Economic Analysis of Spatial Integration of Pulse Market in Ethiopia; A case of Selected Pulse Market in Ethiopia

Abstract

In order to solve the problem of food insecurity the Government of Ethiopia has adopted different strategies since the introduction of agricultural extension services in the early 1970s, to improve the performance of the agricultural sector. However, most of this strategy has focused on how to increase agricultural productivity at the farm level through the dissemination of improved production technologies, while the marketing aspect has been given less attention.  Considering this, in order to improve the market efficiency, significant numbers of empirical studies have been conducted on market integration but they focused mainly on cereal[1] market while pulse market has not been given adequate attention. Yet pulse is the third largest export crop in the country and generates USD 232.5 million annually and it has been showing a significant growth in export and production in the last decade. The study assesses the price transmission of selected pulse market in Ethiopia using monthly wholesale price data in Birr/Quintal covering the period January 2003 to December 2013 for Horse beans and Chickpeas from Ethiopian Grain Trade Enterprise. The stationarity of the price data was tasted using Augmented Dickey-Fuller (ADF) and Phillips-Perron tests. To test the co integration level Engle and Granger (Engle and Granger, 1987) test were applied. To identify which market price change will cause a price change in other market, Granger Causality model was used. The selected markets are Addis Ababa as a central market; Adama as closest market based on distance form central market; Diredewa as remotest both for Horse beans and Chickpeas. While Desse and Gonder as main producing market of Horse beans and Chickpeas respectively. The finding indicates that all the selected markets are co integrated. However, Addis Ababa- Desse for the case of Horse beans and Addis Ababa- Gonder for Chickpeas markets have strongly integrated.  Concerning causality, Addis Ababa - Desse, Addis Ababa - Adama, Desse - Diredawa markets are unidirectional while Desse - Adama are bidirectional for horse bean. However, for Chickpeas, all the selected markets do not Granger Cause each other in both directions except between Diredawa - Adama which were unidirectional. This implies that there is a need of improvement in market information systems especially to producing markets, and also timely accurate price information for trade participant to distribute commodities from surplus area to deficit markets.

Key Words: Pulse, Ethiopia, Granger Causality, price transmission

[1] Studies focused mainly on cereal market: Maize, Wheat, Sorghum and Teff (Negassa, 1998; Negassa et al., 2004; Getnet et al., 2005; Getnet, 2007; Tadesse and Shively, 2009 and Sinishaw, 2013).