Price transmission in a deregulated Ethiopian coffee market
| dc.contributor.advisor | Van Shcalkwyk, Herman D. | |
| dc.contributor.advisor | Alemu, Zerihun Gudeta | |
| dc.contributor.advisor | Goshu, Gezahegn Ayele | |
| dc.contributor.author | Worako, Tadesse Kuma | |
| dc.date.accessioned | 2016-11-22T12:31:54Z | |
| dc.date.available | 2016-11-22T12:31:54Z | |
| dc.date.issued | 2008-05 | |
| dc.description.abstract | English: Ethiopia’s coffee industry has undergone numerous structural changes and deregulation measures as a result of changes in the political and economic landscape of the country since early 1992. The state-controlled marketing system has been replaced with markets run by the private sector. Such changes may have an influence on price transmission, the dynamics of shocks through marketing channels, and the performance of the industry. The principal questions addressed by the study are whether the deregulation of the Ethiopian coffee market has resulted in closer interrelationships among producer, auction and world or FOB prices in the vertically related coffee markets and whether it has improved dynamic interrelationship amongst spatially separated domestic coffee markets. Towards this end, the long-run and short-run dynamics between vertically and spatially related coffee markets were assessed employing the threshold vector error correction (TVEC) modelling approach extending the technique developed by Hansen (1999) to deal with inferential biases occurring as a result of specification errors that have been overlooked till to date by applied studies in the field. This study attempts to measure both vertical and spatial price transmission in two separate sections. In the first part, vertical price transmission is analysed by considering six separate markets, each of which has producer, auction, and world prices. This includes five major categories of Ethiopian coffee by origin of production (Sidama, Yirgachefe, Jimma, Wollega and Harar) and the national average price as representative of all coffee types in the country. The second part measures spatial price transmission between six selected pairs of spatially distinct local coffee markets. Monthly price data from the Central Statistical Agency and the Agricultural Market Promotion Department in the Ministry of Agriculture and Rural Development, as well as cross-sectional data from the 2006 coffee market survey, are used. The following salient results were obtained: Firstly, market deregulation in general has induced strong long-run interrelationship between vertically and spatially related markets. Secondly, of the six categories of vertically related market prices in the four groups (Sidama, Yirgachefe, Jimma and national average prices), auction prices are directly affected by world prices (exhibiting dynamic interrelationships) while producer prices are affected by world prices indirectly through auction prices (i.e. weak interrelationship with world prices). Hence the causality flows from world to auction price and then from auction to producer price. In general, producer prices lack direct interrelationship with world prices and are weakly responsive to shocks in world prices, whereas auction prices are highly interrelated with world prices and are responsive to shocks in world prices. Thirdly, in the case of Harar coffee, neither producer nor auction prices show interrelations with world (FOB) prices, which partly accounts for the high concentration of market power and malpractices in the Harar coffee auction and export markets. Fourthly, asymmetries were also found in price transmission where producer prices fell persistently within the equilibrium band from 1998 through 2006 despite unfavourable world prices. This may be partly ascribed to the high local coffee demand, which plays an important price stabilisation role. Fifthly, with regard to spatial price transmission, producer markets located adjacent to each other show clear short-run price dynamics and integration, while others show weak interrelation. As a result, of the six pairs of spatially separated markets, only three pairs show strong integration while the others do not. In general, evidence from vertically related market analysis reveals that coffee growers remain segmented from the world and benefit less compared to participants in the auction and export markets. Similarly, most spatially separated local markets either totally lack short-run dynamics or are weakly integrated. This segmentation and lack of short-run dynamics is partly explained by the current organisational structure of the Ethiopian coffee market system where coffee farmers lack strong producer cooperatives, which might enhance their capacity to bargain for a proper share of the market price. Hence, dismantling market parastatals and deregulation only is a necessary but not sufficient condition for efficient private markets to evolve. In the absence of appropriate infrastructure and institutions at grassroots level, smallholders remain at the mercy of traders. Thus it is important to shift from merely ‘getting prices right’ to ‘getting institutions right’ so as to address market failures arising from imperfect information, contract enforcement and property rights, as well as insufficient provision of public goods, in order to improve the lives of primary producers and thereby reduce poverty. | en_ZA |
| dc.description.abstract | Afrikaans: As gevolg van veranderinge op politieke en ekonomiese gebied, het Ethiopië se koffiebedryf sedert 1992 talle strukturele veranderings en deregulasie-maatreëls ondergaan. Die staatsbeheerde bemarkingstelsel is vervang met markte wat deur die privaatsektor beheer word. Sodanige veranderinge kan ’n invloed uitoefen op prysoordrag, die dinamika van skokke deur bemarkingskanale en die prestasie van die bedryf. Die belangrikste vrae wat in die studie behandel word, is of die deregulasie van die Ethiopiese koffiemark gelei het tot nouer onderlinge verhoudinge tussen die produsent, veiling en wêreld of FOB-pryse op die vertikale verwante koffiemarkte en of dit die dinamiese onderlinge verhoudinge tussen ruimtelik verdeelde koffiemarkte verbeter het. In hierdie verband is die lang- en korttermyn- dinamika tussen vertikale en ruimtelik verwante koffiemarkte bepaal deur middel van die drumpel vektor foutregstelling (DVFR) modelleringsbenadering, met uitbreiding van die tegniek wat deur Hansen (1999) ontwikkel is om afleibare onewewigtighede wat mag voorkom weens spesifikasiefoute wat tot nou toe nog nie deur toegepaste studies in die veld raakgesien is nie. Die studie poog om sowel vertikale as ruimtelike prysoordrag in twee afsonderlike afdelings te bepaal. In die eerste gedeelte word vertikale prysoordrag ontleed deur die oorweging van ses afsonderlike markte, elk met ’n produsent, veiling en wêreldpryse. Dit omvat vyf groot kategorieë van Ethiopiese koffie wat oorspronklik geproduseer is (Sidama, Yirgachefe, Jimma, Wollega en Harar) en die nasionale gemiddelde prys as verteenwoordigend van al die koffiesoorte in die land. Die tweede gedeelte bepaal ruimtelike prysoordrag tussen ses geselekteerde pare van besliste ruimtelike koffiemarkte. Maandelikse prysdata van die Sentrale Statistiek Agentskap en die Afdeling Landboumarkbevordering in die Departement van Landbou en Landelike Ontwikkeling, asook deursnee data van die 2006 koffiemarkopname, word gebruik. Die volgende opvallende resultate is verkry: Eerstens het mark-deregulasie oor die algemeen sterk, langtermyn- onderlinge verhoudinge tussen vertikale en ruimtelik verwante markte in die hand gewerk. Uit die ses kategorieë van vertikaal verwante markpryse in die vier groepe (Sidama, Yirgachefe, Jimma en nasionale gemiddelde pryse), is veilingspryse in die tweede plek direk deur wêreldpryse beïnvloed (wat dinamiese onderlinge verhoudinge ten toon gestel het), terwyl produsentepryse indirek deur wêreldpryse beïnvloed is deur veilingspryse (d.i. swak onderlinge verhoudinge met wêreldpryse). Daarom die oorsaaklike strominge van wêreld na veilingsprys en dan van veiling na produsenteprys. Oor die algemeen het produsentepryse geen onderlinge verhoudinge met wêreldpryse nie en dit reageer swak op skokke in wêreldpryse, terwyl veilingspryse goed verband hou met wêreldpryse en dus reageer op skokke in wêreldpryse. In die geval van Harar-koffie, wys nóg die produsent, nóg die veilingsprys derdens ’n onderlinge verhouding met die wêreld- (FOB) prys, wat deels rekenskap gee van die hoë konsentrasie markkrag en wanpraktyke op die Harar-koffieveiling en uitvoermarkte. Vierdens is ongelykmatighede ook gevind in prysoordrag waar produsentepryse, ten spyte van ongunstige wêreldpryse, vanaf 1998 deur tot in 2006 aanhoudend geval het in die ekwilibriumband. Dit kan gedeeltelik toegeskryf word aan ’n hoë plaaslike aanvraag na koffie, wat ’n belangrike rol speel in prysstabilisasie. Sover dit ruimtelike prysoordrag aangaan, het produsentemarkte wat na aan mekaar geleë is, vyfdens duidelike korttermyn- prysdinamika en integrasie vertoon, terwyl ander swak onderlinge verhoudinge vertoon het. Daarom het slegs drie paar uit die ses paar ruimtelik verdeelde markte sterk integrasie getoon, terwyl die ander dit nie gedoen het nie. Oor die algemeen het bewyse van die ontleding van vertikaal verwante markte aan die lig gebring dat koffiekwekers steeds apart van die wêreld staan en dat hulle minder voordeel trek in vergelyking met deelnemers aan die veilings- en uitvoermarkte. Net so is daar ’n totale gebrek aan korttermyndinamika in die meeste ruimtelik verdeelde plaaslike markte of hulle is swak geïntegreer. Die segmentasie en gebrek aan korttermyndinamika kan deels verklaar word deur die huidige organisatoriese struktuur van die Ethiopiese koffiemarkstelsel, waar koffieboere mank gaan aan sterk produsente-koöperasies, wat hulle vermoë tot onderhandeling vir ’n behoorlike deel van die markprys kan verhoog. Die afbreek van mark parastatale en deregulasie, is daarom ’n noodsaaklike, maar onvoldoende toestand om doeltreffende privaat markte te laat ontstaan. In die afwesigheid van toepaslike infrastruktuur en instellings op grondvlak, word kleinboere steeds aan die genade van die handelaars oorgelaat. Om die lewens van primêre produsente te verbeter en daardeur armoede te verminder, is dit dus belangrik om weg te beweeg van blote ‘stel pryse reg’ na ‘kry instellings reg’ om aandag te gee aan marksteurings wat voortspruit uit onduidelike inligting, kontrakafdwinging en eiendomsregte, sowel as onvoldoende verskaffing van openbare goedere. | af |
| dc.identifier.uri | http://hdl.handle.net/11660/4745 | |
| dc.language.iso | en | en_ZA |
| dc.publisher | University of the Free State | en_ZA |
| dc.rights.holder | University of the Free State | en_ZA |
| dc.subject | Thesis (Ph.D. (Agricultural Economics))--University of the Free State, 2008 | en_ZA |
| dc.subject | Ethiopian coffee | en_ZA |
| dc.subject | Market deregulation | en_ZA |
| dc.subject | Price transmission | en_ZA |
| dc.subject | Threshold vector error correction model | en_ZA |
| dc.subject | Nonlinearity | en_ZA |
| dc.subject | Price asymmetry | en_ZA |
| dc.subject | Price regulation -- Ethiopia | en_ZA |
| dc.subject | Coffee -- Prices -- Ethiopia | en_ZA |
| dc.subject | Coffee industry -- Ethiopia -- Deregulation | en_ZA |
| dc.title | Price transmission in a deregulated Ethiopian coffee market | en_ZA |
| dc.type | Thesis | en_ZA |