Evaluating cereal market (dis)integration in less developed and fragile markets: The case of Sudan

Abstract

This paper evaluates spatial market integration in cereal markets in Sudan, focusing on wheat and sorghum, two major cereal crops. Sudan’s context provides important insights on the functioning of markets in economies marred by sanctions, conflicts, soaring inflation, and macroeconomic imbalances. We use long-ranging monthly cereal price data and a vector of error-correction cointegration model (VECM) to characterize both short-term and long-term spatial price adjustment across cereal markets. Among the 15 wheat and 18 sorghum markets considered, we can only detect significant spatial market integration among 6 wheat and 11 sorghum markets. Despite some strong spatial market integration among a few neighboring markets, there is no spatial market integration between several markets, including between major wheat consumption and production hotspots. For example, cereal markets in Darfur are not integrated with cereal markets in the rest of the country, despite exhibiting some level of spatial integration within the Darfur region. Finally, we also observe relatively stronger spatial market integration in sorghum markets than in wheat markets. These findings have important policy implications for improving the efficiency of cereal markets in Sudan and other comparable settings.