Does fuel price volatility induce price instability in the agricultural commodity supply chain? Empirical evidence from Ghana

Abstract

Food price volatility has become a hot topic after the global food crisis of 2007/2008 and 2010/2011 due to the livelihood threat it poses, particularly to poor households. The purpose of this paper is threefold: to determine the possible volatility spillover effect from fuel to food prices, assess the perception of actors along the food supply chain on the effects of price volatility, and investigate the indigenous management methods used by the identified actors. We discovered evidence of volatility transmission from fuel to food markets in southern Ghana. However, in northern Ghana, where agricultural commodities are primarily brought to market on motorcycles and tricycles, the spillover effect of fuel is negligible. The supply chain participants believe that price volatility is having a detrimental impact on their decision-making or planning, supplies/production, and finances. Wholesalers and retailers handle price volatility by diversifying their sources, storing products for better pricing, and implementing volume controls. Farmers' primary price volatility control strategies include crop diversification, market information collection, staggered sales, and produce storage for better prices. Policy ideas have been developed to assist reduce price uncertainty in the basic food supply chain.

Keywords

• Volatility
• Staple foods
• Value chain
• Traders
• Diagonal BEKK model
• Asymmetry