International Journal of Research and Innovation in Social Science (IJRISS) |Volume VI, Issue IX, September 2022|ISSN 2454-6186
Market Efficiency in Agricultural commodities: Vector error correction model (VECM) Approach
Mahmoud Ali AMASSAIB1, Mohammed Salih Adam ABDALLA2, Tarig GIBREEL3*
1Department of Agricultural Economics and Agribusiness, Faculty of Natural Resource and Environmental Studies, University of Kordofan, Elobeid, Sudan, Oman
2Department of Projects, Institute of Research and Consultancy, King Faisal University, Saudi Arabia, Oman
3Department of Natural Resources Economics, College of Agricultural and Marine Sciences, Sultan Qaboos University, Oman
*Corresponding Author
Abstract: The study was conducted in Elobied Crops Market to investigate the efficiency market hypothesis (EMH) for sesame, groundnut, and Arabic gum crops. The study used Augmented-Dickey Fuller (ADF) method, Johansen multivariate approach, and Vector error correction model (VECM), and co-integration method. Data was obtained from the Elobied Crops Market database for annual prices and quantities of trading commodities from 1990 to 2017.The study concluded that there is a weak form of EMH for sesame and groundnut and a semi-strong of EMH for Arabic gum.
Keywords: Sudan; Crops Market; Efficiency Market Hypothesis
I. INTRODUCTION
Prices play an important role in guiding production, consumption and government policies, production decisions of farmers and buying decision of consumers largely. Price information has become even more important with recent changes in North Kordofan State conditions. The fact is that prices of agricultural commodities are more volatile than of most non-farm goods and services. Under such circumstance, producers and marketers of field crops in tradition rain fed subsector will be in conditions of risk and uncertainty about price stability and volatility. For a few decades, dramatic changes in prices in domestic markets with increase in costs of production and deterioration in yields and in rainfall have put producers and marketers in critical situation because of price instability. Moreover, they have not been entirely protected from the consequences of price instability and they have limited ability to deal with it. The buying and selling activities in Elobied crops market are correlating to the rainy agricultural season in Kordofan, where the market season begins in mid-November of each year and reaches its peak in following months of January and February. The flow of crops continue until the end of June. After that, crops send to stores of merchants and companies. Accordingly, prices of crops fluctuate due to the supply and demand processes and that correlate to increase or decrease in the productivity of each crop. The question arise here is to what extend the crops price in Elobied crops market reflect the public and private information in context of market efficiency