Co-integration Test: An Application to Selected Sorghum Markets in Sudan

An attempt was made in the study to understand the nature of the market integration. The study was based mainly on monthly wholesale price of sorghum in four market locations; namely Khartoum, Elobied, Gdarif and Damazin. Sorghum wholesale price series was used for the period from January 2012 to December 2016. Unit root test, Johnson co-integration test and Error Correction model were used to disclose stationary series, the long run relationship and short run relationship between these markets, respectively. The result showed that, long run relationship was indicated between all pairs of markets, except between Khartoum and Elobied market (consumption or deficit market). Long run equilibrium indicated adjustment to surplus markets (Gadarief and Damazin). This result may be interpreted by the fact that these markets are connected by good communication and transportation. From ECM model, Wholesale sorghum prices in all markets (higher price) quickly fall back towards Gadarif market whereas Gadarif adjusts back to Khartoum. Also, higher wholesale prices in Damazin quickly fall back towards all markets. There is short run causality running from: Gadarif and Damazin to Khartoum, Gadarif to Elobied and Khartoum to Damazin market. Long run equilibrium indicated adjustment to surplus markets (Gadarief and Damazin).This result may be reflected to good communication and transportation between the markets.