The 4th ESRI-Eastearn Africa Conference, Addis Ababa, 25 September, 2009

1. Spatial Analysis of Cereal Market Prices:
Effects of Remoteness on Market Price
Emily Schmidt and Hailu Shiferaw
The 4th ESRI-EA Conference
24 -25 September 2009
Addis Ababa, Ethiopia
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2. Overview
• Introduction
• Methodology
• Results
• Policy options
• Conclusions
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3. Introduction
An important determinant of household food security
is the market price of key cereal grains.
• Given Ethiopia’s unique biophysical landscape, and spatial placement
of key infrastructures, cereal prices vary across geographic areas.
• We analyze price variations over space for four major cereals
• Teff • Maize
• Wheat • Sorghum
• Taking into account:
• Geographic location of 120 cereal markets
• Travel time from cereal markets to large cities
• Whether a market center is in a region that is classified as surplus
or deficit
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4. Introduction
Effects of location on grain prices
We test the hypothesis:
• Highest prices of cereal grains are in the rural-remote,
deficit producing areas
• High transportation costs to remote areas, with local deficit
production accounts for higher prices in these areas in order to
account for transaction costs
• Lowest prices are in the rural-remote, surplus grain
producing areas
• Rural, remote areas which are growing a surplus amount of
grain, but do not have access to larger markets (or cities)
forced to sell excess supply at low prices
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5. Methodology
Each market is categorized by:
• Net Cereal Supply:
• Surplus: Net production is greater than 10% reported consumption
• Autarky (Balanced): Net production is between 10% above and below
reported consumption
• Deficit: Net production is below 10% of consumption
• Travel Time:
• Remote (greater than 5 hours travel time from a major city)
• Non remote (less than 5 hours travel time from a major city)
• Rural/Urban:
• Rural towns (markets within a town less than 20,000 people)
• Small towns (markets within a town with at least 20,000 people)
• Large city (Addis Ababa and Dire Dawa)
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6. Methodology
Net Wheat Supply
Cereal markets and net supply
for all grains
Net Teff Supply
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7. Methodology
Market Access and Remoteness
• Euclidean distance does not take into account
biophysical features such as mountains and rivers,
nor does it assess road quality and travel speed
• The shortest route in kilometers may not always be the
fastest route
• By calculating a travel time from each market, to
an urban hub (city of 50,000 people), we are able
to classify our study markets into:
• Remote: more than 5 hours travel time to a city
• Non – remote: less than 5 hours travel time to a city
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8. Methodology
Travel Time calculation incorporates:
• Road types and classes:
• Paved, all weather / dry weather
• Gravel, all weather / dry weather
• Earth
• Landcover – walking speed
• Rivers
• Waterbodies
• Slope (calculated using DEM)
• These layers are then reclassified
and combined into a friction layer
that reflects the time in minutes to
cross a single 1km. cell (pixel).
• This friction layer is then used as
input data to calculate a cost Travel time to cities of at least 50,000 people
distance (travel time) to a given
target
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9. Results
Market centers and travel time
to a city of at least 50,000 people
• Several markets in
Benishangul – Gumuz have
surplus grain production,
but remain further than 5
hours travel time to a large
city
• Areas in SNNP region
show deficit production
levels and are not
connected to a major road
network nor are they within
5 hours of a city
•Afar region also has
population in deficit, distant
areas
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10. Results
Markets disaggregated by production, remoteness,
and urban / rural classifications
• A majority of sorghum
production is found in the
Northwest of Ethiopia, Surplus
– distant markets are found in
Benishangul – Gumuz
• Maize, wheat and teff are
grown primarily in the
highlands of Oromia and
Amhara regions
• Some surplus area maize is
grown in Afar region, as well
as selected regions in
Benishangul - Gumuz and
west Oromia
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11. Results
Average Grain Price by Location and Cereal (birr/kg, 2006/07)
When aggregated by Location Teff Wheat Maize Sorghum
all grains, our
hypothesis holds true. Rural 3.99 2.97 1.53 2.03
Large cities and small Small Town 3.98 3.10 1.62 2.27
towns (expected to be Large Cities 4.44 3.41 1.89 3.40
deficit producers)
experience higher Addis Ababa 4.46 3.42 1.88 3.40
grain prices. Distant 3.89 3.02 1.35 1.73
Markets in areas with Connected 4.01 3.06 1.63 2.28
surplus production Surplus 3.81 2.93 1.56 2.04
have lower prices than
deficit markets Autarky 4.06 3.19 1.52 2.26
Deficit 4.13 3.09 1.59 2.19
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12. Results
Average Teff Price by Location and Variety (birr/kg, 2006/07)
White Teff Black Teff Mixed Teff
Location Distant Connected Distant Connected Distant Connected
Rural Surplus 3.68 4.16 3.25 3.22 3.50 3.82
Rural Autarky 4.52 4.15 4.00 4.00 4.00 4.00
Rural Deficit 4.27 4.68 3.71 3.58 4.00 4.38
Large cities - 4.99 - 4.00 - 4.33
Addis Ababa - 5.01 - 4.00 - 4.36
• Compared to rural distant deficit markets, the rural distant surplus markets have
generally lower prices for all teff varietals
• Rural markets that are distant and have deficit production have teff values that
cost roughly 50 cents more per quintile, but urban prices remain the highest for
white and black teff
• Rural deficit prices in connected markets are higher by up to 12 percent for white
and mixed teff.
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13. Results
Average Wheat Price by Location and Variety (birr/kg, 2006/07)
White Wheat Mixed Wheat
Location Distant Connected Distant Connected
Rural Surplus _ 3.04 _ 2.86
Rural Autarky 3.07 2.95 3.34 _
Rural Deficit 3.22 3.07 3.08 3.02
Large cities 3.22 3.00
Addis Ababa _ 3.23 _ 3.06
• Unlike teff, urban prices for white and mixed wheat are not substantially higher
than rural prices
• In distant, deficit areas, white wheat is 15 cents per kilogram higher than in deficit
connected producing areas
• Mixed teff in rural deficit areas is more expensive than in Addis Ababa
• We hypothesize that Ethiopia imports a larger percentage of wheat in comparison
to other grains, and imports of wheat in urban markets may be depressing prices
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14. Results
Population (thousands) in Surplus or Deficit • More than 33 million people
Producing Areas and Connected or Distant live in areas that experience
Regions surplus grain production and
are within 5 hours of a city of
50,000 people
4,278 9,202 1,855 • Almost 22 million people
Deficit Distant
live in deficit producing areas,
Surplus Distant
but are able to access a large
33,119 21,772
Deficit Connected
city within 5 hours travel time
Surplus Connected • Over 9 million people live in
Autarky Connected distant, deficit producing
areas and half are from
SNNP region (4.6 million)
•Almost 2 million people have
surplus production, but
limited access to a large
market
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15. Results
Woredas that are deficit , remote and
High price, Distant Markets outside of the experience high market prices
Productive Safety Net Areas Teff:
• Selamago (SNNP)
• Asayita (Afar)
• Dubti (Afar)
• Moyale (Somali)
Wheat:
• Bambasi (Benshangul-Gumuz)
• Shambo (Oromia)
• Asayita (Afar)
• Dubti (Afar)
• Dahana (Amhara)
Maize:
• Dahana (Amhara)
Sorghum:
• Dubti (Afar)
• Moyale (Somali)
• Dahana (Amhara)
• Basketo (SNNP)
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16. Possible policy interventions for further exploration
In the short term:
• Currently 7.5 million people receive from
PSNP program
• Remote, deficit areas facing high grain
prices could benefit from PSNP assistance
in-kind
In the long term:
• The Road Sector Development Plan
initiated in 1997, built and/or improved
roughly 15,000km. of trunk and regional
roads.
• A future RSDP could assess road
investments in order to increase
connectivity along specified transportation
networks between deficit producing areas
and surplus grain markets.
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17. Conclusions
• Analyzing grain prices across geographic space in Ethiopia at an
aggregate level illustrates that most markets are well-connected (in terms
of transport networks) and transaction costs (as reflected in the gross
margins) between rural and urban areas are generally reflected in the
higher prices reported in cities.
• When comparing distant, deficit areas with PSNP receiving woredas,
several woredas emerged that may benefit from PSNP assistance in-kind .
• In the long run, further improvements to transportation infrastructure
between deficit and surplus areas would improve access to key goods and
services, as well as decrease transaction costs between markets.
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