Spatial Market Integration and Price transmission of Selected Sorghum market in Ethiopia

Ethiopian government has adopted various strategies in enhancing agricultural production and productivity.

However, it has given a less attention for the marketing aspects. Hence, in order to improve marketing

efficiency, it is important to conduct useful studies on market integration. Thus, this paper aimed at analyzing

the degree of market integration, its price transmission and price causality patterns of selected sorghum

market with the help of Johansen co-integration test, Vector error correction model and Granger causality test

by using a 11 years' average monthly prices of sorghum over the period 2010 to 2020. The result of Johansen

co-integration test clearly revealed that the null hypothesis of no co-integration is rejected by both λmax and

the λtrace statistics at 1% and 5% level of significance with a minimum of at least 4 co-integrated sorghum

markets. The result of vector error correction model also revealed that out of six selected markets of sorghum,

only two sorghum retail markets of Adama and Diredawa have statistically significant speed of price

adjustment at 1% and 5% respectively. Although the remaining four markets have an expected negative sign

of speed of price adjustment, they are not statistically significant. Hence, the speed of price adjustment for

Adama and Diredawa sorghum market were faster than the other four sorghum market of Addis Abeba,

Bedesse, Abomsa and Jigjiga. The result of Granger causality test also indicated that there was bidirectional

causality between sorghum price of Addis Abeba and Jigjiga, Adama and Abomsa, and Bedesse and Diredawa

sorghum prices while there were unidirectional relationships between sorghum price of Addis Abeba and

Adama, Diredawa with Addis Abeba and Adama, Jigjiga with Adama and Abomsa. The result also further

indicated that there was independent causation between Addis Abeba and Bedesse, Addis Abeba and Abomsa,

Bedesse and Abomsa, Bedesse and Jigjiga, Abomsa and Diredawa, Jigjiga and Diredawa market pairs. Hence,

government and other concerned bodies should work on asymmetric information to address slow price

adjustment between various sorghum markets.