pat seasonality and volatility session 3.2. wfp markets learning programme3.2. 1 price analysis...

PATSeasonality and

Volatility

Session 3.2.

WFP Markets Learning Programme 3.2. 1Price Analysis Training

Learning objectivesBy the end of this session, participants should be able to:

Explain concepts of seasonality & volatility, their value in monitoring supply/demand abnormalities, in predicting increasing/decreasing vulnerability to shocks & their impact on WFP programme design & implementation

Explain implications of seasonality & volatility on HH FS

Analyze graph of nominal prices, identify key seasonal trends, & explain implications for food security analysis

Calculate 5-year averages & compare normality/abnormality of a price change to a seasonal reference

Analyze graph of nominal prices, identify if volatility is present & should be further evaluated for food security analysis

Calculate month-to-month % changes & evaluate magnitude of volatility

WFP Markets Learning Programme 3.2 2Price Analysis Training

Seasonality Month to month price fluctuations may represent normal

seasonal cycles which are determined by:

• seasonal calendar (harvest, lean season)

• longer cycles relating to drought, flooding etc…

Normal price trends or cycles are identified by comparing to long-run averages (typically 5-year averages)

Particularly useful in a monitoring context to signal possible abnormalities in supply/demand

WFP Markets Learning Programme 3.2 3Price Analysis Training

Quick Case Seasonal Impacts on Food Prices in Mozambique

WFP Markets Learning Programme Price Analysis Training 2.3.4

Task: Read Quick Case and, with a partner, discuss questions below:

Analysis of maize prices in Mozambique shows significant price fluctuation since 2003. In 2008 maize prices were 50% above 5 year average & 66% above 2007’s average in Maputo. In Beira maize prices were 65% above 5 year average and 83% above same time in 2007.

Current causes of high food prices appear cyclical and seasonal depending more on climate extreme conditions (e.g. droughts, floods, cyclones). Southern Mozambique generally experiences high food prices because of drought; rural areas in south are remote, isolated from markets. Other drivers include decline in government grain reserves, high cost of fuel, increased demand for maize by milling companies.

• According to the case, what are the reasons for food price fluctuation in Mozambique?

• How do seasonal concerns play a role in these fluctuations?

Adapted from: Gandure, Dr. Sithabiso, “High Food Prices in the Eastern, Central and Southern Africa: Assessing Impact and Tracking Progress Towards Meeting the CFA Objectives,” WFP, December 2008.

Price Seasonality


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Seasonal rice price – Lao PDR


Food prices decrease from Oct to Dec due to increased availability of rice from main rice harvest season in lowlands. Subsequent months of rice harvest in the uplands from January to March have less impact on food prices because of limited production. From March to October, trading of small quantities for nonfood needs and own consumption reduce food availability, resulting in upward trend of food prices.

Quick Case Price Seasonals in Benin

Task: Read Quick Case and, with a partner, discuss questions below:

“After peaking in August, the price of beans has fallen by 34% over the past two months. As with maize, this is mainly due to the harvest, with the important exception that the downturn pressure is steeper than the usual seasonal trend. In fact, from August until October the price of beans normally does not decrease at all, as the usual downturn usually occurs between the month of October and the end of the year.

Another similarity vis-à-vis maize is that despite the recent drop, the price is still 18% higher than seasonal trend and 60% higher than last year’s level.”What is the “normal” seasonal price trend for beans in Benin?What might account for differences from the normal trend this year ?

WFP Market Bulletin, November 2008.


Price Seasonals: Volatility

Excessive month-to-month changes that are not explained by seasonality or normal trends imply price volatility & greater uncertainty

WFP Markets Learning Programme 3.2.8


Lower volatility:

• means prices decline less during harvest time; farmers who sell get better prices

• means prices rise less during lean season; HHs who buy pay lower prices

• reduces uncertainty

HHs facing less uncertainty might avoid strategies that make them less vulnerable to shocks, but also generally yield lower incomes



Volatility measured with a “Coefficient of Variation” (“CV”)

Measures amount of dispersion of prices over time & space

Looking at short-term moving average of CV can help in monitoring and early warning of market instabilities

3-5-7 month CMAs can be calculated of the CV for a shorter view on volatility in prices

General formula:

Where sigma = standard deviation and miu = average


Price Seasonals – Volatility across space

Coefficient of variation of sorghum prices

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Darfur Rest of Sudan

Prices in rest of Sudan appear more volatile than prices in Darfur

Volatility in prices in rest of Sudan and Darfur began a downward trend in 2007


Price Seasonals – Volatility across space

Volatility of relative sorghum prices in Sudan

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Volatility of relative sorghum prices in Sudan


Price Seasonals – Volatility across time

Volatility of Average National Sorghum Prices across time

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Volatility of average national sorghum prices across time


Please turn to Workbook Exercise 3.2.

The Marketastan File: Seasonality in Northern Marketastan, Parts I and II (use Excel data file: 3.2. Marketastan Seasonality Exercise.xls)


Small Group Work

Marketastan 3.2. Debriefing

Part I:

1. Wheat price trends for 3 regions for past five years. What do you observe?

2. 5-year averages for wheat prices for 3 regions. What do you observe with regard to seasonality?

3. Seasonal index for 3 regions. What do you observe?

4. How would you respond to the Commissioner’s remarks? Is he correct? Is current situation in North abnormal? Why?


Marketastan 3.2. Debriefing

Part II: How does your volatility analysis support

– or refute – your analysis from Part I of this exercise?

Do you agree with the Commissioner?


Wrap-UpSeasonality & Volatility Analyses

Interpretation: Informs supply: seasonality of production, supply shocks, frequency of droughts, floods,

pests, diseases…

Informs access: price volatility flags risk and vulnerability factor

Complementary information needs:

• Livelihoods profiling: terms of trade

• History of shocks and monitoring of contextual factors

Decision-making: Informs important aspects related to:

• Volatility Free food vs. food-for-work or cash/voucher

• Seasonality Timing of food assistance

• Seasonality and Volatility Local purchase (timing)

• Early warning


Outstanding concerns?


pat seasonality and volatility session 3.2. wfp markets learning programme3.2. 1 price analysis...

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