AAMP Training Materials

1. AAMP Training Materials T.S. Jayne (MSU) jayne@msu.edu Module 4.3: Marketing Margins & Marketing Costs

2. Objectives • Understand relationships between food prices between countries • Examine the relationships between food prices at different marketing levels

3. Maize price vs. import parity, Lilongwe, Malawi

4. Maize prices vs. import parity, Blantyre Malawi

5. Maize prices vs. import parity, Nairobi, Kenya

6. Wholesale maize grain and maize meal prices, Zambia

7. Motivation • Why bother studying the relationship between food prices in one market and another? • Why bother studying the relationship between food prices at one level (e.g., farm-gate) and food prices at another level (e.g., retail)?

8. Definitons • Spatial marketing margins • Spatial marketing costs • Vertical marketing margins • Vertical marketing costs

9. Luchenza retail price and farmer-reported prices received in remote villages in Mulanje District, 2009/10 marketing year

10. Wholesale maize grain and breakfast meal prices, Zambia (nominal prices)

11. Wholesale maize grain and breakfast meal prices, Zambia (real prices)

12. Determinants of marketing margins • Spatial margins: • 1 • 2 • 3 • Vertical margins • 1 • 2 • 3

13. Why might margins ≠ costs • Spatial margins: • 1 • 2 • 3 • Vertical margins • 1 • 2 • 3

14. What does it mean if: • Spatial margins < transfer costs • 1 • 2 • 3 • Spatial margins > transfer costs • 1 • 2 • 3

15. Maize prices vs. import parity, Nairobi Kenya

16. December 2008, Kenya

17. February 2009, Kenya – tariff removed

18. April 2009, Kenya

19. August 2009, Kenya

20. Exercises • Examine maize prices at • SAFEX • Blantyre, Malawi • & Transfer costs between them • Compute the spatial price spread • Compute import parity prices at Blantyre • On the basis of spatial margins vs. transfer costs, predict the months in which you would expect to see imports occurring • Compare this with actual trade flows • Explain the reasons for what you see