Authors : Nkang M. Nkang , Henry M. Ndifon and Gabriel N. Odok
Abstract: Full price transmission and spatial market integration are hallmarks of market efficiency that enable a market system to perform its development functions; the gains of which can be enjoyed by producers, middlemen and consumers in the marketing chain. The integration of cocoa and palm oil markets in Cross River State is necessary if producers who are mostly dwellers in the rural areas where cocoa and oil palm plantations are sited are to benefit from being part of the marketing system. This study was concerned with testing for long-run market integration as well as determining the degree and speed of price transmission in cocoa and palm oil markets in the State using standard econometric techniques. Results show that cocoa markets with respect to Factors between Ikom and Akamkpa as well as Etung are fully integrated in the long-run, with price transmission elasticities of approximately 1.00 (indicating that the Law of One Price holds in the markets) as well as very high speed of price transmission from the central to the rural markets. However, the markets for cocoa Licensed Buying Agents (LBA) were not integrated. By the same token, palm oil markets between Ikom and Akamkpa are perfectly integrated, with price transmission elasticity of 1.05, with very high speed of price transmission. Overall, the study concludes that producers of cocoa and palm oil in the State benefit from spatial arbitrage as suggested by the perfect integration of the markets and the fulfilment of the Law of One Price. The implications here are that since these cocoa and oil palm estates are located mostly in the rural areas, incomes of the rural people can be greatly enhanced with expanded opportunities and incentives for them to intensify their production and/or go into the production and sale of cocoa and palm oil.
Nkang M. Nkang , Henry M. Ndifon and Gabriel N. Odok , 2007. Price Transmission and Integration of Cocoa and Palm Oil Markets in Cross River State, Nigeria: Implications for Rural Development . Agricultural Journal, 2: 457-463.