Impact of trade controls on price transmission between southern African maize markets

Tracy Davids, Ferdi Meyer and Patrick Westhoff

Agrekon, 2017, vol. 56, issue 3, 223-232

Abstract: Maize is an important staple crop in southern Africa that has often been prioritised from a policy perspective, particularly in the imposition of export controls under periods of perceived uncertainty. This tendency has been particularly relevant in Zambia, which has also emerged as an important surplus producer in southern Africa in recent years. Its favourable transport differential and non-GM maize has helped Zambia grow its share in Zimbabwean maize imports at the expense of South Africa, but exports into Zimbabwe remains competitive between the two countries and particularly during periods of export control in Zambia, South Africa typically steps in to supply the deficit. This study therefore evaluates the extent of price transmission between Zambia, South Africa and Zimbabwe under two exogenous regimes defined by periods of open trade and trade controls imposed by the Zambian government. It uses secondary data of monthly white maize prices in these three markets to quantify the long and short run price relationships under different regimes. While several authors have noted that trade is not a prerequisite for price transmission between markets, this study finds evidence that the imposition of policies that inhibit trade also influences the rate and nature of price transmission between markets. Periods of open trade were characterised by efficient transmission of prices from Zambia to Zimbabwe, which is in line with typical trade patterns, but during periods of trade controls, no relationship was found between Zambian and Zimbabwean markets, with prices being transmitted from South Africa to Zimbabwe instead.

Date: 2017
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DOI: 10.1080/03031853.2017.1344133

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