IOSR Journal of Business and Management (IOSR-JBM) e-ISSN: 2278-487X.Volume 8, Issue 3 (Mar. - Apr. 2013), PP 50-53 www.iosrjournals.org www.iosrjournals.org 50 | Page Spatial Price Analysis of Paddy Rice in Ebonyi North Zone of Ebonyi State, Nigeria Nwibo, S. U.* 1 , Odo, N. E. 2 , Igberi, C. O. 3 1, 2, 3 Department of Agricultural Economics, Management and Extension, Ebonyi State University, Abakaliki, Nigeria Abstract: The study analysed the spatial price of paddy rice in Ebonyi North Zone of Ebonyi State. Data were collected using structured questionnaires administered on 120 paddy rice marketers purposively selected from the 8 markets locations in four Local Government Areas in the zone. Data collected were analyzed using descriptive and inferential statistical tools such as mean, percentage, frequency, simple regression and factor analysis. The result of the analysis shows that there exists spatiality in the prices of paddy rice in the zone. And that market locations, cost of transportation, availability of storage facilities, density of paddy buyers, market information, market organisation, and individual price fixing are the major factors influencing spatial price of paddy rice. The result equally shows that with the coefficient of multiple determination (R 2 ) of 0.768; about 77% in the total variations in the quantity of paddy rice sold was influenced by spatial price in the area. Despite the spatiality of prices in the markets the coefficients of elasticity in each of the market locations were elastic; thus depicting that that in every N 1 increase in the price of paddy rice will result into a unit increase in the quantity of paddy rice marketed. Consequent upon the general profitability of paddy rice marketing in the area, the individual Local Government Area market analysis shows that marketing of paddy rice is most profitable in Ohaukwu LGA. Based on the findings, the study recommended the provision of marketing infrastructures such as good roads to enhance easy delivery of paddy to the point of demand. Again, government marketing agency should provide and enforce the use of a standard unit of measure to enhance uniformity in the price of paddy in the area. Key words: Paddy rice, spatial price, marketers, market location. I. Introduction Variation of agricultural commodity prices between locations is a natural market phenomenon. Price variation is necessary for the existence of a market, as it creates the incentives that attract market players to engage in trade. Spatial price analysis is an important area of discuss in the structure of markets (Ravallion, 1986). Thus, it is not the spatial differences in of prices per se that should be of concern to the policy makers, but rather excessive variability and, in some cases, no or little variability of staple food prices across space. The need for spatial analysis arises because agricultural commodities are bulky, their production is seasonal, and production and consumption points are spatially dispersed. As a result, the transportation of a commodity from one market to another is costly and requires special efforts (Sexton et al, 1991). Spatial price analysis involves the study of spatial markets in which the concept of pricing efficiency is distinguished from the concept of market integration. Market locations across space often lack integration due to inadequate provision of public goods (such as infrastructure), inefficient flow of information, imperfect competition, and incomplete or missing institutions for risk management like credit and insurance—all of which qualify as sources of market failures. The pricing efficiency is the price-based notion of equilibrium, whereas the market integration is the flow-based indicator of tradability (Barrett, 2001). The efficiency is associated with a condition in which the marginal benefits from trade are zero. If trade in a location exists between two markets and trade volume is unregulated, the process of arbitrage is expected to lead to a spatial equilibrium, such that the price spread between the markets is equal to the transfer costs. However, when the trade volume reaches some ceiling value, the price spread between the markets is bounded below by the cost of arbitrage between these markets (Barrette, 2001). In the case of domestic markets, especially in developing countries like Nigeria, the volume of trade is unrestricted. In such situations, we expect the price spread between the markets to be bounded from above by the cost of arbitrage between the markets. If an equilibrium condition holds, it is said that the spatially separated markets are integrated (Goodwin and Schroeder, 1990), or the law of one price (LOP) prevails between the two markets (Zanias, 1999; Sexton et al., 1991), or the markets are spatially price efficient (Tomek and Robinson, 1990). Otherwise, the markets may have some constraints on efficient arbitrage such as trade barriers and information asymmetry (Ravallion, 1986; Barrett, 2002), or imperfect competition in one or more markets (Faminow and Benson, 1990). Hence, the study of spatial market relationships provides the extent to which markets are related to efficiency in pricing. If trade relates the two markets of interest, the shock in prices in the central market (surplus market) is expected to transmit to the local market (deficit market) as quickly as possible.