The impact of production shocks on maize markets in Ethiopia: implications for regional trade and food security

Yami, Mesay; Meyer, Ferdi; Hassan, Rashid

doi:10.1186/s40100-020-0153-5

Agricultural and Food Economics

Table 3 Maize model specifications

From: The impact of production shocks on maize markets in Ethiopia: implications for regional trade and food security

Area harvested^a	H^m = δ₀ + δ₁P^m_t + δ₂S^p_t +δ₃R^L_t + δ₄T_t+ ε_t 1(a)
Area harvested^a	H^m = θ₀ + θ₁ΔP^m_t + θ₂ ∆ P^s_t+θ₃∆R^L_t − λ (Y_t − α₀ − α₁P^m_t − α₂P^s_t − α₃R^L_t − α₄T_t) + ν_t 1(b)
Yield	Y^m= R^p_t + IR^m_t + SDⁱ_t + \( {T}_t^L \)
Production	M^P = H^m ∗ Y^m
Beginning stocks	B^s= \( {E}_{t-1}^s \)
Supply	X^m= M^P + B^s + I^m
Ending stocks	E^s = B^s + M^P − P^w + A^f
Per capita consumption	C^m=S^w- P^w+G^d+S⁰⁵+S¹¹-T_t
Human consumption	HCons^m = C^m ∗ Pop
Domestic use	DUSE^M=FEED^m+SEED^m+HCons^m
Demand	D^m=EXPO^m+DUSE^M + E^s
Model closure	X^m = D^m (market clearing price)

Variable names
H^m = Planned maize acreage proxied by area harvested in thousand hectares
P^m_t= Deflated maize producer price (ETB/ton). It is obtained by dividing the nominal maize producer price by CPI indexed at the 2010 price
S^p_t= Real producer prices for competing crop (sorghum) (ETB/ton)
R^L_t= Rainfall amount (mm) prior to sowing period
T_t = a time trend variable used as a proxy for technological progress in maize farming
Y^m = Maize yield (ton/ha)
R^p = Rainfall amount for production season. It includes average rainfall (mm) for the months of June, July, August, and September
IR^m = Irrigated maize area (ratio)
SDⁱ = Maize planted with improved seed (ratio)
\( {T}_t^L \) = Linear trend to capture the overtime effects of maize technological improvement on yield
M^P= Maize production
B^s = Beginning stock
\( {E}_{t-1}^s \)= Lagged ending stock
X^m = Total maize supply
I^m = Maize import
P^w= Real wholesale maize price (ETB/ton)
A^f= Wheat food aid quantity (tons)
C^m= Per capita maize consumption
S^w=Real wholesale sorghum price (ETB/ton)
G^d=Real per capita GDP
S⁰⁵= a shift variable for the period of soaring food prices in the domestic grain market. It takes 1 for the period since 2005 and 0 otherwise
S¹¹=a shift variable for the export ban; 1 for the period since 2011 and 0 otherwise
Pop= Ethiopia population
HCons^m = Human maize consumption
DUSE^M = Total domestic use of maize
FEED^m = Feed use of maize
SEED^m = Seed use of maize
D^m = Total maize demand
EXPO^m= Maize export
^aThe equation for maize supply response was estimated following the two-stage procedure proposed by Alemu et al. (2003). First, a static long-run equilibrium regression is given by Eq. 1(a), was estimated. Second, a dynamic error correction model as specified in Eq. 1(b) was estimated by including the lagged residual from Eq. 1(a) (of course, the residual from Eq. 1(a) should be stationary). The planned maize acreage is proxied by area harvested. It has been common practice to proxy an acreage decision by area harvested because of the lack of data on area planted (Meyer and Kirsten 2010). Area harvested is preferred to output because farmers have more control on the former than on the latter. This is because agricultural output is subject to fluctuations, which are beyond the control of farmers.

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