University of Khartoum

Evaluation of Sorghum Price Volatility and Market Cointegration in Sudan

Evaluation of Sorghum Price Volatility and Market Cointegration in Sudan

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Title: Evaluation of Sorghum Price Volatility and Market Cointegration in Sudan
Author: Suliman, Fatima Sharafaddin Mohamad
Abstract: The main objective of this study was to estimate the extent and the trend performance of price volatility of sorghum-fatarita in Gadarif, Khartoum and export markets. The study used secondary data obtained from formal sources including the Ministry of Agriculture, the Ministry of Finance in GadarifState, the Central Bureau of Statistics and the General Administration of Customs. The data collected covered the period January 2009-March 2015 for sorghum supplies and prices in Gadarif and Khartoum markets, and the period January 2004-August 2015 for sorghum exports quantities and prices. The study used descriptive analysis, regression analysis, stability of time series test and market cointegration tests in the short and long run. The descriptive analysis results showedexistence of highvolatility in fatarita quantities by 141.8% in Gadarif market and by 166.6% in the export market. When comparing the real and nominal price volatility of sorghum in Gadarif and Khartoum markets, the volatility in the real prices was lower than that of nominal prices. Whereas nominal price volatilities were 49% and 44% for Gadarif and Khartoum markets, respectively the real price volatility recorded were 20% and 21% for the two markets respectively. The export price volatility was about 37%. Those prices had high impact on the supply and demand quantities of fatarita in Gadarif market and on export quantities and prices of fatarita. The analysis stability results indicated existence of stability of fatarita prices at the first difference level. The cointegration test results indicated the existence of one direction of sorghum prices cointegrated between Gadarif and Khartoum markets in the long run. This was verified by Johanson test which gave values of 26.92 and 25.32 being higher than the critical values of 25.32 and 18.96 at 5% level. It also indicated the existence of bidirectional cointegration among the three markets of Khartoum, Gadarif, and Exports in the long run. This was verified by Johanson test which gave values of 63.12 and 42.44, being higher than the critical values of 33.27 and 25.54 at 5% level. In the short run, the cointegration test indicated the existence of a mutual effect between the two markets of Gadarif and Khartoum with a probability value of less than 0.05, and the absence of such mutual effects among the three markets all together. The study recommended the design of appropriate storage policies and systems to reduce the effects of price volatilities, and to enable the response to short-term production volatilities. The study also recommended the institution of clear policies for exports of sorghum in response to the world demand, particularly in the short run; and to carry out analytical studies on the expected impact of price trends and volatility on sorghum markets. Conducting a market value chain analysis study between the markets of Gadarif and Khartoum will help in identifying the structural and behavioral constraints that limit the regular flow of sorghum.
Description: 78 page
URI: http://khartoumspace.uofk.edu/123456789/25470


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