1 CHAPTER ONE 1.0: INTRODUCTION 1.1: Background information Rice is one of the important staple foods in Tanzania.

Its per capita consumptio n is about 16Kg, contributing 8% of caloric intake among Tanzanians (Minot, 2010 ). The per capita consumption of maize and cassava are estimated at 73Kg and 157 Kg respectively. According to Kadigi (2003), the bulky of paddy consumed in Tanz ania is produced from five regions namely Mbeya, Shinyanga, Mwanza, Morogoro and Tabora. Morogoro town is located nearly 200Km west of Dar-es-salaam city. It is a good supplier of rice to Dar-es-salaam markets which receive even rice import ed from outside countries such as Thailand and Vietnam as well. 1.1.1: Characteristics of rice/paddy producers 1.1.1.1: Small farmers Small rice farmers can further be classified into small tradition farmers and sm all irrigation farmers. i. Small tradition farmers They cultivate 1-5 acres using tradition methods. Use hand hoes or hire oxen with a plough. In some cases (rarely) they hire tractors. Hire local labour (for planting, weeding, and harvesting/threshing). 2 Earns 150,000 TSH per acre (Assuming all rice is sold). ii. Small irrigation farmers Grow about 1ha of rice in an irrigation scheme often controlled by the governmen t. Rents the land from the scheme. Also they rent out their services. Gross margin can be 175,000 TSH per acre. 1.1.1.2: Larger rice farmers Grow more than 5 ha of rice in irrigation scheme. Hires labours to involve in various field operations. They are cash intensive. They enjoy economies of scale as a result of operating in large scale cultivatio n In addition, both small and large farmers involve in irrigation schemes of paddy . However, larger farmers are the ones who involve mainly in irrigation schemes than small farmers. 1.2: PRODUCTION OF PADDY/RICE IN TANZANIA In general, rice involves about 281,000 rice growing households (Ebony Consultin g International, 2003). Moreover, rice is mainly grown by smallholders under rai n fed 3 conditions, where about 74% of total rice area is rain fed lowland rice, 20% is upland rice and 6% is irrigated. According to Hamilton and DAI (2010) rice production in Tanzania is taken by sma ll scale farmers where less than 1% of the rice crop is produced by large scale farmers. Although more than 99% is produced by smallholder farmers, some of them are part of large scale rice irrigation schemes that were formerly state manage d farms (NBS, 2006). Paddy production is estimated at 1.2 million metric tones a nnually or 750,000 metric tone of milled rice (Hamilton and DAI, 2010). 1.3: STATEMENT OF THE PROBLEM AND JUSTIFICATION Prices of staple foods in Tanzania have been fluctuating a lot due to various re asons such as poor harvests leading to shortage of food relative to the demand b y the people. This fluctuation tends to affect the spatial price difference of s taple foods between regions. This is due to the fact that once there is a change in price at one market, usually a surplus market; this change must be shifted i nto the deficit region especially if they are well integrated. Furthermore, this price fluctuation affects the welfare of both producers and co nsumers. Producers are affected once there is a decrease in prices of their prod

uce mainly during a bumper season while consumers especially those in a deficit region are affected when there is an increase in prices of those produce (Dawe a nd Opazo, 2009). According to Gjolberg et al (2004), the wholesale prices of rice over 1992-2002 were consistently higher in Dar-es-salaam city than in Morogoro municipality, wi th the 4 average difference being 4000Tsh/100KG. This suggests that Dar-es-salaam is a de ficit region having higher prices while Morogoro is the surplus region experienc ing relatively lower prices. In addition, this fluctuation of rice prices depict s an upward trend. A more recent study by Minot (2010) also indicates fluctuation in wholesale pric es of staple foods. Wholesale prices of maize in Dar-es-salaam were falling in 2 006 while they started to increase sharply in September 2007 and eventually decr eased in March 2008. For rice, wholesale price in Dar-es-salaam started to rise in August 2007 and falling sharply in April 2008. This shows to what extent the staple food prices fluctuate over time. While the above two studies have indicated fluctuation of prices of the two stap le foods (rice and maize) no attempt has been made to carry out a detailed spati al price analysis to show how prices in the two markets are related and factors influencing the difference in prices between Morogoro and Dar-es-salaam. This st udy was intended to analyze spatial price differences of rice between Morogoro m unicipality and Dar-es-salaam city. 2.0: OBJECTIVES OF THE STUDY 2.1: GENERAL OBJECTIVE To analyze the spatial price difference of rice between Morogoro and Dar-es-sala am so as to check to what extent prices of rice in these regions are related. 2.2: SPECIFIC OBJECTIVES a) To examine the trend of rice prices in Morogoro and Dar-es-salaam. 5 b) To identify determinants of rice price differences between these regions. 3.0: HYPOTHESES a) There is no significant difference between the average wholesale prices/Kg ch arged in these two regions (Average wholesale price/Kg in both regions are stati stically equal). b) Marketing costs are not the major determinants of price differences in these regions. 4.0: LIMITATIONS/ASSUMPTIONS OF THE STUDY 1. All rice is of the same type and quality. It was assumed that all rice traded by traders had the same quality and of the s ame type. Therefore the differences in quality and type of rice were not capture d in this study. 2. Morogoro and Dar-es-Salaam were assumed to have equal variances. Samples of wholesale monthly rice prices for three years i.e. 2001, 2002 and 200 3 in these regions were assumed to be collected in the population having equal v ariances. 3. Marketing costs were assumed to be the same in all three situations. 6 CHAPTER TWO 2.0: LITERATURE REVIEW 2.1: Staple food prices variation World food prices have been varying dramatically in recent years due to number o f reasons such as fluctuation in world fuel prices. This is also the case in Tan zania for the case of major staple foods namely maize, rice and cassava. Therefo re, this part is going to make a review about the variation of staple food price s. According to the quarterly bulletin on food prices in Africa by FAO regional off ice for Africa (2009), region prices remain higher than 2007 levels. For example , price of maize in Tanzania was 68% higher in October than two years earlier. H owever, in Dar-es-salaam the wholesale price of maize dropped to $419/tonne.

Food retail price series were collected and showed seasonal fluctuations as well as a considerable variation across a large sample of markets in Tanzania (Delga do et al., 2003). The overview in staple food prices trends by WFP (2009) shows that prices in Tanzania experience an upward trend relatively to the past five y ears. Another study by WFP (2009) on trends in staple food prices in selected vu lnerable countries shows that maize prices in Tanzania increased by 17%. The shortage of food due to failure of rainfall in 2009, left about 280,000 peop le in Tanzania food insecure (FEWSNET, 2009). Another factor that contributed to the 7 shortage of food in some of the areas in Tanzania in 2009 is the increase in mai ze, rice and bean prices to 40%-60% above their five year averages (FEWSNET, 200 9). According to the latest edition of Food price watch, the World Banks food price i ndex rose by 15% between October 2010 and January 2011. Moreover, this is 29% ab ove its level a year earlier and it is only 30% below its 2008 peak. A more recent study by Falcon and Naylor (2010) reveals an upheaval of staple fo od prices in the world in 2008. This sharp rise captured the interest of Economi sts, creating some questions about the state of food security, the nature of pri ce variability and the appropriate strategies for international agricultural dev elopment. Rice prices have been increased in all markets as the case on prices of other st aple foods in Tanzania (USAID, 2008; FEWS NET, 2009). The trend in 2009 shows th at prices of staple food are higher than the last year as well as above the five year averages. This rise in prices was probably due to increased transportation costs and traders speculation during the hunger season. According to Minot (2010) wholesale prices of maize tend to move together in the late 2003 and late 2005 in almost all markets in Tanzania. Furthermore, this in crease in price was due to poor harvests in 2003 and 2005 when output fell by 42 % and 33% respectively. 8 A recent study by Dawe and Opazo (2009) using data from new FAO price database s hows that domestic staple food prices in developing countries typically increase d by 48% in real terms during the world food crisis in 2008. In recent years, food prices have increased throughout the world (USAID, 2008; F AO 2008). These reports indicate that during the first three months of 2008, int ernational nominal prices of all major food commodities reached their highest le vels in nearly 50 years while for the case of real prices it is nearly 30 years. Global food prices started rising sharply in 2006 and reached record levels in t he second quarter of 2008 (Macharia et al., 2009). However, in June 2008 it star ted to decline even though it was different in some of the east African countrie s which experienced increasing prices in June 2008 and Early 2009. For example, Tanzania experienced a sharp increase in its food price index (FPI) between the last quarter of 2007 and the first quarter of 2008 i.e. about 9% increase. Event ually, prices dropped down following a bumper harvest for maize and rice in May 2008. According to a recent discussion paper by Minot (2011) staple food prices in Tan zanian markets tend to move with the world staple food prices. For example, Arus ha showed to have a long-run relationship with the world price of maize. For ric e, four of the height rice markets in Tanzania appeared to be linked to world ri ce markets. Furthermore, the elasticity of price transmission ranges from 0.24 t o 0.54 implies that 24% to 54% of the world rice prices changes are transmitted to the Tanzanian markets. 9 A report by USAID (2008) shows that regions in Tanzania such as Mbeya, Iringa an d Morogoro have shown increased prices of major food crops. In addition, there a re various reasons for this increase in prices such as poor harvests of major fo od crops, higher transport cost of major food, increased demand for food by cons umers, Oil and energy supplies and rising cost in energy which contribute to the increasing of agricultural production cost which is eventually reflected into f

ood prices. 2.2: Determinants of staple food prices variation According to Nyange and Wobst (2005), the price volatility is determined by mark et forces i.e. demand and supply of a product. This implies once there is an imb alance between demand and supply of a product, and then prices are likely to flu ctuate in the process of re-gaining an equilibrium point. The demand side factor s (rising incomes, increasing world population and urbanization) and supply side factors (high agricultural input prices and declining agricultural input resour ces) influence the price increase of the product (ILRI, 2009). The behavior of the domestic food prices depends highly on the degree of tradabi lity of the commodity (Delgado et al., 2004; Haggblade and Dewina, 2010; Minot, 2010). For international commodities, domestic prices are expected to follow the world prices of the same commodities unless otherwise there are significant bar riers to trade. Conversely, if not, it is likely to be determined by domestic su pply and demand of that particular commodity. 10 Naylor and Falcon (2010) argues that weather variability, changes on population, fluctuation of Petroleum prices, speculation and stockholding and changes on ex change rates are the major determinants of staple food price variation. They ins ist that any changes in these factors are likely to be shifted into the staple f ood price and hence its variation. A recent report by a Central Bank of Lesotho (2010) also suggests that the incre asing demand on food along with the world population growth is one among the det erminants of variation of staple food prices. This increase in demand on food du e to an increase in world population may result to an imbalance between demand a nd supply of food, the former being relatively higher. This might be compensated by the price increase as it is the case since July 2010. According to the report by FEWS NET (2009) on the Tanzania food security, it is postulated that increased demand at the markets and increased transportation cos ts caused by high fuel prices are likely to contribute to high food prices. This report suggests that variability in food prices may be caused by changes in dem and and transport costs . Agricultural prices vary because production and consumption are variable (Gilber t and Morgan, 2010). However, predictable and unpredictable should be distinguis hed from the economic point of view because the latter is characterized by the e lements of shocks. This implies that, shocks in production and consumption are t ransmitted into 11 price variability. Furthermore, it postulates that speculation and stockholding or purchase currently and sell in future at relatively higher prices also determ ine the degree of food price variability. A more recent study by Rashid and Minot (2010) suggests that the variation of co mmodity prices between locations and over time is a natural market phenomenon an d, in addition, excessive variability of staple food prices to a large extent is a reflection of a lack of market integration across space. Kilima et al (2008) studies changes in the variability of maize prices using mon thly maize wholesale price data from seven regions of Tanzania between 1983 and 1998. The results revealed that market liberalization increased both the level a nd the variability in the maize prices. This suggests that market forces namely demand and supply are major determinants of price variability. According to Jayne et al (2005) government intervention contributes potentially to the staple food prices variability particularly in maize market. These interv entions are maize export bans as what is the case in recent years in Tanzania, u nexpected changes on import tariffs and government importation and sell to selec ted buyers. Once there are changes in at least one of these mentioned interventi ons, it is likely that changes to be shifted into prices resulting to its variab ility. 12 Schlosser (2006) applied regression models using the actual spatial price variat

ion so as to determine the causes of spatial price variation over time. He used mean price, standard deviation and coefficient of variation as the tools to meas ure price variations. In addition, coefficient of variation for each item was re gressed against a dummy variable commodity (good or service) so as to determine whether an item is a good or service while assigning 1 to a good and 0 for servi ce. In this study, he mentioned supply and demand, transport costs and market ch aracteristics as the major determinants of price variation. For the case of mark et characteristics, the study describes that characteristics such as monopoly si tuation in the industry leads to higher price variation and conversely if there are relatively many competitors in the industry, then price variability is likel y to be relatively low since there is a stiff competition. 2.3: Analysis of spatial prices variation The major economic approaches that are used to measure the degree of spatial pri ce integration are the Law of One Price (LOP), Co-integration (regression analys is), Ravallion model and Granger-Causality (Baulch, 1997). Nyange and Wobst (2005) applied Autoregressive Conditional Heteroskedastic (ARCH) regression to analyse the monthly price data over the period of 1992-2000 in predominantly consumer, producer and border markets of Dar-es-salaam, Dodoma and Arusha respectively. The essence of this analysis was to examine changes in maize price levels and variability in Tanzania so as to evaluate effects of Str ategic Grain Reserve on stabilizing domestic market prices against alternative f ood security policies such as regional food stock and trade. 13 Rashid and Minot (2010) suggested Cointegration analysis, Threshold Autoregressi ve (TAR) and Parity Bound Model as the suitable methods in analyzing spatial arb itration. Cointegration takes non-stationary into account and allows long-run re lationship as well as the speed of adjustment; however, it does not distinguish between lack of integration because of market inefficiency and lack of integrati on because the difference is too small. Karfakis and Rapsomanikis (2008) used threshold co-integration to examine the re lationship between prices in a number of well connected and remote markets in Ta nzania. In addition, this approach was used to approximate the magnitude of tran sport and other transaction costs between the markets. The threshold co-integrat ion suggested that regional markets in Tanzania are integrated. Brempong and Asare (2007) also used co-integration to study the monthly time ser ies price data from January 1996 to December 2003 so as to measure the extent to which the rice prices in spatially markets are integrated or co-move. This stud y suggests that prices of imported rice in Ghana do not share the common propert ies with the local prices trends in the central market. Separate regressions were used by Minot (2010) to study the relationship between domestic staple foods prices as well as the transmission of changes in internat ional food price to domestic markets in Tanzania. 14 Campenhout (2007) used Threshold Auto-regressive (TAR) model and Parity Bound Mo del (PBM) to analyze the relationship between maize prices in Iringa and other s ix markets in Tanzania. Weekly price data over the period of 1989 to 2000 were u sed in this analysis. Korir, et al (2003) applied Cointegration analysis in analyzing the average mont hly wholesale bean prices (secondary data) from four markets namely Arusha, Mosh i, Taveta and Nairobi. In addition, Augmented Dickey Fuller (ADF) test, Granger causality test and Pearsons bivariate correlation coefficient were used to test t he stationarity of prices and first difference, capturing the direction of causa lity in price changes and analysig the market integration respectively. Boysen (2009) used descriptive statistics and regression methods to assess the s patial variability and transmission of prices in Uganda. Time series data were u sed and classified into two datasets namely time series of retail prices for six major local markets in Uganda and national household survey 2002/2003 which inc ludes detailed information on expenditure and unit value data for 9711 household s. Standard Vector Error Correlation Model and Threshold Vector Error Correlation M

odel (TVECM) were used by Amikuzuno (2010) to estimate the speed of price adjust ments between the net producer and net consumer market pairs. Two datasets were used in this analysis namely High Frequency Data (HFD) and Low Frequency Data (L FD) in five major Tomato markets in Ghana. 15 Barry and Piggot (2001) applied Threshold Cointegration models to analyze and ev aluate the spatial price dynamics among regional corn and Soybean markets in Nor th Carolina. They found that Threshold reflecting the influences of transaction costs is confirmed and markets are strongly spatially integrated. It is important to note that two spatially separated markets are said to work ef ficiently if and only if the price difference between them is not larger than th e transaction costs required to move the good from surplus market to deficit mar ket (Rapsomanikis, 2003). 16 CHAPTER THREE 3.0: METHODOLOGY 3.1: Description of the research design The design of the research was a case study of two regions i.e. Dar-es-salaam ci ty and Morogoro municipality and the item concerned was rice. These two regions are located almost 200Km apart, Morogoro being located at the western side of Dar-es-salaam. Morogoro is one among the surplus regions that pr oduce rice in Tanzania. 3.1.1: Ifakara town Ifakara is a small rural town in Kilombero district, Morogoro region, south cent ral Tanzania. It is the headquarter of the Kilombero district administration and the main trading centre for Kilombero and Ulanga districts. The town is located near the Tanzania-Zambia Railway (TAZARA) line, at the edge of the Kilombero va lley, a vast swampland flooded by the mighty Kilombero River. 3.2: Sampling methods Methods that were used to select sample are simple random sampling and purposive sampling methods. The sample was selected randomly from the groups of traders w ho are involved in rice trade in these two regions particularly those who transp ort rice from Ifakara to different markets in Dar-es-Salaam. 3.3: Sample size Total of 21 traders who transport rice from Morogoro (Ifakara) to Dar-es-Salaam city were interviewed in order to get data which were later used to estimate ric e prices in 17 both good and bad seasons. In addition, these data were also used to estimate av erage prices of buying and selling rice for both traders and farmers. 3.4: Data collection Both primary and secondary data were collected for the study as described below. 3.4.1: Primary data collection Structured questionnaires as well as face to face interviews were used to collec t primary data from traders who transport rice from Morogoro (Ifakara) to Dar-es -salaam city. 3.4.2: Secondary data collection Secondary data on wholesale monthly prices of rice in both regions for the perio d of time 2001, 2002 and 2003 were collected from the Ministry of Industry, Trad e and Marketing of Tanzania located in Dar-es-Salaam. In addition, secondary dat a on the trends of fuels prices in Tanzania were collected from various previous studies so as to ensure critical analysis of the rice prices patterns in these two regions as far as fuels prices trends are concern. 3.5: Survey and questionnaire administration A survey was conducted by the researcher himself for two days in the mid-May 201 1. The data were collected at market place and at milling machines by using stru ctured questionnaires prepared in English but translated in Kiswahili during the data collection. In addition, face to face interviews with traders using Kiswah ili was also done since Kiswahili is understood better by all respondents and wa s therefore a useful language for the purpose of the study. This helped in makin

g the response rate from the 18 traders more useful and, indeed, they seemed to be aware about the research on t heir business. Respondents were asked on the following important variables: a) Traders were asked on the quantities of rice they purchase from farmers as we ll as whether they resale all of them or not. Also they were asked to mention th e buying and selling prices of the rice they purchase from farmers. b) Also traders were asked to to mention the buying and selling prices during go od and bad season regarding the availability of rice(supply). c) Moreover, they were asked to specify the cost for each marketing function the y incur namely packaging, storage, processing, loading, transportation and unloa ding. d) Eventually they were asked to mention taxes and/or market charge they pay if any. 3.6: Data analysis 3.6.1: Software Data from the questionnaire survey were analyzed using Excel software computer p rogram. Excel was used to simplify the analysis of quantitative secondary data o n wholesale monthly prices of rice in 2001, 2002 and 2003 for both regions. Also it was used to calculate percentages and averages for primary data on different cost elements of the marketing costs. In addition, it displayed quantitative st atistics which were t-statistics. 19 3.6.2: Descriptive analysis Descriptive statistics were used in the analysis of the study data. It included deduction of means and percentages of marketing costs during different situation s of rice availability. 3.6.3: Quantitative analysis The mean difference t-test was used to test the hypothesis that there is no sign ificant difference in wholesale monthly rice prices charged in Morogoro Municipa lity and in Dar-es-Salaam city. 3.7: Tools of testing hypotheses 1. T-test was used to test the significance of hypothesis that there is no signi ficant difference in wholesale monthly prices of rice charged in these regions. 2. Percentages and pie chart were used to show the proportion of marketing costs to the average price difference. 3.8: Decision rule For T-test, the rule of thumb was to reject the null hypothesis if and only if t he corresponding P value is less than the predetermined significant level of 5%, and fail to reject if p value is greater than the predetermined significant lev el of 5%. 20 CHAPTER FOUR 4.0: RESULTS AND DISCUSSION 4.1: Gender of the respondents. All 21 respondents who were interviewed were males i.e. 100% of the respondents. This suggests that males dominate this trade by being more involved directly in this trade rather than females. However, this does not conclude that males are the owners of the businesses since they might be sent on behalf of the owners wh o are probably females. 4.2: Statistical significance of price gap between Morogoro and Dar-es-Salaam re gions. Results from Table 1 on the T-test show that the price gap of rice per 100KG bet ween these two regions is statistically significant, (P<0.05). This can be expla ined by the fact that the profit margin attached by the rice traders as well as marketing costs incurred are expected to contribute substantially in the price d ifference in these regions. 21 Table 1: T-test of wholesale prices of rice for Morogoro and Dar-es-Salaam refio ns

Mean Wholesale price for Morogoro Mean Wholesale price for Dar-es-Salaam df Sig. (2-tailed) t-value Price TSH/100KG 33321.56 38588.56 70 0.0000* -4.174 * Implies statistically significant at 5%. 4.3: Trend of wholesale monthly rice prices in Morogoro town and Dar-es-salaam c ity for the year 2001, 2002 and 2003. Figure 1 of this report shows that wholesale monthly prices of rice in both regi ons are almost moving together. However, prices in Morogoro are relatively lower throughout the specified period of time i.e. 2001, 2002 and 2003 even though th ere are some occasions whereby the prices in Morogoro are higher than that of Da r-es-Salaam. The tendency of wholesale prices of rice in Dar-es-Salaam being higher than that of Morogoro helps us to explain the fact that the former is the deficit region relatively to the latter. In addition, the average gap is 5,267 TSH per 100KG. T his result is the same to what was concluded by Gjolberg et al (2004) who studie d the movement of the prices of maize, beans, and rice over 1992-2002 between Da r es Salaam and Morogoro 22 (a rice surplus region).Their study showed that monthly wholesale prices in Dares-Salaam is relatively higher than that in Morogoro and the average gap was 4,0 00TSH per 100 KG. Therefore from this comparison, it can be concluded that the a verage gap of rice prices in these regions increased from 4,000TSH per bag over 1992-2002 to 5,267 TSH per bag over 2001 and 2003. Also from figure 2 of this report, it depicts that the gap of monthly wholesale rice prices between these regions fluctuate a lot due to various reasons such as seasonality due to rainfall. Indeed, it should be noted that Dar-es-Salaam is a deficit region, hence we expect it to have higher prices than Morogoro town. Ho wever, this is not always the case since the gaps in some months are negative fo llowing the fact that prices in Morogoro being higher than that in Dar-es-Salaam because the latter is also receiving rice from other surplus regions in the cou ntry as well as rice from outside the country. This makes supply of rice in Dares-Salaam to increase and hence lowering the price of rice and sometimes become relatively lower comparing to that prevail in Morogoro. Table 2: Wholesale monthly rice prices in Morogoro town and Dar-es-salaam city S/N TIME WHOLESALE RICE PRICES IN MOROGORO (TSH/100KG) WHOLESALE RICE PRICES IN DAR-ES-SALAAM (TSH/100KG) 1. Jan/2001 36,833 43,500 23 2. Feb/2001 35,500 45,250 3. Mar/2001

35,400 37,692 4. Apr/2001 35,564 38,410 5. May/2001 38,125 38,542 6. Jun/2001 29,167 40,000 7. July/2001 29,875 35,583 8. Aug/2001 27,722 33,796 9. Sept/2001 25,357 36,750 10. Oct/2001 27,667 36,250 11. Nov/2001 28,143 38,000 12. Dec/2001 28,500 38,000 13. Jan/2002 31,714 38,917 14. Feb/2002 32,333 37,542 15. Mar/2002 34,455 35,925 16. Apr/2002 32,875 35,063 17. May/2002 28,500 36,385 18. Jun/2002

25,727 37,000 19. July/2002 23,750 33,000 20. Aug/2002 23,000 32,500 21. Sept/2002 39,021 41,211 22. Oct/2002 24,396 33,889 23. Nov/2002 24,667 33,000 24 24. Dec/2002 36,000 40,000 25. Jan/2003 28,900 39,542 26. Feb/2003 31,773 37,136 27. Mar/2003 32,318 39,273 28. Apr/2003 34,132 39,447 29. May/2003 39,667 37,200 30. Jun/2003 39,729 38,667 31. July/2003 39,200 37,883 32. Aug/2003 38,688 40,091 33.

Sept/2003 41,667 45,000 34. Oct/2003 43,607 46,286 35. Nov/2003 45,375 46,125 36. Dec/2003 50,229 46,333 SOURCE: Ministry of Trade, Industry and Marketing of Tanzania. 4.4. Average quantity of rice purchased and sold, purchasing and selling prices of rice/KG (A case of traders). According to the analyzed data on prices of rice per KG during good and bad seas ons with respect to the availability of rice from the farmers, it showed that th e average prices per KG paid by traders during good and bad seasons are 597.9TSH /KG and 832.5TSH/KG respectively. In addition, normal average buying and selling price of rice by rice traders under normal situation are 575.7TSH/KG and 1162.7 TSH/KG respectively. However, it should be noted that the research was not able to capture the 25 type and quality attributes of rice which are among the factors that differentia te prices of rice classified in different grades. Therefore, this study assumed that all rice purchased by different traders was the same as far as their types and qualities are concern, and the major emphasis was given in estimating the av erages prices of rice in three situations namely normal situation whereby rice i s neither shortage nor plenty, good season whereby rice is available in abundanc e and bad season whereby rice is available not in abundance. Also results show that quantities of rice purchased by rice traders are all sold . This can be explained by the fact that majority of rice traders who purchase r ice from Ifakara to Dar-es-Salaam markets are small traders i.e. majority purcha se on average between 1-3 tones while few of them purchase between 4-7 tones. Th is difference in quantities purchased from one trader to another is due to their difference level of their capital. Therefore, the quantity purchased on average by each trader is about 1.82 tones. Table 3: Prices, quantities of rice purchased and sold by rice traders at Ifakar a Item Value Average quantity of rice purchased by rice traders (Tone) 1.83 Average quantity of rice sold by rice traders (Tone) 1.83 26 Average price of rice paid by rice traders under Normal situation (TSH/KG) 575.7 Average price of rice received by rice traders under normal season (TSH/KG) (TSH/KG) 1162.7 Average price of rice paid by traders during bad season (TSH/KG) 832.5 Average price of rice paid by rice traders during good season (TSH/KG) 597.9 Average price of rice received by rice traders during good season (TSH/KG)

1169.05 Average price of rice received by rice traders during bad season (TSH/KG) 1359.5 SOURCE: Own calculations from the data collected. 27 From Table 4, Storage services are offered free of charge by the owners of the p rocessing (milling) machines and that is why it is not included in estimating ma rketing costs. However, for the case of processing costs, it is not included in Table 4 since it is paid by farmers themselves before selling their rice to trad ers. Table 4: Estimation for marketing costs incurred by traders LOADING (TSH/KG) PACKAGING (TSH/KG) TRANSPORT (TSH/KG) UNLOADING (TSH/KG) TOTAL MARKETING COSTS (TSH/KG) 4.01 6.31 61.11 3.756 75.186 SOURCE: Own calculations from the data collected. Table 5: Marketing margin, costs and proportion of marketing costs in the price gap between Morogoro and Dar-es-Salaam. Duration Marketing margin(Farmer Trader, TSH/KG) Marketing costs(TSH/KG) Proportion of Marketing costs in price gap (%) Normal season 587 75.186 12.8 Bad season 571.11 75.186 13.164 28 Good season 526.98 75.186 14.267 Figure 3. 4.5. Determinants of staple food prices variation From the results presented in the Table 6, it shows that prices of rice vary acc ording to the variation in availability of rice i.e. supply of rice. This can be evidenced by the variation of both buying and selling prices of rice by traders during good and bad seasons. These variations of rice prices are also the resul ts of weather variation. In addition, prices are lower in good season whereby su pply of rice is relatively higher than demand while prices are higher during bad season from October to January (off-season) whereby supply of rice is relativel y low comparing to demand. The results are 29 comparable with other studies on the same topic. Variation of staple food prices is due to forces of demand and supply in the domestic markets and variation in weather conditions (Nyange and Wobst, 2005; Naylor and Falcon, 2010; Delgado et al., 2004; Haggblade and Dewina, 2010; Minot, 2010). Moreover, the analysis done from the prices of fuel collected from other studies show that prices of rice in both regions tend to move together with the variati on in the prices of fuel in Tanzania. These results are the same to the results by Naylor and Falcon (2010) and FEWS NET (2009) whereby in both studies, it was

found that prices of fuels play a significant role in determining prices of stap le foods. Consider the Movement of rice prices in both regions and the movement of prices for Diesel and Gasoline. 30 Trends of avearage annual wholesale rice prices 0 10000 20000 30000 40000 50000 60000 1995 1997 2000 2001 2002 2003 2004 YEAR PRICES(TSH/100KG) Morogoro Dar-es-Salaam 56 Figure 4. 31 Trends of fuels prices 0 10 20 30 40 50 60 70 80 90 100 1995 1997 2000 2001 2002 2003 2004 YEAR PRICES (US CENTS/LITRE) Gasoline Diesel Figure 5. 32 CHAPTER FIVE 5.0: CONCLUSION AND RECOMMENDATIONS 5.1: Conclusion The conclusion made is based on the statistical significance of the gap between these two regions, trend of wholesale rice prices, marketing margin during diffe rent situations of regarding availability of rice and determinants of staple foo d prices variation. 5.1.1: significance of the gap between these two regions

The critical question of whether average wholesale rice prices in these regions are statistically the same was one among the important issues covered in this st udy. It was shown that the price gap between these regions is statistically sign ificant at 5% using t-test tool. 5.1.2: Trend of wholesale rice prices between these regions It was shown that monthly wholesale prices in these regions tend to move togethe r throughout the specified period of time i.e. 2001, 2002 and 2003. However, the re are some occasions whereby prices in Morogoro are higher than that of Dar-esSalaam. This may be the result of importation of rice from outside countries int o the latter which increases supply of rice and hence relative lower prices than the former. 5.1.3: Marketing margin Marketing margin between farmers and traders differ in different situations rega rding the availability/supply of rice. The marketing margin normal, good and bad situations are 587TSH/KG, 571.11TSH/KG and 526.98TSH/KG respectively. In additi on, the 33 proportion of marketing costs in the marketing margin for the three mentioned si tuations are 12.85, 13.164% and 14.267% respectively. 5.1.4: Determinants of staple food prices variation. The study revealed that the major determinants of staple food prices variation a re supply and demand of the product regarding the climatic conditions and on-sea son as well as off-season (October to January), variation in the fuels prices. 5.2: Recommendations The government should make an effort to reduce prices of fuels because are the e ssential element of transport for commodities particularly rice. As we have seen in the results and discussion part, transport costs account about 81.28% in the marketing costs incurred by rice traders. The government can achieve this strat egy through reducing taxation on fuels imported in our country. This will reduce cost burden which is usually shifted to final consumers by traders involving in fuels industry in our country. Also the government should improve its monitoring system on provision of farm in puts particularly to small holder farmers so as to make sure that the targeted f armers get these inputs at lower prices as planned. This will help to increase n umber of those who get these inputs which will help to reduce costs of productio n and eventually reduction in prices of rice to the final consumers of rice as w ell as its volatility. Indeed, in depth research should further be done to capture the attributes of qu ality and type of rice and how they affect the prices of rice due to the fact th at this study ended assuming all rice are the same as far as quality and type at tributes are concern. 34 REFERENCES Abdulai, A. (2007). Spatial and vertical price transmission in food staple marke t chain in Eastern and Southern Africa: What is the evidence? Amikuzuno, J. (2010). Spatial price transmission analysis in Agricultural market s: Does the data frequency improve our estimation. A paper presented at the join t 3rd African Association of Agricultural Economists (AAAE) and 48th Agricultura l Economists Association of South Africa (AEASA) Conference, Cape Town, South Af rica. Boysen, O. (2009). Border price shocks, spatial price variation and their impact s on poverty in Uganda: A discussion paper number 306. Brempong, S.A. and Asare, Y.B.O. (2007). Has imported rice crowded out domestic rice production in GHANA? What has been the role of policy? Campenhout, B. V. (2007). Modeling Trends in Food Markets integration: Method an d an Application to Tanzanian Markets. Dawe, D. and Opazo, C.M. (2009). How much did developing country domestic Staple food prices increase during the world food crisis? How much have they declined? Economic Institute of Cambodia, (2006). Cambodia competitiveness report. Eskola, E. (2005). Agricultural marketing and supply chain management in Tanzani

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