Analysis of Integration of Sorghum Markets in Kenya

Abstract

This study evaluated the integration of sorghum markets in Kenya using a cointegration approach. Bimonthly wholesale prices for sorghum for five major markets; Kalundu Market (Kitui County), Soko Posta Market (Busia County), Homabay Town market (Homabay County), Kibuye Market (Kisumu County) and Gikomba Market (Nairobi County) for the period 2011 to 2017 were used. The findings of this study indicate that Kalundu and Sokoposta markets have the lowest mean prices. Sokoposta, Kibuye and Homabay markets have the highest variability scores implying that wholesale sorghum prices are unstable over time. The markets are integrated with the presence of four cointegrating vectors”. This implies that the markets share a long run equilibrium relationship. Granger causality test results reveal that Gikomba and Kalundu have a bidirectional relationship, Homabay, Sokoposta and Kibuye unidirectionally granger cause Gikomba market while Sokoposta unidirectionally granger causes other markets. The presence of independent and unidirectional relationships in most majority of the market pairs imply that there exists price shock transmission inefficiencies thus lowering the level of integration. The study makes certain key recommendations that will help improve sorghum market integration. Firstly, an improvement of transport infrastructure will help improve integration and reduce price volatility. This will in turn help increase access to sorghum markets. Additionally, the development and strengthening of market information systems within the analysed markets will improve price transmission thereby increasing market efficiency and enhancing market integration.