Aad van Tilburg

Testing for the law of one price and identifying price-leading markets: an application to corn markets in Bénin

A data-determined method is proposed to test for the law of one price as a long-run equilibrium condition and to identify which markets in a network of spatially dispersed commodity markets quote the reference price. The method consists of supplementing Johansens FIML cointegration procedure with a permanent-transitory decomposition and rules of inference in linear time-series models with unit roots. As an example, we apply our method to prices of six corn markets in Benin. We find that the law of one price holds in the long-run. It appears that two rural markets quote the reference price: their prices adjust fastest towards the permanent change induced by the common stochastic trend.

Market access, poverty alleviation and socio-economic sustainability in South Africa

Markets continue to be seen as the means for ensuring that smallholder producers of agricultural products are effectively integrated into the mainstream of national economies, especially in developing countries. For one thing, markets provide the opportunity for farm production to contribute to poverty reduction through the cash income realised from sales of farm produce. In turn, markets drive production as farmers strive to meet the demands of consumers and end-users in terms of quantity and quality. But their very existence, or how effectively they function, cannot be guaranteed in many developing countries. In South Africa, there is a certain urgency to address the real concern that, in spite of considerable investments into restructuring the sector since 1994 and directly tackle agrarian and land reform, poverty is still rife and there is the clear indication that much of this arises from farmers not being able to sell produce at a profit. Unlocking markets for this group of farmers is therefore considered a crucial developmental necessity. Research conducted from 2004 in various parts of the country point to the importance of the market access to smallholders. The aim of this book is to attempt an aggregation of the findings from an investigation into the technical and institutional constraints to smallholders’ market access and how these affect other aspects of community life. Without a doubt, such concerns are not new and have formed part of theoretical and policy work focusing on the gains from trade for several centuries.

Factors unlocking markets to smallholders: lessons, recommendations and stakeholders addressed

The book aimed to present results of investigations conducted to ascertain to what extent South Africa’s small-scale farmers can share in the expected gains of integration into the national and international markets. Related to that broad goal, it was also intended to identify what institutional and other reforms are necessary to enhance the effective and profitable participation of these farmers in the regional economy given the constraints that smallholder agriculture is facing in South Africa.

Smallholder market access and governance in supply chains

Smallholders in developing countries tend to sell their products at local markets because of their proximity and the fact that they are immediately paid for the produce delivered. Increasingly, they also perceive opportunities in both national or international markets or supply chains to sell their surpluses. They tend, however, to encounter several constraints. A first challenge regards the availability and accessibility of resources and competences which are required to deliver the products that consumers demand (Ingenbleek and Van Tilburg, 2009). Another challenge is the manner in which farmers can be organised to meet the quantities and qualities that their supply chain partners or the consumer market need. A third challenge regards the limited access smallholders have to market information and necessary services such as working capital to manage their operations properly.

Market performance of potato auctions in Bhutan

Abstract Market performance with respect to a main horticultural export commodity in Bhutan is the subject of this paper. Imperfections in (market) infrastructure and market structure and conduct may prevent an optimal price for farmers. Market performance is assessed by testing the law of one price for this commodity. This is done by testing three series of auction price data on both long-run and short-run price integration. It is concluded that for the period 1996-2000 the auction prices were interrelated both in the long and short run with one of the three auctions as the price-leading market. In contrast, in the period 2001-2005 the market arbitrage process slowed down, indicating the rise of market imperfections. Policy implications are suggested.

Testing for the law of one price and identifying price-leading markets

A data-determined method is proposed to test for the law of one price as a long-run equilibrium condition and to identify which markets in a network of spatially dispersed commodity markets quote the reference price. The method consists of supplementing Johansens FIML cointegration procedure with a permanent-transitory decomposition and rules of inference in linear time-series models with unit roots. As an example, we apply our method to prices of six corn markets in Benin. We find that the law of one price holds in the long-run. It appears that two rural markets quote the reference price: their prices adjust fastest towards the permanent change induced by the common stochastic trend.