Establishing the Presence of a Risk Premium in the Cocoa Futures Market: An Econometric Analysis

Previous attempts at identifying and estimating a time-varying risk premium in the cocoa futures market yielded conflicting results. Using a longer series that includes the most recent cash and futures data, the existence of a time-varying risk premium in the cocoa futures market is re-investigated using LM ARCH tests and a Quadratic ARCH in Mean Error Correction Model. In contrast to available research the time series properties of the data are carefully accounted for by employing the most recent econometric techniques in testing for the presence of a risk premium. No evidence is found in support of a positive time-varying [or constant] risk premium in the cocoa futures market at conventional significance levels. The result suggests that cocoa producing countries have one less cost to consider in deciding whether or not to hedge cocoa price risk using futures contracts.Cocoa, Futures markets, time-varying risk premium, error-correction model, Agribusiness, Marketing, M,

Explaining Ghana's Recent Good Cocoa Karma: Smuggling Incentive Argument

The paper contends that the current boom in cocoa exports from Ghana is primarily in response to reversal in price incentives to smuggle Ghana cocoa to La Cote d’Ivoire and not due to productivity gains in the Ghana cocoa supply chain. Using recent data; ADF, Perron and KPSS tests of stationarity; Engle and Granger and Johansen co-integration tests; Granger causality tests; single and vector error correction models; as well as partial adjustment models, we estimate the Ghana cocoa supply response to determine the most pertinent factors that explain the cocoa boom. Different from previous research, the VECM and ECM models are modified to be more reflective of current conditions in the Ghana cocoa sector by including prices of relevant substitutes in cocoa production. Furthermore we carefully account for the time series properties of the data and address endogeneity problems that plague the estimation. For example, in testing for the order of integration of different series, we account for the possible existence of structural breaks. We find that the “price incentive to smuggle” argument adequately explains the current boom in Ghana cocoa supply response. This finding is important because it questions claims in the literature that substantial productivity gains in the cocoa sector in response to good policy is the main reason behind the Ghana cocoa export boom.International Relations/Trade,

An Empirical Analysis of Recent Changes in US Beef Marketing Margins

An Augmented Relative Price Spread (ARPS) model is employed to explain recent changes in real US beef wholesale-retail (WR) and hence farm-retail (FR) marketing margins. It is found that the surge in retail market concentration in 1999 most likely increased retail market oligopsony power relative to wholesale oligopoly power, ultimately changing real US WR beef marketing margins. The finding that higher oligopsony retail market power relative to oligopoly wholesale market power in the US beef industry was most likely responsible for the changes in US WR marketing margins in 1999 is important because it provides an economic justification for policy makers to regulate anticompetitive conduct by beef retailers.Livestock Production/Industries, Marketing,

The double-edged sword: financial source of household healthcare expenditure in Ghana

In many regions, some of the most formidable enemies of health are joining forces with the allies of poverty to impose a double burden of disease, disability and premature death. This paper looks at the main financial sources households use to finance healthcare in Ghana. It examines the spatial and socio-economic dynamics and the challenges these pose to health and development. Analysis of the 2003 Ghana World Health Survey data indicates that approximately 41% of households depend on more than one financial source with 88% depending on household income to finance healthcare expenditure. The high dependency on household income will erode gains in the economic and health sector in the midst of the recent global economic recession. Comprehensive national health insurance programs that cover emerging disease conditions will mitigate the double burden of disease on households in emerging economies

IDENTIFICATION OF MARKET POTENTIAL FOR PASTURE-RAISED PORK IN THE MISSISSIPPI DELTA OF ARKANSAS-1998

Agribusiness,

Is Foreign Aid Beneficial for Sub-Saharan Africa? A Panel Data Analysis

Significant ambiguity surrounds the magnitude and sign of the effect of foreign aid on economic growth. Foreign aid can potentially augment scarce domestic capital to spur growth but foreign aid can also remove positive incentive to build wealth, stalling growth. This paper characterizes the effect of foreign aid on the growth of Sub-Saharan African countries after correcting endogeneity problems that plague the estimation. Foreign aid is found to be growth promoting given good governance and using fixed effects in a static panel framework. Data from twenty-one Sub-Saharan African countries spanning 1995-2003 was used in the estimation. The finding of a significant foreign aid-growth relationship is pertinent because it suggests that increased aid to Sub Saharan Africa is one way to achieve the UN’s Millennium goals. By lobbying for increased foreign aid, advocates are prescribing a necessary albeit insufficient medicine for Sub Saharan Africa’s economic problems.Food Security and Poverty,

AGRICULTURAL BANK EFFICIENCY AND THE ROLE OF MANAGERIAL RISK PREFERENCES

We investigate the objectives of agricultural bank managers and their impacts on bank efficiency. If managers are non-neutral toward risk, then banks may appear inefficient when they are not. We find non-neutrality toward risk and efficiency gains due to firm size, loan shares, asset shares, and share of market deposits.Financial Economics, Risk and Uncertainty,