Stocks and Storage Behavior of Traders in Ghana: Insights from a Trader Survey

Abstract

Grain markets in many African countries exhibit large price variability which is driven by strong seasonality. Seasonal production and limited storage are identified as major causes of intra-annual price variation. This study is based on unique data that comes from a quantitative survey among Ghanaian wholesale traders with significant storage capacity. The survey was about their operations in spatial trade and intertemporal storage. Qualitative interviews were conducted with processing companies, market experts, and further relevant stakeholders. The findings provide empirical evidence on storage behavior of traders and reveal the existence of distinct stocking strategies apart from speculation. Wholesale traders are found to carry a significant share of stocks, in particular toward the end of the marketing year. Price analysis indicates the presence of large seasonal variation in maize, sorghum, and millet prices in Ghana. Price spikes occasionally occur as the consequence of stock-outs at the end of a marketing season. These stock-outs are induced by the risk of making a loss because of carrying stocks into the next year when prices usually drop. Overall, the findings can contribute to improving policy design with the aim to stabilize prices and to reduce market risk.