Impacts of Market Reform on Spatial Volatility of Maize Prices in Tanzania

Abstract

Maize is one of the major staples and cash crops for many Tanzanians. Excessive volatility of maize prices destabilises farm income in maize-growing regions and is likely to jeopardise nutrition and investment in many poor rural communities. This study investigates whether market reform policies in Tanzania have increased the volatility of maize prices, and identifies regional characteristics that can be attributed to the spatial price volatility. To achieve the objectives, an autoregressive conditional heteroskedasticity in mean (ARCH-M) model is developed and estimated in this study. Results show that the reforms have increased farm-gate prices and overall price volatility. Maize prices are lower in surplus and less developed regions than those in deficit and developed regions. Results also show that the developed and maize-deficit regions, and regions bordering other countries have experienced less volatile prices than less developed, maize-surplus and non-bordering regions. Our findings indicate that investments in communication and transportation infrastructures from government and donor countries are likely to increase inter-regional and international trade, thereby reducing the spatial price volatility in Tanzanian maize prices in the long run. Copyright (c) 2008 The Authors. Journal compilation (c) 2008 The Agricultural Economics Society.

Economywide Impact of Maize Export Bans on Agricultural Growth and Household Welfare in Tanzania: A Dynamic Computable General Equilibrium Model Analysis

“…First, research by Kilima et al. () suggests that the price effect of informal trade is primarily felt in areas closest to the border whereas surplus regions are primarily located in the south of the country. Second, interviews with both farmers and traders by the research team confirmed that maize prices did indeed decline and are more volatile during the export ban period.…”

“…In reality maize prices would presumably decline more moderately than the model result suggests and such declines would occur heterogeneously across regions in the country for two reasons. First, research by Kilima et al (2008) suggests that the price effect of informal trade is primarily felt in areas closest to the border whereas surplus regions are primarily located in the south of the country. Second, interviews with both farmers and traders by the research team confirmed that maize prices did indeed decline and are more volatile during the export ban period.…”

“…Moreover, they found that Kenya's open‐border policy had kept the country's prices more stable and predictable than those in countries with ad hoc trade interventions such as Malawi and Zambia. Maize price volatility analysis in Tanzania also found that those regions of the country with greater access to borders were significantly less likely to exhibit price volatility compared to other regions (Kilima et al., ). Their results suggest that informal trade routes during an export ban mediate price fluctuations and that investments in infrastructure to connect surplus and deficit markets may help to mitigate spatial price volatility.…”

Do Trees on Farms Matter in African Agriculture?

“…For instance, the authorities could support remote markets by linking them through (better) road access to major consumption centers across the country, as well as in neighboring countries. Other studies have come to a similar policy conclusion about the importance of rural roads for rural development and poverty reduction (Kilima et al 2008). This will be key to improving the commercialization of agricultural products in remote areas and reducing price volatility across markets in Burkina Faso.…”

Interlocked Village Markets and Trader Idiosyncrasy in Rural India

“…Typically, existing empirical studies do not explore how interlinkages between markets reinforce the impact of imperfections in each market or how the adjustment mechanism in one market depends on conditions in other markets (Kilima et al. , 2008).…”