Are price changes in the world market transmitted to markets in less developed countries? A case study of sugar, cotton, wheat, and rice in Tanzania
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Date
2006
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Publisher
IIIS
Abstract
This paper investigates the extent to which world market price changes are
transmitted through changes in border prices into local producer prices for four
agricultural product markets in Tanzania: sugar, cotton, wheat and rice. The changes in
the marketing channels for each of these products resulting from market liberalization are
described. The statistical analysis finds that, in general, Tanzanian border and world
market prices for these products do not move closely together, although there is evidence
that border prices are influenced by world market price levels but not vice versa. The
absence of monthly price data at producer level for these products did not permit a
detailed examination of the relationship between farmgate prices and either border prices
or world market prices. However, the qualitative discussion suggests that the extent of
price transmission is likely to be imperfect. These results have implications for the
interpretation of simulation results modelling the potential impact of trade policy changes
on Tanzanian producers and consumers. They also underline the need for concerted
efforts by policy makers to reduce the extent of monopoly power in these marketing
chains and to improve the degree of price transmission.
Description
IIIS Discussion Paper No. 160
Keywords
Price changes, World market, Agricultural trade, Price transmission, Developing countries, Tanzania