Droughts, Grain Markets and Food Crisis in Niger
47 Pages Posted: 2 Aug 2007 Last revised: 5 Jul 2013
Date Written: May 3, 2008
Famines are a common occurrence in the Sahelian region of Sub-Saharan Africa. In 2004, a drought occurred in Niger, resulting in a production shock, higher grain prices and a severe food crisis. Whereas a drought in 2000 resulted in lower per capita grain production relative to 2004, a food crisis did not occur. Similar to the Bangladeshi famine of 1974, the government and the media were quick to blame grain traders for the crisis, arguing that the removal of governmental regulations had led to a market failure during the crisis. Using a dataset that combines information on prices, transaction costs, rainfall, trade flows and food crisis status, we exploit rainfall variation to estimate the impact of drought on grain market performance in Niger during crisis and non-crisis years. Time series tests suggest that grain markets in Niger respond to supply shocks, and that markets are more integrated during drought years. Exploiting the exogenous nature of extreme rainfall in a difference-in-differences framework, we find that drought reduces grain price dispersion across markets. This impact is stronger as a higher percentage of markets are affected by drought, as was the case in 2004/2005. The results suggest that a market failure did not occur in 2005, contrary to media claims. Early warning systems in West Africa should focus on the spatial impact of drought and magnitude of production at the sub-regional level, as well as monitor prices in key forecasting markets. And finally, policies regarding the impact of local purchases and regional trade need to be carefully examined and discussed.
Keywords: Markets, equilibrium, food crisis
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