TST How Markets Work Session 1.4 WFP Markets Learning Programme1.4. 1 Trader Survey Training V2.
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Transcript of TST How Markets Work Session 1.4 WFP Markets Learning Programme1.4. 1 Trader Survey Training V2.
TST
How Markets Work
Session 1.4
WFP Markets Learning Programme 1.4. 1Trader Survey Training V2
Learning Objectives
After this session, participants should be able to:
Identify and explain the key elements of market functioning, including market structure, conduct and performance
Explain the relevance of structure, conduct and performance in anticipating market response to shocks
WFP Markets Learning Programme 1.4. 2Trader Survey Training V2
Supply: understanding food production and trading patterns (especially for most important staple foods)
Demand: factors that affect household demand (e.g. changes in incomes, purchasing power, preferences)
Prices: levels, trends, seasonality
Markets: environment & functioning (structure-conduct-performance of “SCP”) - factors influencing trader decisions and behaviour
Key elements of market analysis
WFP Markets Learning Programme 1.4. 3Trader Survey Training V2
Why focus on “SCP”?
More comprehensive, forward looking SCP analysis can:Help analysts anticipate market response, define relevant scenarios, formulate expectations about the season to tell more complete food security storyprovide decision makers with info needed to make better responseshelp orient timing of humanitarian interventions, complementing & compensating for markets rather than replacing them
WFP Markets Learning Programme Price Analysis Training 1.4.4
e.g., Traders plan to import cereals using prices from regional & from international markets.
They have strategies for dealing with production shortfalls in their market areas.
Learning about trader behaviors helps identify market indicators to follow, analyze implications of market phenomena, project likely supply responses, and ultimate market outcomes.
Market environment:
external factors affecting market conditions (trade policies…)
Key elements for market analysis
Understanding Market Functioning
WFP Markets Learning Programme 1.4. 5Trader Survey Training V2
Market Environment
Economic and Public policies and regulations• Price ceilings• Trade policies: Import/export regulations• Quality control and food safety measures• Net Importers vs. Net Exporters (national level)
• Example: Food price crisis and national policy reactions: subsidies, export bans etc.
Environmental • Agro-ecological conditions and seasonal calendars• Surplus/deficit areas
WFP Markets Learning Programme 1.4. 6Trader Survey Training V2
WFP Markets Learning Programme Price Analysis Training 1.4.7
1.What are the main thrusts of the GoE’s food security policy?
2.What are the main challenges confronting the GoE in liberalising its food security policies?
Quick Case: Exercise 1.4.a. Markets & FS Policy in Egypt
Task: Read the Quick Case in your workbook and, with a partner, answer the questions.
How do trade policies impact markets in this
country?
WFP Markets Learning Programme 1.4. 8Trader Survey Training V2
Market Structure
Refers to relatively stable features of market that influence rivalry of buyers and sellers:
Number of buyers & sellers
Barriers to entry (e.g. license fees and taxes, farmer and trader access to credit, kinship ties)
Nature of trading relations: vertical coordination mechanisms, or the ways in which transactions are conducted between market participants (e.g, spot market transactions, contracts, cooperatives, or strategic alliances among farmers, traders, transporters, processors and consumers)
WFP Markets Learning Programme 1.4. 9Trader Survey Training V2
Structure: Surplus/Deficit Areas - Example
-40000
-35000
-30000
-25000
-20000
-15000
-10000
-5000
0
5000
10000
2003 2004 2005 2006
District level cereal balances in Timor Leste (2003-2006)
WFP Markets Learning Programme 1.4. 10Trader Survey Training V2
Structure: Commodity Flows Wheat & wheat flour flows in Caucasus Region
WFP Markets Learning Programme 1.4. 11Trader Survey Training V2
Structure: Vertical Coordination/IntegrationMarketing Chain
WFP Markets Learning Programme 1.4. 12Trader Survey Training V2
Structure: Marketing Chain Channels
WFP Markets Learning Programme 1.4. 13Trader Survey Training V2
How do marketing chains function in this country?
How might a major shock disrupt these chains?
WFP Markets Learning Programme 1.4. 14Trader Survey Training V2
Market Structure
Market Conduct
The patterns of behaviour that traders follow to affect or adjust to changing market conditions:
Price-setting behaviour
• Level of competition
Buying and selling practices
• Weights and measures
• Grades and standards
WFP Markets Learning Programme 1.4. 15Trader Survey Training V2
WFP Markets Learning Programme 1.4. 16Price Analysis Training
Cas
hew
Nut
Pric
es (
FC
FA
)
Collection (5), local transport (20) & wholesaler fees (5) , wholesaler margin
(25), transport to Bissau (10)
170- <-Wholesale Price
Tax (14) Exporter Fees (5) & Port Fees (10), Export Tax (47)
246- <-FAS Guinea Bissau
Margin – International Trade (92)
338- <-FOB Guinea BissauTransport Insurance (53)
391- <-CIF Cochin, India
Producer costs and profit (105)
105- <-Producer Price in Guinea Bissau
Conduct: Market Actor’s Margin Breakdown: from Rural Guinea Bissau to India
To what extent is there competition in markets in this country?
Or is the market controlled by a few interests?WFP Markets Learning Programme 1.4. 17Trader Survey Training V2
Market Conduct
Market Performance
Extent to which markets produce outcomes deemed good or preferred by society: regular, predictable availability of basic foods at affordable prices
Price levels and stability over time and space (market integration)
Margins and costs
Volumes
Profits: excessive or not
Product quality
Food distribution within market
WFP Markets Learning Programme 1.4. 18Trader Survey Training V2
What is Market Integration?
The existence of trade flows: the movement of food in response to supply/demand imbalances
Market integration allows price signals to be transmitted from one market to another
Impact on HH Food Security of market integration?
• When markets are integrated, prices become more stable: then HH FS is likely to be improved, as poor HHs can obtain food at more affordable prices
WFP Markets Learning Programme 4.2. 19Price Analysis Training
Market Performance: Example
50
10
015
020
025
0M
on
thly
Defla
ted M
illet P
rice
(C
FA
/Kg)
1996m1 1998m7 2001m1 2003m7 2006m1Month and Year
Agadez Diffa
Dosso MaradiNiamey TahouaTillaberi Zinder
Real millet prices in regions of Niger and Nigeria, 1995 to 2006
WFP Markets Learning Programme 1.4. 20Trader Survey Training V2
How do markets perform in this country?
Are prices & supply relatively steady, predictable? Or are extreme fluctuations the norm?
WFP Markets Learning Programme 1.4. 21Trader Survey Training V2
Market Performance
Market Functioning Logical conclusion from structure, conduct
and performance of markets
Is food moving from where it is produced to where it is needed?
WFP Markets Learning Programme 1.4. 22Trader Survey Training V2
Application and Interpretation of S-C-P and Market Functioning
Helps anticipate market response to shocks
Can formulate expectations about the season
Implications for cash & voucher programming: helps identify risks related to corruption, inflation & trader response capacities
WFP Markets Learning Programme 1.4. 23Trader Survey Training V2
Exercise 1.4.b.
Market Environment in Malawi
WFP Markets Learning Programme Trader Survey Training V2 1.4.24