The Future of Smallholder Farming in Eastern Africa - Uganda ...

The average wholesale price of all teff types showed a sharp increase toward the end of April,
mainly because of government intervention in the grain market. Wholesale prices of teff
stablized afterward but at higher level. Table 5.2 reveals that the opening prices of Adda,
Wollenkomi, and Gojjam/Bechena are less volatile than the closing prices. A higher degree of
instability has been observed between the opening and closing period of the market (i.e.,
around 7:30 a.m.): a higher standard deviation, indicating significant variability. An
interesting feature of teff prices is that instability index tends to decline during the closing
period of the market. Prices also tend to be less stable or become more variable at closing
time.
Table 5.2: Instability index of daily wholesale prices of teff, March–July
2002
Adda Wollenkomi Gojjam/Bechena
Description 6:00 7:30 8:30 6:00 7:30 8:30 6:00 7:30 8:30
Mean price 221.13 221.41 219.53 176.16 180.16 174.3 156.43 156.52 154.93
SD 10.59 11.29 12.68 17.15 20.3 17.38 19 20.41 19.35
Instability 4.56 4.84 5.49 7.24 10.16 7.41 5.58 7.91 6.40
index
Source: Own computation.
The average opening prices of wheat grades 1, 2, and 3 were birr 121.6, 117.2, and 111.3,
respectively, during the period under consideration. The corresponding closing prices were
121.3, 116.7, and 110.8 (Table 5.3). It has been observed that, except on a few market days,
the closing wholesale prices of all wheat types were consistently lower than the opening or
midway prices. This is similar to teff, and it can be attributed to the fact that as 9:00 a.m.
approaches brokers make every effort to sell their wheat and offer lower prices. Failure to sell
on any given day implies additional parking costs, and transporters lose the opportunity of
moving to other businesses. In addition to the storage costs, regional traders will not get their
money (sales revenue) if the grain is not sold within the three market days.
Similar to teff types, the opening prices of all wheat types were less volatile than the closing
price. Relatively higher instability has been observed for all wheat types during the middle
hour of the market day. The instability index tends to increase during the closing period of
the market, compared with the opening price.
It should also be noted that there seems to be some relationship between the degree of price
instability and the quality of wheat. Table 5.3 shows that the higher the quality, the lower the
instability index. For instance, of the three wheat grades, wheat grade 1 has the lowest price
instability index. The pattern is the same for teff, with the lowest instability index reported in
the case of Adda teff. It pays farmers to produce the highest possible quality of grain to get a
more predictable price.