1 Integration between cattle markets in the Sudan, 1980-2000 Nawal M. M. Babiker 1 and Mohammed O. A. Bushara 2 1 Department of Agricultural Economics, Faculty of Agriculture and Natural Resources Abuharaz, University of Gezira, Wad Medani, Sudan. 2 Department of Agricultural Economics, Faculty of Agricultural Sciences, University of Gezira, Wad Medani, Sudan. ABSTRACT Long and short run price relationships in Sudanese cattle markets were evaluated in a system of equations using Johansen cointegration and error correction representation procedure with monthly real price data for the period January 1980 – December 2000. Empirical results suggest the existence of a unique long run or equilibrium relationship among cattle prices. The error correction terms were significant, confirming the existence of the long run relationship. A dummy variable capturing the effects of telecommunications improvements and liberalisation polices have emerged as important determinants of cattle prices function. This can be interpreted that, the telecommunications improvement and liberalization policy in Sudan improved the extent of price transmission across spatially separated markets. The error correction models have also been found robust as they satisfy almost all relevant diagnostic tests. The short run and the causality results suggest the lead of Omdurman market, implying that the system is demand driven. The impulse response analysis implied that, in any price shock in any particular area, markets in other areas will respond. However, as implied by the small magnitude of the error correction terms (0.06 - 0.16), the speed of prices adjustment is still low, which implies market liberalisation by itself cannot achieve a structural change in market integration unless more investments in marketing infrastructure (transportation, communication, etc.) are undertaken. INTRODUCTION Cattle make a form of productive capital, providing a stream of desired goods and services, including milk, meat, manure and traction. They also serve as an important store of wealth and contribution to the livelihood of farmers and herders and is a source of self-insurance against income shocks. By allocating livestock efficiently over space, spatial market integration should foster a sustainable use of pasture resources. It is also expected to favour the sharing of risk across regions by smoothing price variations. The cointegration models, a blend between economic theory and data properties of economic time series, gained overwhelming popularity in empirical researches. This study contributes to this area by applying the recently developed cointegration technique to cattle market in Sudan. Markets are cointegrated if a change in one market will cause changes in the other markets, or if changes in markets do not happen independently (Wyeth, 1992). There are many intuitive ideas behind the measurement of market integration. Under certain conditions, following the structure-conduct-performance approach, the existence of price cointegration may be viewed as a necessary condition for efficient allocation of resources and hence, maximum welfare (Baulch 1997; Goletti et. al., 1995; Palaskas and Harris-White, 1993; Palaskas 1999; Baharumshah and Habibullah, 1994; Williams and Bessler, 1997). Munir et al. (1997) stated that market cointegration