interdependence among the surplus and deficit regions for grain supplies and thus affecting
national food security.
Other research on the behavior of wholesale traders indicates the scope for significant reduction
in handling and transaction costs if improvements in cereal grading and standards could be
achieved (Eleni, forthcoming). For example, inadequate grading procedures cause grain to be un-
bagged and re-bagged for quality inspection each time grain changes hands. These findings are
indicative of an emerging body of empirical evidence on policy reform in Africa suggesting that,
while some reforms have been critical to promote economic growth, they are insufficient by
themselves to generate leaps in productivity growth and require associated improvements in key
market institutions, infrastructure, and broader nurturing of civil society (Gordon 1996).
Volatility, as measured by SD, of grain price levels declined in 11 of 16 cases examined while the
volatility in price spreads declined in 23 of the 24 market pairs examined. These findings suggest
that the transfer costs charged by traders for distributing cereal from one region to another have
not only declined but have also become more stable in absolute terms during the post-
liberalization period.
Price stability is one of the important factors affecting farmers’ decision-making process. Under
highly variable (unpredictable) price conditions farmers may be reluctant to make important
investments such as the use of fertilizer. Variability in grain marketing margins also represents one
of the risk factors for the private grain traders increasing the uncertainty of the amount of income
they derive from grain trading. This also affects traders’ decision to make investments which
increase the efficiency of the grain marketing system.
Results of price correlation analysis strongly indicate that wholesale cereal prices have become
much more highly correlated in the post-liberalization period. The correlation between wholesale
market prices has risen in 17 of 24 market pairs examined since liberalization in 1990. This
provides a rough indication that grain markets have become more spatially integrated since
liberalization, at least at the wholesale level. This finding is to be expected since the costs and
risks of transporting grain across regions has declined substantially since liberalization.
Integration between producer prices and wholesale prices is still a major unknown, since
compatible price information at the producer, wholesale, and retail level was not collected under
the EGTE price collection system, and has only just begun in August 1996 under the new
GMRP/EGTE/MEDAC system. The integration between producer and wholesale cereal prices
is a key issue for the design of local purchase programs designed to raise producer prices through
purchasing grain from wholesalers.
The goal of raising and stabilizing farm revenues can be promoted by improving the efficiency of
the grain marketing system. A more efficient marketing system would help pull grain quickly out
of surplus areas, thus relieving the localized gluts that depress farm prices, and more quickly
deliver grain to deficit areas. Examples of investments that are likely to improve the efficiency
of the grain marketing system include more timely and widely disseminated market information,
improved road infrastructure, and removing barriers that raise the costs of moving grain from one
region to another. The continuation of competitive local purchase operations during large harvest
years, guided by timely information on marketed supplies and prices, could also stimulate private
investment in the food system, promote competition, and reduce grain and input marketing costs
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