3rd Africa Rice Congress Theme 4: Rice policy for food security through smallholder and agribusiness development Mini symposium 2: Policy and price transmission mechanisms affecting rice sector development in Africa Author: Fiamohe et al.

1. Transmission of rice prices from
Thailand into West African markets
The case of Benin, Mali and Senegal
Ibrahima Bamba1, Rose E. Fiamohe2*, Didier Y. Alia3, Aliou Diagne2
and Eyram Amovin-Assagba 2
1
International Fund for Agricultural Development (IFAD), Via Paolo di Dono, 44, 00142 Rome, Italy.
Rice Center (AfricaRice), 01 BP 2031 Cotonou, Benin.
3 University of Kentucky, Department of Agricultural Economics, 400 Charles E. Barnhart
Building, Lexington, KY 40546-0276, USA
2 Africa

2. Background
Millions
● Share of imported rice in total consumption in West Africa
20
18
Production (tonnes)
Consumption (tonnes)
consumption
Growth rate 2000-2007: 4%
Growth rate 2007-2011: 7%
16
14
Imports (36%)
Growth rate 2000-2007: 6%
Growth rate 2007-2011: 3%
12
10
8
6
Production (64%)
Growth rate 2000-2007: 4%
Growth rate 2007-2011: 10%
4
2
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011

3. Background
● Rice imports of Benin, Mali and Senegal from International Market
Senegal
Mali
Benin
2000
1800
1600
1400
1200
1000
800
600
400
200
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011

4. Background
● Detailed rice trade flows for Benin, Mali
and Senegal
 Sources of rice imports of the selected countries in
2008 :
 Benin : Thailand (>25%) , Brazil, China, France, …
 Mali : Thailand (>25%), China, India, Pakistan…
 Senegal : Thailand
(>25%), Myanmar, India, Vietnam, …
Benin
Mali
Thailand
Senegal

5. Background
● Rational
 Before and after 2008 food crisis, many results from literature provided
evidence that international rice price changes were transmitted more
frequently, stronger and faster to domestic markets in West African countries,
 The reverse is not true because the region is price taker especially for rice.
 Responses of domestic market prices in importing countries to changes in the
prices in exporting countries are suspected to be of asymmetric nature:
 High level of government in both developing and high-income countries interventions
in rice markets regulating to stabilize domestic supply and prices due to the inherent
instability of the international rice market,
 And the structure of both the international (thin and concentrated) and domestic (not
homogeneous, and few number of large firms dominate import and wholesale
functions) rice markets,

6. Objectives
● To shed further lights on the functioning of West African and world rice
markets by empirically examining whether there is asymmetric adjustment
in the transmission of price (PT) shocks between each pair of markets
over the period of 2000-2011,
 Estimation of:
 Linear and threshold short and long run relationship between
Thailand and 3 West African countries rice markets,
 The value of threshold (transaction costs) that resulted from
exchanges between selected pairs of markets.

7. Methodology
● Estimation framework
 The threshold cointegration approach capturing the transaction costs introduced by
Hansen and Seo (2002) was used to investigate the dynamic linkages between the
selected pairs of rice markets.
 Step of estimation
(1) Testing for the presence of unit root in each price variable in order to examine
the properties of the different time series: ADF and PP tests,
(2) Testing of the existence of linear cointegrating relationship between Thailand price
and domestic price : Engle-Granger (1987) and Johansen and Juselius (1990) methods,
If evidence of linear cointegration is found
(3) Testing of the threshold effects and estimating of the cointegrating vector and the
value of the cointegration threshold (Transaction costs).
(4) Estimation of the parameters of short and long run dynamic adjustments of
domestic to world market prices for all cointegrated markets (linear and threshold)

9. Key results
● Linear long run dynamics adjustment of price response
markets pairings
Benin-Thai100
Lag=3
Benin-Thai25
Lag=2
Benin Thai A1super
Lag=3
Mali-Thai100
Lag=2
Mali-Thai25
Lag=2
Mali-A1super
Lag=3
Senegal-Thai100
Lag=3
Senegal-Thai25
Lag=2
Senegal-A1super
Lag=4
Engle-Granger test
Test Stat
Critical value
-3.396**
0.000
-3.243**
0.001
-3.031**
0.002
-3.561**
0.000
-3.179**
0.001
-2.608**
0.009
-4.061**
0.000
-4.041**
0.000
-3.831**
0.000
The notations*and** correspond to10%and 5% significance levels.
Ho
r= 0
r= 1
r= 0
r= 1
r= 0
r= 1
r= 0
r= 1
r= 0
r= 1
r= 0
r= 1
r= 0
r= 1
r= 0
r= 1
r= 0
r= 1
Johansen test
Trace stat
Critical Value
24.837
25.872
6.222
12.517
25.498
25.872
6.101
12.518
26.286*
25.872
5.539
12.518
21.543*
15.495
1.215
3.841
12.983
15.495
0.309
3.841
13.993
15.495
1.457
3.841
21.000*
15.495
0.664
3.841
23.715*
15.495
0.435
3.841
32.499*
15.495
0.836
3.841

10. Key results
3.1. Test of linear versus threshold cointegration of Hansen and Seo (2002)
Price (bivariate)
Benin
Mali
Senegal
Senegal
Senegal
ThaiA1 Super
Thai 100
Thai 100
Thai 25
Thai A1 Super
Type of
Test de Hansen and Seo (2002)
cointegration
β estimate
β=1
T. stat P-Value
T. stat P-Value
24.034 0.048** 23.669
0.058*
Threshold
23.436 0.051* 28.851 0.003***
Threshold
18.767
0.448 31.611 0.005***
Linear
Linear
15.212
0.296 17.469
0.161
Linear
14.806
0.333 13.206
0.532
The notations*, ** and***correspond to10%, 5% and 1%significance levels.
3.2. Estimated cointegrating vectors and thresholds (transaction costs)
Domestic market
Benin
Mali
Senegal
Senegal
Senegal
Thailand market
Thai A1 Super
Thai 100
Thai 100
Thai 25
Thai A1 Super
Estimated
Cointegrating Vector
1. 224
1. 123
0.794
0.808
0.823
Estimated
Threshold
-0.178
-0.096
No threshold
No threshold
No threshold

11. Key results
● Short run dynamics of price response
Market Pairings
Linear price responses for
Senegal to change in
Thailand prices
wt−1
Senegal-Thai 25
Senegal-Thai 100
Senegal-Thai A1 Super
Asymmetric price responses for
Benin and Mali to change in
Thailand prices
wt−1<= - wt−1> - wt−1<= - wt−1>0.178
0.178 0.096 0.096
-0.144***
(0.036)
-0.129***
(0.035)
-0.157***
(0.036)
Benin - Thai A1
-0.030 -0.026
(0.637) (0.152)
Mali -Thai 100
Nob. of observation
144
8.5%
0.064 0.015
(0.409) (0.771)
91.5% 20.6% 79.4%

12. Conclusions and implications
● Conclusions
 Changes in prices in Thailand select rice grade markets are differently transmitted to
the West African countries,
 Linear co-movements between the prices of the three grades Thai rice and
domestic price in Senegal,
 Asymmetry co-movement between prices of Thai A1 Super and domestic
prices in Benin and that of Thai 100 and domestic prices in Mali,
 Presence of high transaction costs.
● Implications
 Benin and Mali
 Price increases in Thai A1 Super and Thai 100 markets are quickly transmitted
to domestic price than price decrease respectively,
 Short run dynamic inefficiencies due to the presence of high transaction costs.
 Senegal
 Price adjustment is linear,
 More deep integration to selected Thailand rice markets.

13. Merci!
Thank you!
Center of Excellence for Rice Research