Genesis of millet prices in Senegal: the role of production, markets and their failures

Submission to D4D Challenge (December 2014).

ABSTRACT

Staple prices are the main indicator of food access and a key determinant of the revenues of those living in agricultural zones. Differentials in prices between producing (low prices) and consuming (high prices) areas harm both groups and indicate the presence of market failures. In this study we model the millet prices formation process in Senegal in a spatially explicit model that accounts for both high transportation costs and information asymmetries. The model integrates a unique and diversified set of data in a framework that is coherent with the economic theory. The high ability of the model in reproducing the price differentials between 41 markets (R² > 80%) opens a new avenue for the research on market integration which (i) integrates production data derived from remote sensing, (ii) simulates

the demand and supply at the local level and (iii) the arbitrage process between imperfectly integrated markets.