The ability of futures markets to predict subsequent spot prices has been a controversial topic for a number of years. Empirical evidence to date is mixed; for any given market, some studies find evidence of efficiency, others of inefficiency. In part, these apparently conflicting findings reflect differences in the time periods analyzed and the methods chosen for testing. A limitation of existing tests is the classification of markets as either efficient or inefficient with no assessment of the degree to which efficiency is present. This article presents tests for unbiasedness and efficiency across a range of commodity and financial futures markets, using a cointegration methodology, and develops a measure of relative efficiency. In general, the findings suggest that spot and futures prices are cointegrated with a slope coefficient that is close to unity, so that the postulated long‐run relationship is accepted. However, there is evidence that the long‐run relationship does not hold in the short run; specifically, changes in the spot price are explained by lagged differences in spot and futures prices as well as by the basis. This suggests that market inefficiencies exist in the sense that past information can be used by agents to predict spot price movements. A measure of the relative degree of inefficiency (based on forecast error variances) is then used to compare the performance of different markets. © 1999 John Wiley & Sons, Inc. Jrl Fut Mark 19: 413–432, 1999

Much research has been devoted to assessing the evidence for linear trend in a time series. We discuss the statistical implications of some recent developments, with specific application to 24 time series of relative primary commodities prices.

This study examines the responsiveness of peasant farmers in Ethiopia to price and non-price factors. Quadratic production and restricted profit functions are estimated using farm-level survey data from Ethiopia in 1994. The results indicate that farmers respond only modestly to price incentives. The own-price output supply elasticity is very low and output supply is not responsive to fertilizer prices or the wage rate. Non-price factors are far more important in affecting production and resource use than price incentives. The results are robust to whether the primal or dual approach is used to estimate elasticities. The results underscore the need to strengthen market incentives through effective policies that will improve farmers' access to fertilizer, land and credit, public investment in roads and irrigation. Copyright © 2004 John Wiley & Sons, Ltd.

Using farm‐level survey data from Ethiopia, this paper estimates a quadratic restricted profit function to assess the supply response of smallholder farmers. All major crops are identified in the analysis and variations in agro‐climatic and farming systems are accounted for. Peasant farmers, at least in the more commercial Central and Southern zones, do respond positively and significantly to price incentives. Farmers in the Northern zone are least commercial and least responsive to prices, and in fact the model based on profit maximisation does not adequately capture their behaviour. In general, non‐price factors, especially rainfall and market access, are more important than prices in affecting poduction, and which factors are most important varies depending on the crop and region in question. We conclude with suggestions regarding which crops appear most suitable to each agro‐climatic region, and identify the most relevant policy interventions in each case.

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