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

One of the common features of the seasonal price indexes of the three crops is that the
closing price index is lower than the opening price index. This suggests that the closing price
is more stable than the opening price and that the opening price exhibits more variability with
time. Apparently, sellers adjust their selling prices downward before the market closes. The
intra-month price movements are much lower at the closing than the opening of the market.
The seasonal effect is higher for wheat and maize than for teff. The relative stability of the
seasonal indexes of teff might be due to the fact that it can be stored without fumigation for a
long period of time. Of the three crops, the seasonality effect of maize is highest, a fact that is
consistent with its high instability index.
The results of the integration test show that the wholesale and retail markets are integrated—
that is, there is a long-run and stable price relationship between the two markets for the
sample grain products. While the causality directions are from wholesale to retail for white
maize, the causality runs in both directions for mixed maize. It seems that the direction of
causality is stronger from wholesale to retail for mixed maize than the other way round (i.e.,
the retail price of mixed maize is highly influenced by the wholesale price). Thus, the
wholesale markets lead the retail markets for maize. A similar picture has been observed for
wheat: there is a two-way interaction or causation between the two series. Except for wheat
third, for which the relationship is unidirectional (from wholesale to retail, but not vice
versa), all wheat types have a Granger causality relationship in both directions. As in the case
of white maize, the relationship is stronger from wholesale to retail than vice versa. This
shows that Wholesale markets are somewhat efficient already and are more closely integrated
with retail markets.A different picture emerges for teff, however, which shows a weak
causality relationship virtually in all teff types. The only exception is Bechena teff, for which
the retail market leads the wholesale market. In terms of grain types, the relationship of
causality for wheat is stronger than both for maize and teff.
In general, the performance of the central market of Addis Ababa has been disappointing and
is characterized by high risk, limited access to credit, low trade margins, and consequently
low investment in marketing facilities and improved systems. As a result, consumers, traders,
and producers have not benefited from the trading activities. The market needs improvement
and modernization to ensure that it functions fairly and efficiently. A set of comprehensive
and complementary measures should be taken to modernize the central grain market of Addis
Ababa and consequently all other regional grain markets of the country.
First, brokers, regional traders, retailers, and large-scale wholesalers and processors appear to
operate with no legal protection and virtually no recourse to courts. They operate in a trading
environment where grades and standards are negotiated and informed buyers have stronger
bargaining power than sellers. Brokers are involved in wholesaling and retailing with no
regard to the conflict of interest that may arise in selling the grain of regional traders. There is
no market information to guide the activities of traders and producers. The market is
dominated by too many small and informal traders with very small financial resources and no
social capital. Gangsters acting as intermediaries have made it extremely difficult and risky to
trade at the central marketplace. Hence, the market has failed to grow and expand beyond
cash-based spot markets or a physical cash market. There is a need to establish, strengthen,
and develop important marketing institutions such as: