CHAPTER 1

INTRODUCTION

1.1 Purpose of the manual

The purpose of this manual is to provide guidance to early warning professionals on

appropriate and sustainable methods for monitoring price data.  This manual will assist the

analyst to understand: 1) what influences price behavior, 2) how prices behave, 3) which

markets and commodities to monitor, 4) suggested procedures, and 5) what to report about

price and market developments in early warning publications.

The focus of this manual is primarily on using graphical analysis and visual interpretation.

The reason for this approach is that it is simple.  By plotting the data on a graph one can

easily see price trends, identify if there is missing data or data  outliers, and identify odd

price behavior.  There are a few instances where techniques for quantitative analysis or data

transformations are presented.  In these cases the justification for this analysis is provided, as

well as the techniques.

This manual is not intended to provide guidance on how to create a market information

system (MIS).  A MIS collects, manages, and disseminates market information.  Its primary

role is to increase market transparency by making market information available to all market

participants.  It also serves as a source of market information.  As such, it is the primary

source of price data for early warning.  This manual assumes that a MIS or other sources of

price data are readily available.  These alternative sources of price data are also discussed in

this manual.

This manual is intended to complement and reinforce concepts presented in other available

documents.  For example, SADC Regional Early Warning System has developed a series of

Technical Handbooks, including  Market Information for Early Warning  (written by Jan

Helder and Jan Joost  Nijhoff) and  Food Security Bulletins  Vol 1: Analytical Content of

Monthly Bulletins  (written by  Yeb Hiemstra).  Within the FEWS Project two documents

are worth noting.  First, the initial exploration of using price data in early warning was

presented in  Price data in a famine early warning  (written by Chuck May).  Second,

FEWS/Somalia (written by Philip  Steffen and  Sidow  Addou) developed a set of training

materials on markets and marketing systems.

1.2 Challenges of price analysis

The main challenge to early warning professionals is to develop a system to monitor

prices that are consistent with both available resources (human and financial) and

decision maker needs.  Early warning professionals tend to be over extended in the

demands for their time and usually have limited resources.  This manual provides

practical suggestions that recognize these constraints.