This article examines the impact of marketing cooperatives on smallholder commercialization of cereals using detailed household data in rural Ethiopia. We use the strong government role in promoting the establishment of cooperatives to justify the use of: propensity score matching to compare households that are cooperative members to similar households in comparable areas without cooperatives. The analysis reveals that although cooperatives obtain higher prices for their members, they are not associated with it significant increase in the overall share of cereal production sold commercially by their members. However, these average results hide considerable heterogeneity across households. In particular, we find that smaller farmers tend to reduce their marketed Output as a result of higher prices, whereas the opposite is true for larger farmers.

Based on original trader surveys, this paper examines how agricultural traders operate in Benin and Malawi. Results indicate that the largest transaction costs are search and transport. The use of modern technology is limited. Search methods rely principally on personal visits by the trader, and quality control requires the presence of the trader at the time of purchase. This increases costs, as the trader has to travel a lot, and makes it difficult for trading enterprises to grow. Since enterprises remain very small, personal transport and search time represent a non-negligible share of marketing costs.

Based on original trader surveys, this paper examines how agricultural traders operate in Benin and Malawi. Results indicate that the largest transactions costs are search and transport. The use modern technology is limited. Search methods rely principally on personal visits by the trader. Quality control requires the presence of the trader at the time of purchase. This raises costs as the trader has to travel a lot, and makes it di¢ cult for trading enterprises to grow. Since enterprises remain very small, personal transport and search time represents a non-negligible share of marketing costs.

Using detailed trader surveys in Benin, Madagascar, and Malawi, this paper investigates the presence of increasing returns in agricultural trade. After analyzing margins, costs, and value added, we find little evidence of returns to scale. Motorized transport is found more cost effective for large loads on longer distances. But transporters appear to pool quantities from multiple traders. Margin rates show little relationship with transaction size. Personal travel costs are a source of increasing returns, but the effect is small. Consequently, total marketing costs are nearly proportional to transaction size. Working and network capital are key determinants of value added. Constant returns to scale in all accumulable factors–working capital, labor, and network capital–cannot be rejected. This implies that policies to restrict entry into agricultural trade are neither necessary nor useful. Governments should focus instead on technological and institutional innovations to upgrade agricultural markets.

Using primary data from a survey of expert opinion, this paper identifies key successes emerging in African agriculture. Among these, major commodity-specific successes identified include breakthroughs in maize breeding across Africa, sustained gains in cassava breeding and successful combat of its disease and pests, control of the rinderpest livestock disease, booming horticultural and flower exports in East and Southern Africa and increased cotton production and exports in West Africa. Using a dynamic analytical framework, the paper attempts to identify key ingredients that appear necessary for building on these individual cases and expanding them into broad-based agricultural growth.

The importance of technological advance to economic growth has become accepted fact. Yet the answers to questions of who adopts new technologies, how quickly, and at what cost to society remain elusive. While these issues are not unique throughout history, the advent of biological and chemical technologies that are both divisible and scale-neutral and the experiences referred to as the Green Revolution in the latter-half of the twentieth century throughout much of Asia have fostered a lively and long debate on the growth and particularly the distributional consequences of technological change in the agriculture of developing countries.

MTID Discussion Papers contain preliminary material and research results, and are circulated prior to a full peer review in order to stimulate discussion and critical comment. It is expected that most Discussion Papers will eventually be published in some other form, and that their content may also be revised. This paper is available at http://www.cgiar.org/ifpri/divs/mtid/dp.htm * Effective April 1, 2003, Markets and Structural Studies Division (MSSD) was renamed as the Markets, Trade and Institutions Division (MTID). INCREASING RETURNS AND MARKET EFFICIENCY IN AGRICULTURAL TRADE

the context of on-going market reform in developing countries, there is a need for an improvement in the existing methods of spatial market efficiency analysis in order to better inform the debate toward designing and implementing new grain marketing policies, institutions, and infrastructure that facilitate the emergence of a well developed and competitive grain marketing system. The standard parity bounds model (PBM), while it overcomes many weaknesses of the conventional methods of spatial market efficiency analysis, it does not allow for the test of structural changes in spatial market efficiency as a result of policy changes. In this paper, building on the standard PBM, we develop an extended parity bounds model (EPBM). The EPBM is a stochastic gradual switching model with three trade regimes. The EPBM is estimated by maximum likelihood procedure and allows for tracing the time path and structural change in spatial market efficiency conditions due to the policy changes. We applied the EPBM to analyze the effect of grain marketing policy changes on spatial efficiency of maize and wheat markets in Ethiopia. The results show that the effect of policy changes on spatial market efficiency is not significant statistically in many cases; there is high probability of spatial inefficiency in maize and wheat markets before and after the policy changes. The implication of these results is that maize and wheat markets are characterized by periodic gluts and shortages, which can undermine the welfare of producers, grain traders and consumers. It is also observed that the nature of spatial inefficiency for maize and wheat markets is different implying that the two commodities might require different policy responses in order to improve spatial market efficiency. Maize traders made losses most of the time while wheat traders made excess profits most of the time covered by the study. Authors' Abstract

This paper addresses the conceptual issues around the negative price effects of technological change on agricultural producers, explores price policy options vis-a-vis this problem, and reviews and compares experiences across Asian countries as they transformed their rural economies. It then draws implications for the challenge of achieving a smallholder-led agricultural revolution in Africa in the context of market liberalization.

This article reviews the extensive evidence on agricultural market reforms in Sub-Saharan Africa and summarises the impact reforms have had on market performance, agricultural production, use of modern inputs, and poverty. It offers eight recommendations for completing the reform process and developing a new agenda for agricultural markets in Sub-Saharan Africa. The reform experience in Sub-Saharan Africa has varied widely across countries and crop subsectors. The available evidence shows clear progress in some areas and mixed results in others. Most reforms were only partially implemented and policy reversal was common. Once implemented, however, reforms have increased competition and reduced marketing margins, benefiting both producers and consumers. Reforms have also boosted export crop production. On the other hand, food crop production has stagnated and yields have not improved. Further expansion of private trade is constrained by lack of access to credit, uncertainty about the government’s commitment to reform, and high transaction costs.

Drawing on original surveys of agricultural traders, the authors examine how traders operate in two Sub-Saharan African countries, Benin and Malawi. They find the following: The largest transaction costs for traders are search and transport. Search methods rely principally on personal visits by the trader, which raises search costs. And since enterprises are very small, transport represents a large share of marketing costs. Brand recognition, grading, and quality certification are nonexistent. Brokers and agents are not organized in commodity exchanges. Quantities are not pooled for transport and storage so as to achieve returns to scale. Interseasonal and interregional arbitrage is not feasible for most traders, who prefer to operate day to day in a small territory. This information provides some important insights into how agricultural trade could be improved. It suggests possible policy interventions in four main areas: increasing traders' asset base, reducing transaction risk, promoting more sophisticated business practices, and reducing physical marketing costs.

In most countries in sub-Saharan Africa at present, the majority of the population is engaged in agriculture, with economies in the very early stages of structural transformation the process whereby a predominantly agrarian economy is transformed into a diversified and productive economy dominated by manufacturing and services. These countries are characterized by low levels of farm productivity, limited growth of non-farm employment and high rates of population growth. This paper focuses on the factors involved in fostering a country’s structural transformation. This process of transformation has many dimensions. Among these we emphasize interactions between four factors: increased agricultural productivity, rural industrialization, the expansion of agricultural markets, and the demographic transition. All of these are critical to reducing agriculture’s share in the total labor force and promoting broad-based economic growth. In this paper, we assess the relevance of the East Asian experience, primarily that of Taiwan, for the task of determining priorities for agricultural and rural development in the countries of sub-Saharan Africa, in spite of their very different historical and cultural antecedents and physical environments. Important lessons emerging from the East Asian experience are that the transformation of the structure of a predominantly agrarian, semi-subsistence economy cannot be achieved without substantial increases in agricultural

"This paper examines the impact of cooperatives on smallholder commercialization of cereals, using detailed household data from rural Ethiopia. We review the involvement of cooperatives, in terms of who participates and where they are located. We then use the strong government role in promoting the establishment of cooperatives to assume that the decision of where to establish a cooperative is largely driven by external considerations, and is thus exogenous to the members themselves justifying the use of propensity-score matching in order to compare households that are cooperative members to similar households in comparable areas without cooperatives. Four conclusions are derived from the analysis. First, despite the spread of cooperatives – they existed in less than 15 percent of districts in 1994 and nearly 35 percent in 2005 – there are important disparities across regions. Within regions, cooperatives tend to be located in areas that already have better access to markets and lower exposure to price and environmental risks. Second, at the household level participation is only 9 percent, with poorer households less likely to participate. Third, while cooperatives obtain higher prices for their members, they are not associated with a significant increase in the overall share of cereal production sold by their members. Fourth, these average results hide considerable heterogeneity in the impact across households. In particular, we find smaller farmers tend to reduce their marketable surplus as a result of higher prices, while the opposite is true for larger farmers." from Authors' Abstract