grow certain cereals as a cash crop. Also, the potentially destabilizing effect of food aid on
market prices may introduce additional risks and costs for private traders, who are likely to pass
these costs onward to producers and consumers.
SURE results for white wheat are presented in Table 10. Market liberalization has been
associated with a 12 birr per quintal increase in the price of white wheat in the surplus-producing
area of Hosaenna. This result was significant at the 5% level. For the deficit markets,
liberalization is associated with lower real prices in two of three cases. However, only in Mekele
was the effect statistically significant at the 1% level. In this market, equilibrium wheat prices
have been 42 birr per quintal lower in the post-liberalization period, after controlling for other
factors in the model.
The impact of imported food aid wheat on white wheat price were significantly negative in one
of four cases (Mekele). Mekele is situated in Tigray Region, which has received a large
proportion of total food aid distributed in the country over the sample period. Therefore, it is not
surprising to find a significant negative effect of food aid on prices of both wheat and teff in this
market. The results indicate that equilibrium wholesale prices in Mekele declined by 2.7 birr per
quintal for every additional 30,000 quintals of food aid released within that region over the prior
three-month period.
Changes in price spreads
Table 11 shows the various factors affecting maize price margins between different markets, the
coefficients and statistical test statistics in the maize price margins analysis are derived based on
the estimates from the SURE model. Market liberalization has significantly (p<5%) reduced the
maize price spreads between Addis Ababa and Mekele and Addis Ababa and Shashemene. The
spread between other markets either increased or decreased but the changes are not statistically
significant. The effects of seasonality on maize price margins are not as pronounced as in maize
price levels, because prices in both surplus and deficit markets appear to follow a roughly similar
seasonal pattern. The effect of rainfall on maize price spreads is found to be significant in most
of the cases while the effect of food aid is not significant.
Table 12 shows the impact of various factors affecting white teff price spreads. Seasonal
differences in price spreads are observed only between Addis Ababa and Mekele, October to
March representing months of lowest margin. Market liberalization was associated with lower
price spreads for all market pairs considered. The white tef spreads between Addis Ababa and
Bahir Dar, Mekele and Addis Ababa, Dire Dawa and Hosaenna and Addis Ababa and Hosaenna
have declined significantly at a probability of less than 1% while the margins between Dire Dawa
and Bahir Dar reduced significantly at a probability of less than 5%. Equilibrium white teff price
spreads have declined by 1 to 48 birr per quintal in the post-liberalization period.
Food aid is also found to have significant but often complex effects on cereal price spreads. In
the case of teff price spreads between Bahir Dar and Addis, for example, food aid released in the
region comprising Addis is found to significantly reduce Addis prices (the deficit market), which,
other factors constant, reduces the size of the price spread between these markets. Food aid
released in the region comprising Bahir Dar also negatively affects teff prices in this major
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