Food Aid, Food Prices, and Producer Disincentives in Ethiopia

Although the short-term aims of food aid are well conceived, strong concerns have been voiced regarding the long-term impacts of such aid on incentives for agricultural producers in recipient countries. This article examines the statistical link between food aid shipments and food prices in Ethiopia over the period 1996–2006. Monthly data from three markets and three commodities are used to estimate a system of seemingly unrelated regression models for food prices. Results indicate that previous year food aid shipments reduce prices in all producer and consumer markets. These effects, however, appear to be limited to the set of internationally traded commodities that are domestically marketed. A recursive regression procedure is used to identify the food aid threshold at which a negative aid effect emerges. Food aid shipments that constitute less than 10% of domestic production appear to be benign, but shipments above this level show signs of being disruptive to local markets. We use a simple policy simulation to argue that production-sensitive targeting, e.g., conditioning food aid on local food production, would help to circumvent disincentive effects.     

The Boundary of Smallholder Producers’ Cooperatives: A Conceptual and Empirical Analysis

In this study we explain the concepts, determinants and imperatives of boundary in smallholder producers’ cooperatives both conceptually and empirically. The conceptual framework indicates the importance of the type of goods (being a club good or not) and range of activities that a cooperative provides to its members in defining a competitive boundary. Using unique organisational and market level data from Ethiopia, we then test empirically whether the observed (weak) performance of producers’ cooperatives in Africa is explained by their organisational boundary – the type and range of goods or services they provide to members. The empirical results confirm that the competitiveness of producers’ cooperatives is significantly correlated with the type and number of services – i.e. cooperatives that provide club goods and a limited range of services are found to be more competitive. The results also suggest that a considerable number of cooperatives in Ethiopia engage in markets where they do not have competitive advantage. Overall, we demonstrate the importance of properly defining a viable boundary – proper selection of services (or markets) and limiting the range of services – for improving the competitiveness of membership‐based producer cooperatives in Africa.     

The behavior of commodity prices in Ethiopia

In an attempt to identify price stabilization strategies and rationalize public intervention in buffering markets, this article investigates the intertemporal dynamics of commodity prices in Ethiopia. A classical rational expectation model is modified to account for seasonal correlation of shocks. Model predictions are reduced to computable periodic threshold autoregression. Several nonlinearity tests are applied to detect threshold effects. A regime‐switching normalized maximum likelihood method is formulated to estimate thresholds and threshold autoregression parameters using monthly data from Ethiopia for the period 1996–2006. The result indicates the presence of periodic price thresholds that could be formed as a result of speculative storage. Comparison of price movements below and above thresholds indicates that prices are more correlated below the thresholds than above them. However, the effect on error variance is not very strong. Temporal arbitrage, which is the gross return from speculative storage, appears to be modest. The long‐ and short‐term implications of the findings are discussed within the context of ongoing policy debates.     

African farmers’ market organizations and global value chains: competitiveness versus inclusiveness

Abstract

This conceptual paper discusses the challenges smallholder producer cooperatives in developing countries face while trying to access agricultural global value chains. We assess the problem of competitiveness related to lack of commitment and improper selection. Prioritization of open membership over selection is generally taken for granted in the policy debate on farmers’ market organizations (FMOs). We argue that open membership may work in community-driven organizations, however, it becomes a major threat for entrepreneurial FMOs. Inclusion facilitates free riding, which forms a barrier for investments of members. This is one of the major reasons why so many of these organizations are so much resource constrained, i.e. are not able to compete in the market without external support. FMOs should take targeting and selection serious if entrepreneurial activities are intended. Otherwise, they miss the opportunity to create a committed member base willing to invest in a potentially competitive organization.