Abstract
Agricultural price behaviour in the long run depends on several factors ranging from the socio-economic, environmental and political environment among others. This study tested for the long run price adjustment mechanism between the producer price of raw cassava in the rural market and retailed price of its derivatives in urban market in the Southern region of Nigeria. The study was built from the Engle-Granger to Enders-Siklos methodologies to verify the symmetric and asymmetric price relationship between the source price (raw cassava) and its derivative prices (garri, fufu, chip, starch and flour) along the food chain. The result confirmed significant short and long run market integration between the source and its derivatives. However, the source price equilibrium in the long run followed asymmetric adjustment with respect to urban prices of fufu and cassava flour; whereas symmetric adjustment was obtained with respect to prices of garri, cassava chip and starch. It is suggested that, the cassava market/industry in the study area has problems that need intervention in order to remove price distortion or externality costs in the long run. Issues such as seasonality, many middlemen, high perishability and poor processing technologies among others were mentioned. Hence, these issues need to be addressed adequately in order to achieve high efficiency in the industry.
Highlights
Recent researches have focused on the relationship between prices of agricultural commodities either along or across food chains (Vavra and Goodwin, 2005; Akpan et al, 2014)
The findings have shown that the rural price of cassava followed symmetric and asymmetric adjustment in the long run with respect to its derivatives
This result portrays the significant influence of externality costs or arbitrage activities in the marketing system of cassava in the study area
Summary
Recent researches have focused on the relationship between prices of agricultural commodities either along or across food chains (Vavra and Goodwin, 2005; Akpan et al, 2014). Asymmetry price transmission refers to pricing phenomenon occurring when the downstream prices react in a different manner to upstream price changes It implies that, there is an unreciprocal relationship between rise and fall of commodity prices at various stages in the marketing chain. A finding on asymmetric price transmission may allow a researcher to make some inferences about the behaviour of agents in the market, as their actions impact on links across different market levels (Goodwin and Schroeder, 1991). Symmetric price adjustment has being noted to help optimize resource use; increase farm incomes; signal the degree of competitiveness, widen commodity markets and encourage value addition as well as create employment (Sexton et al, 1991; Acquah and Rebecca, 2012; Akpan et al, 2014)
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