Nature of Price Adjustment and Market Integration among Stages in Cassava Value Addition Chain in Southern Nigeria

Abstract

Agricultural price behaviour in the long run depends on several factors ranging from the socio-economic, environmental and political environment among others. This study tested for the long run price adjustment mechanism between the producer price of raw cassava in the rural market and retailed price of its derivatives in urban market in the Southern region of Nigeria. The study was built from the Engle-Granger to Enders-Siklos methodologies to verify the symmetric and asymmetric price relationship between the source price (raw cassava) and its derivative prices (garri, fufu, chip, starch and flour) along the food chain. The result confirmed significant short and long run market integration between the source and its derivatives. However, the source price equilibrium in the long run followed asymmetric adjustment with respect to urban prices of fufu and cassava flour; whereas symmetric adjustment was obtained with respect to prices of garri, cassava chip and starch. It is suggested that, the cassava market/industry in the study area has problems that need intervention in order to remove price distortion or externality costs in the long run. Issues such as seasonality, many middlemen, high perishability and poor processing technologies among others were mentioned. Hence, these issues need to be addressed adequately in order to achieve high efficiency in the industry.