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Enhancing Maize Market in Southern Africa: Spatial-Temporal Price Equilibrium Study

Investigating the impact of improving storage efficiency on maize markets in Southern Africa through a spatial-temporal price equilibrium model and welfare measures analysis.

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Enhancing Maize Market in Southern Africa: Spatial-Temporal Price Equilibrium Study

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  1. Maize Market in Southern Africa:Effects from Improving Storage Efficiency(A spatial-temporal price equilibrium approach) António Sousa Cruz Mozambique September 2006

  2. ProblemPrices rise before following harvest

  3. Objectives • To study the maize market in Malawi, Mozambique, South Africa, Tanzania, Zambia e Zimbabwe (SA6) • To analyze economic effects from improving storage efficiency, i.e., reducing real interest rates (Arndt, Schiller, e Tarp 2001) • Using a spatial-temporal price equilibrium model (Samuelson 1952; Takayama e Judge 1971) • To analyze effects from reducing storage costs, reducing transportation costs and liberalizing intra-SA6 trade

  4. Correlation Coefficients of Maize Outputamong SA6, 1987-2002

  5. Assumptions • Producer and consumers are price-takers, operating in competitive markets • Transactions costs: storage, transportation, tariffs • Each region is a separate market • Partial equilibrium • Producers and consumers are risk neutral • Perfect foresight for the entire year • Maize is a single and homogeneous product

  6. STPE Model: Objective Function

  7. Subject to restrictions:

  8. Simulations

  9. Results(Base Scenario) • South Africa-East reveals a pattern of trade of the Benirschka and Binkley (1995) type: • Storage efficient region • Intra-seasonal flatter prices • Sells maize later in the marketing season • Mozambique-Center, Mozambique-North, and Tanzania present a Timmer’s (1974) pattern of trade: • Low storage efficient regions • Intra-seasonal price hikes • Exporting maize immediately after harvest • Importing it back later in the “hungry season”

  10. Impact of Simulations on Welfare Measures,SA6 Regions (% changes)

  11. Conclusion: Maize Market • Current differences in storage costs (in particular, in real interest rates) is an important determinant of South Africa’s comparative advantage over other SA6 countries • When reducing real interest rates Mozambique-Center, South Africa-East and Tanzania increase their exports to other SA6 • Combining improvement in storage and transportation efficiency, and trade liberalization provides the best welfare results among all scenarios

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