Can the Benefits of Developed Country Agricultural Trade Reforms Trickle Down to the Rural Agricultural Households in Least Developed Countries: Analysis Via Price Transmission in Selected Agricultural Markets in Uganda

Abstract

This paper investigates the extent of price transmission from international to domestic markets for selected agricultural products in Uganda, so as to assess the likely impact of increased market access on agricultural household poverty in rural Uganda. The study applies a variety of econometric techniques to assess the various components of market integration using monthly data over the period 2000 through 2004. The results indicate that there is price transmission from world market prices to border prices in the case of cotton, tea and tobacco. However, there is insufficient evidence of price transmission from border prices to producer prices. We also found evidence to support the null of no price transmission from border to producer prices for the non-traditional exports of beans, maize and banana, which are mostly exported to the regional market. We recommend that Government should strengthen the information network on agricultural marketing and distribution so as to reduce exploitation of smallholder farmers by well-informed middlemen. Government should also strive to increase investment in the agricultural sector so as to improve marketing and transport infrastructure.

Keywords: Agricultural trade, price transmission, developing countries

JEL Classification: Q13, Q17