ANALYSIS OF SUPPLY RESPONSE AND DEMAND FOR LOCAL RICE(Oryza sativa L.)IN NIGER AND BENUE STATES, NIGERIA (1980-2016)

Abstract

Local This research was conducted to analyze supply response and demand for local rice (Oryza sativa L.) in Niger and Benue States. The Objectives of the study were to describe the socio-economic characteristics of local Rice consumers, analyze the trends of local Rice supply, and determine the responsiveness of local Rice to changes in price and non-price factors. The research further assessed the effect of Local Rice characteristics on its price and examine the factors inhibiting the purchase of locally produced Rice in Niger and Benue States. A multi-stage sampling technique was employed to obtain 281 producers and consumers of local Rice. Primary data was used to describe the socio-economic characteristics of the respondents. An exponential growth model was used to estimate the production growth of Niger and Benue States using secondary data (from 1980 to 2016). The Vector Autoregressive model (VAR) was used to estimate Local Rice production variables that Granger cause local Rice supply while an ARDL model was used to estimate structural breaks. The LA/Almost Ideal Demand System (LA/AIDS) was used to estimate the expenditure share, respondent’s price elasticity, cross elasticity and income elasticity of both short local Rice and long local Rice grains. Hedonic model and Kendall’s coefficient of concordance were used to determine the effect of local Rice characteristics on its price and examined the factors inhibiting the consumption of local Rice respectively. The result indicated mean age of 45, 47 and 46 for the respondents Niger, Benue States and pooled. The mean annual incomes were N414,489 and N452, 000 for Niger and Benue States respectively, from 1980-2016, there were 1.90 and 1.36 percent local Rice production growth in Niger and Benue States. The Granger caused production of local Rice in Niger and Benue States. The result of OLS also confirmed that 96% of local rice 2 production were due to variables like area, yield, price, fertilizer and rainfall. The result of LA/Almost Ideal Demand System reveals that local Rice is a normal good and is expenditure inelastic. It also shows that long local Rice and short local Rice grains were substitutes.It is noteworthy that the coefficient of the price of short grain Rice was significantly negative and that of the substitute long grain Rice was significantly positive in influencing the share of the expenditure on short grain Rice. This implies that an increase in the prices of short grain local Rice will reduce households’ expenditure share of short grain local Rice while increase in the price of the substitute, long grain local Rice will lead to Increase in the households’ expenditure share of short grain local Rice ceteris paribus, Similarly, coefficient of the price of long grain local Rice was significantly negative and that of the substitute short grain local Rice was significantly positive in influencing the share of the expenditure on long grain local Rice. The result of Hedonic model reveals that stone free, whiteness, aroma, cohesion and taste were all significant. This means that all these attributes have great effect on price of local Rice. When these characteristics are not there, the local Rice will command low price in market. The result of Kendal’s coefficient of concordance reveals 62 percent agreement of respondents on inhibiting factors of Local Rice. These respondents ranked the inhibiting factors as presence of foreign materials in that order.