profitable for traders to import food products from neighbouring countries such as South
Africa, than to transport them from the northern to the southern region of the country (Corzine, 2008; Fews Net,
2009).
The government has attempted to address low agricultural productivity through its Strategy Plan to Reduce
Poverty (PARPA I and PARPA II) which focuses on promoting sustained agricultural production and growth by
increasing investment in agricultural research and extension services, improving agricultural infrastructure, and
increasing agricultural inputs-outputs accessibility. These commitments continued in the recent Strategic Plan for
Agricultural Sector Development (PEDSA 2010) and Agricultural Investment Plan (2013). The government has
also embarked on efforts to revitalize Mozambique institute of Cereals (ICM) to provide market infrastructure
and create a strategic grain reserve.
Despite the efforts to increase productivity, Mozambique continues to experience food deficits, estimated to over
400,000 metric tons per year, part of which the government considers to be due to weaknesses in storage and
marketing of agricultural products (Coulter and Schneider, 2004). As expressed by Coulter and Schneider
(2004), storage losses have been reported to range between 20% and 40% depending on the crop and
geographical location. Aside from causing hunger, storage losses force farmers to sell their products early to
avoid physical losses and hence reducing opportunity to sell at favorable prices. Coulter and Schneider (2004)
report that most farmers sell half or more of their crops within the first three months of harvest, due in large part
to the problem of pests, and notably insects. This exposes farmers to lower farm gate prices during harvest and
to high consumer prices when they purchase during the lean season, hence exacerbating price volatility.
Policy Responses to Food Price Volatility in Mozambique
Mozambique heavily depends on imported food making the country vulnerable to international price shocks. For
instance the 2007-9 price shocks greatly affected the prices of food and caused poverty rates to persist. In
response to volatility of food prices, the government of Mozambique adopted both direct and indirect policies. In
the 1980’s and early 90’s the government intervened in maize markets. The Government bought and sold maize
through the Cereals Institute of Mozambique (ICM) in order to maintain low and stable maize prices. The
restructuring of ICM in 1996 reduced its role as a buyer and seller to that of renting granaries to the private
sector. Thereafter, the private sector actors set the market prices.
After the 2007/9 food price crisis, the Government of Mozambique (GoM) embarked on policies to reduce the
dependence on imported food commodities by increasing production, storage, distribution and processing. The
trade policies adopted included reducing import tariffs on maize. In early 2008, the tariffs were reduced from 25
to 2.5 percent. In response to an increase in international prices, the GoM embarked on policies to maintain an
overvalued exchange rate and subsidize fuel prices.
The impacts of the policies to mitigate the negative effects of food crisis were generally mixed. The trade
policies were effective in reducing the impact of international prices of food and fuel. This was important since
Mozambique (especially south) is still not self sufficient in the production of food staples. Policies to increase
agricultural productivity were necessary since agriculture is the main economic activity in Mozambique.
However, according to Cunguara and Hanlon (2010) poverty has actually been increasing. The situation was
made worse by weather shocks especially in the central and southern provinces which reduced productivity. The
result is that the country has continued to be a net importer of food staples and policies to reduce the
vulnerability of the agrofood sector have not fully achieved the desired effect.
In an effort to stabilize prices the government reduced import tariffs. Although the interventions shielded the
consumers from unstable food prices, the government had to forego revenue which slowed down investment.
The cost of the scheme in terms of foregone taxes and increased subsidies increased both public and external
debt. In addition, food insecurity problem persisted. The Action Plan for food production 2008-2011(PAPA)
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was implemented with the main purpose of reducing staple food deficit. The programme included subsidies,
social protection, and monetary policies among others. Subsidies decreased prices and increased production and
a stable currency stabilized prices for imports. However, sustainability of the programme is questionable since it
was more of a stopgap measure. For instance government transfers to the vulnerable households were
insignificant considering the cost of staple food basket.
Methodology
Data and Data sources
The study utilized time series price data, literature review from relevant documents and key informant interviews
with key stakeholders including Government officials, development partner organizations and key selected
actors working on warehouse receipts, and post-harvest loss management. The estimation of seasonality analysis
and price volatility made use of monthly prices of maize covering 10 years period (2003-2013) obtained from
Agricultural Market Information System (SIMA). The price gaps identified were filled with the mean of the
surrounding prices and through linear interpolation. The analysis focuses on maize since it is by far the most
important staple food in Mozambique.
Since Mozambique is divided into three production regions, four markets were selected from each region to
represent the overall country’s price trends. The south is a maize deficit region while the central (depending on
the season) and north are maize surplus regions. Twelve markets were selected for data analysis: Maputo,
Xaixai, Chokwe and Massinga in the southern region; Gorongonza, Mutarara, Manica and Tete in the central
region; Nampula, Lichinga, Cuamba and Nacala in the Northern region.
Data Analysis
To test for seasonality, a price multiplicative model for time series decomposition was employed for data analysis
to achieve the stated objectives of the study. This method follows the work of Goetz and Weber (1986). The
basic idea behind decomposing a price series is that there are four components composing a price, namely, a
trend, a cyclical pattern, a seasonal pattern and a random or disturbance component. The most common approach
is to assume that these components are related multiplicatively (Trotter, 1992). That is
P = T x C x S x E (1)
Where
P = Prices series
T = Trend component
C = Cyclical component
S = Seasonal component
E = Random component.
Focus is on the seasonal component rather than all the price components so as to ignore the influence of
inflation, random events, and production cycles. Seasonality is defined as a systematic movement that repeats
itself every 12 months. The most common reason for seasonal price movement is the seasonal fluctuations of
supply. Demand fluctuations can also cause seasonal price changes.
Seasonality Analysis
Seasonal index and grand seasonal index, both based on centered moving averages (CMA) were used in the
seasonality analysis. To estimate the seasonal index the centered moving average over 12 months was used. The
formula for CMA is:
24
P+P
=CMA
i
5t=i
6t=i
i
5+t=i
6-t=i12
∑∑
−
+
(2)
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CMA completely eliminates seasonal and random components of a price series. This it represents the trend and
cyclical components of the original price series and eliminates seasonality and randomness. The seasonal index
(SI) is then calculated as a division of the original price series by CMA:
10012
×
CMA
P
SI i
i (3)
Where SIi is the seasonal index for month i, Pi is the price during month i, and CMA12
is the 12 month centered
moving average. To remove the random component in the SI the Grand Seasonal Index (GSI) is calculated as:
i
SI
SIGSI
∑
×=
1200
(4)
Where SI is the average seasonal index for month i.
The GSI summarises the typical seasonal behaviour of a time series. GSI represents the pure seasonal averages
of the series during the period of analysis. Since it shows the real seasonal fluctuation for the prices in the
markets, it is a good starting point of analysis of feasibility of storage.
Calculation of Gross Storage Returns
Calculating the Gross Storage Returns (GSR) of maize was used to evaluate the feasibility of storage. Maize is
stored for the creation of time utility. According to Trotter (1992), GSR can be estimated from GSI, because the
GSI is a measure of average change in the seasonal components of prices. The GSR can be calculated by
computing the percentage increase from seasonal price low to seasonal price high. The computation is given as
follows;
100×
−
=
GSILowest
GSILowestGSIHighest
GSR (5)
The GSR for maize in the various markets was calculated in order to understand the prevailing opportunities in
time for farmers and traders involved in maize marketing. They do not represent profits since they are not
adjusted for storage costs. A higher value of GSR will indicate that the return to storage of maize is higher in the
market.
Estimating Volatility
Coefficient of variation, computed as the ratio of the standard deviation to the mean, was used in the estimation
of price volatility. In addition, estimating a GARCH models was used to analyze the dynamics of volatility in the
maize markets.
In order to compute the extent of price volatility, the generalized autoregressive conditional heteroscedasticity
(GARCH) model was fitted. Before fitting the GARCH model, autoregressive integrated moving average
(ARIMA) filtration was done to identify the best fit ARCH term and then GARCH model was fitted (Bollerslev,
1986). The representation of the GARCH (p, q) is given as:
itititit eYbYbaY +++= −− 22110 (6)
(autoregressive process)
and the variance of random error is:
2
1
1
2
1
2
, −
=
−
=
∑∑ ++= t
q
i
iit
p
i
iti εασβωσ (7)
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Where, Yit is the price in the tth
period of the ith
commodity, p is the order of the GARCH term and q is the order
of the ARCH term. The sum of αi+βi gives the degree of persistence of volatility in the series. The closer is the
sum to 1, the greater is the tendency of volatility to persist for a longer time. If the sum exceeds 1, it is indicative
of an explosive series with a tendency to meander away from the mean value.
Time series data analysis approaches require that the economic variables must be non stationary. The unit root
test separates and tests for order of economic integration i.e. the number of times the series needs to be
differenced before transforming it into a stationary series. The finding of a unit root in time series data indicates
non-stationarity. The Augmented Dick-Fuller (ADF) was used to test for stationarity. According to Dickey and
Fuller (1979), the test is based on the statistics obtained from applying the Ordinary Least Squares (OLS)
method to following regression equation:
thti
m
h
htiti PPP ϑφδδ +∆++=∆ −
=
− ∑ ,
1
1,10, (8)
Where ϑ for t=1,……,n is assumed to be Gaussian white noise, ∆ is the difference operator; mis the number of
lags; and δ’s and ϕ’s are parameters to be estimated. The null hypothesis is that cointegration coefficient, δ1=0,
that is, there is a unit root in Pi (Pi is non-stationary) (Dickey and Fuller, 1979; Fuller, 1976). If the unit-root null
is rejected for the first difference of the series but cannot be rejected for the level, then we say that the series
contains one unit root and is integrated of order one, I(1).The number of lagged terms mis chosen to ensure the
errors are uncorrelated. Akaike information criterion (AIC) was used choose the number of lag terms.
Results and Discussion
Descriptive Statistics
The time series price data was recorded in Mozambiqan Meticais per kilogram (MzM/Kg). During the ten year
period the average nominal maize price was 6.76 MzM/Kg (Table 1). As expected, the mean prices were highest
in the southern region and lowest in the northern region. The mean maize price was highest in Maputo at
9.12MZM/Kg and lowest in Cuamba at 5.51MZM/Kg. The standard deviations were highest in the central region
while the north recorded the lowest. This implies that price fluctuations were highest in the markets in central
Mozambique.
Maputo is the largest city in Mozambique and a major consumption area. Maize is the preferred crop in the
southern region and being a low production area, the deficit may have caused the prices to be higher than for the
other markets. The northern and southern regions are surplus areas thus the prices are lower. Maize from the
central region (especially from Zambezia and Tete provinces) is usually exported to neighbouring Malawi and
often imports occur during periods of shortages. This may have caused high variations in prices for the markets
in the region. Tostão and Brorsen (2005) found that markets in the north were isolated from the other markets.
Less integrated markets are expected to have lower price variations since prices in such markets are not
influenced by prices in other areas. This may explain the low standard deviations observed for the markets in the
north.
Price Trends
The seasonal patterns of maize for different markets in the three production regions are reported in figure 1. The
figure indicates quite similar price patterns across all the markets in the three regions. There are price swings
during the period under consideration with 2005 and 2008 having the highest peaks. The prices showed signs of
stabilization in 2009/10 but began to increase during the first three months of 2013.
The food crisis of 2007 are the main causes of the price spikes in 2008 which persisted until the year 2009. The
flooding in the central provinces (along River Zambezi) and a drought in the south further contributed to the
price hikes in 2008/9. Since then, price fluctuations have been experienced with another rapid upward trend
observed from early 2012 followed by another downward trend in early 2013. The 2004/5 drought especially in
the south caused the price hikes during the cropping year. Mozambique has been a net importer of maize and
this may have further contributed to the sharp increase in prices in 2005/6.
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Seasonality Analysis
The results for GSI are summarised in figure 2(A-C). The 100% line represents the average value of the time
series over the period of analysis. The bar graphs indicate by how much each month’s seasonal index values lies
above or below this overall average. The figures show that the GSI values deviated from 100 which is an
indication that seasonality exists. The highest GSI were observed in January, February and March. The GSI start
to decline in April and June recorded the lowest GSI for all markets.Thereafter, GSI rises until the end of the
year. Monthly price variations are related to harvest period which begins in march and continue upto end of
april.
GSI represents seasonal averages for the period under analysis thus showing the monthly fluctuation for the
prices. The pronounced and almost similar seasonal variances have implications on incomes and food security.
This shows that producers and traders faced enormous risks in production and marketing maize. However, the
observed GSI also mean that there are opportunities in time and space for farmers and traders to store maize and
benefit from high prices later in the season.
Maize is harvested once a year while demand remains constant throughout. Since maize is a storable commodity
it is important to evaluate its feasibility. Gross storage returns considers the seasonality in price changes which
sellers can utilise to get better prices for their maize. The feasibility for storage is reported in Table 2.
Gross storage returns are the nominal price margins within a season.Table 2 shows that generally the returns to
storage were lowest in the markets in the south and highest in the markets in the north. The average returns to
storage per region was 35.13 percent, 66.91 percent and 92.12 percent for south, central and northern regions
respectively.The returns to storage was lowest in Maputo at 22 percent while the highest returns were observed
for Cuamba at 113 percent.
The results imply that the producers will make highest returns if they stored and sold to the markets in the north
during periods of high prices and lower returns if they sold in the south, where seasonal price variability is lower.
The observations are consistent with the markets in the north being poorly integrated with the markets in the
central/south. The high range in seasonality index means that maize prices in the northern region are not fully
transmitted to other markets in times of gluts and shortages.
Testing for Volatility
Unit Root Test
Tables 3 presents the results for testing for unit roots in maize retail price series by the Augmented Dick-Fuller
(ADF) test. The number of lags included in the test was selected using the Akaike’s information Criterion (AIC).
The test for all the maize price levels could not reject the hypothesis of unit roots at 5 percent critical level.
When the price series are differenced once, they all become stationary and the null hypothesis of unit roots is
rejected. Thus, the maize price series for the markets under consideration are integrated of order one.
4.4.2 Conditional Variance and Volatility Persistence
Conditional variance (CV) based on estimates of the ARCH GARCH model of price volatility shows that the
series were excessively peaked as evidenced by excessive kurtosis (figure 3). Excess kurtosis suggests that price
distribution in most markets is highly leptokurtic, which implies large price changes follow even larger changes
and smaller changes follow smaller changes.
The observed leptokurtic changes indicate ARCH disturbances hence persistent price volatility. All the markets
recorded volatility clustering around the years 2005/6 and 2008/9. This is a period during which domestic
production dropped. The natural disasters of 2004/5 and the food crisis of 2007-9 caused price shocks hence the
observed volatility clustering around that time.
The average maize price volatility in Mozambique as implied by the mean conditional variation show that it
varied between 17.2 percent and 26.7 percent. The findings in table 4 suggest that maize prices in Maputo were
the most volatile as compared to the other markets as indicated by the high average conditional variance of 28.1
percent. This is followed by Chokwe (26.7%), Nacala (26.4%) and Xaixai (24.5%), while Mutarara had the least
volatile maize price with a variation of 17.2 percent.
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The persistence of volatility in the maize prices is summarised in table 4. The results show that apart from
Xaixai, Chokwe and Nampula, the estimated α+β coefficients were closer to ‘one’ indicating that the volatility in
maize price persisted for a long time. Chokwe had the lowest volatility persistence meaning that prices took a
shorter time to stabilize. Price volatility in Gorogonza, Cuamba and Lichinga persisted for a longer time than the
other markets. On the other hand, Massinga, Manica, Mutarara and Lichinga prices recorded α+β coefficients
that were greater than one. This is an indication of explosive series meaning that in times of price shocks, prices
tend to meander away from the mean value.
The significance of the ARCH and GARCH term indicate that volatility in any given month prices depend on
volatility in the preceding month’s prices and that the current price variance depends on the past price variances.
The coefficients mean that whenever price spikes occur, the process reverts very slowly. This may explain why
even after the food price crisis of 2008/9 high prices continued to persist in Mozambique. The high and
persistent volatility made the price stabilization programmes during the price shocks to be very costly.
6. Conclusions
The high volatility in food prices has remained a matter of concern to producers, consumers and policy makers.
This study evaluated the seasonality and volatility of maize prices in Mozambique retail markets using grand
seasonality analysis and ARCH/GARCH models. The study used ten year- monthly retail price data for maize in
twelve markets in three production regions of Mozambique.
The analysis indicates that seasonality exists in maize price series. This means that producers and consumers
face production and marketing risks. An estimation of gross returns to storage show that there are opportunities
which producers and marketers could exploit to increase benefits. Commodity price volatility as implied by
conditional variation show that generally markets in the south had the highest volatility while the markets in the
central region had the lowest volatility. Conditional variance was highest in Maputo and lowest for Gorogonza.
The extent of volatility in maize prices as measured by coefficients of the GARCH model indicates both
persistence and explosive volatilities.
The incidences of seasonality in prices and persistence in food price volatility in Mozambique means that long
term interventions will be needed to improve local production and distribution. Since production of maize is
mainly rainfed, prices are determined by the season and amount of rainfall. Investing in irrigation infrastructure
especially in areas prone to drought will reduce inter seasonal variations in production and thereby stabilize
prices. There is also a need for the Government to buy surplus at a competitive price to maintain a buffer stock.
This should increase availability throughout the year thereby reducing seasonality and food price increases
occasioned by shortages. Institutional support especially crop insurance, credit and warehouse receipt system
will help producers to cope with risks and reduce postharvest losses. Warehouse receipt system will further
improve quality and grading, attract millers and provide an enabling environment for trading through a
commodity futures exchange. The government needs to increase the rural population’s access to the road
networks in order to facilitate marketing of agricultural inputs and outputs, which is essential for stabilizing food
prices.
ACKNOWLEDGEMENTS
The authors wish to thank Alliance for Green Revolution in Africa (AGRA) for providing the financial support
for data collection.
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Table 1: Descriptive statistics for monthly retail prices in MzM/Kg
Region
Market
Minimum Maximum Mean Std.
Dev
Maputo 4.08 13.45 9.12 3.25
South Xaixai 3.32 13.64 7.33 2.99
Chokwe 3.23 15.53 7.59 2.84
Massinga 3.64 18.18 7.84 3.42
Average 3.57 15.2 7.97 3.13
Gorongoza 1.99 15.58 5.98 3.32
Central Manica 1.99 16.57 6.33 3.23
Tete 2.38 15.85 6.51 3.19
Mutarara 1.14 19.68 6.38 3.71
Average 1.88 16.92 6.3 3.36
Nampula 2.57 13.26 6.49 2.68
Cuamba 1.8 14.29 5.51 2.87
North Lichinga 2.29 18.63 5.57 2.75
Nacala 2.54 12.07 6.43 2.44
Average 2.3 14.56 6 2.68
All 2.58 15.56 6.76 3.06
Figure 1: Maize retail price trends (2003-2013)
Price(MZN/Kg)
Maputo
Xaixai
Chokwe
Massinga
Gorongoza
Manica
Tete
Mutarara
Nacala
Lichinga
Cuamba
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Figure 2A: GSI for maize prices in the southern region (2003-2013)
Figure 2B: GSI for maize prices in the central region (2003-2013)
%ofannualaverages
Maputo Xaixai Chokwe Massinga
%ofannualaverages
Gorongoza Manica Tete Mutarara
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