5.2.2.1 Step 1: Understanding seasonal patterns

The purpose of this  analysis is to understand for a given market and commodity

combination the seasonal price trends.  By understanding these trends (done by explaining

unexpected behavior using the contextual information generated in Chapter 3) the analyst

will gain valuable insights that will facilitate analysis of  current prices.  Also, this process

can assist in identifying reference periods that will be useful comparisons for  current price

behavior.

An example of the output from this analytical procedure illustrates the behavior of maize

prices in Nairobi, Kenya for each year over the period of 1993 to 1997 (Figure 5.2).  The

multiple year periods was selected to provide a historical perspective of the price behavior

of maize for those years.

Figure 5.2.  Example of intra year seasonal price behavior

Maize prices in Nairobi Market (Kenya): 1993   1997

1,800

1,600

1,400

1,200

1,000

800

600

400

200

1993

0

1994

1995

Month

1996

1997

The following insights explain the observed price behavior in the Nairobi Market.

During the first part of 1994, maize prices were well above normal.  The reason for these

high prices is that Kenya was just coming out of a severe drought. During the second half

of 1994, prices exhibited normal seasonal levels, following an exceptionally good July 

November long rains harvest and exceptional imports.  The price pattern in 1995 was

surprisingly flat.  The reason for this was the exceptionally good July   November 1994

long rains harvest and the staggered releasing of grain on the market by traders.  This

tempered the usual increases in prices during the January   June period that resulted in the

flat price curve.  A near total maize crop failure occurred during the October December

short rains season in 1996. Thus maize prices appreciated dramatically during 1997 and

remained comparatively higher than normal levels throughout 1997.   Also, the

unexpected price patterns in 1993 and 1996 are explained by uncharacteristic price

appreciation after May that resulted from an expectation of below normal long rains

production.

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