How do markets respond to extreme rainfall in West Africa? This paper examines
the effect of weather on grain market performance in Niger, a country increasingly
affected by drought and severe food crises over the past two decades. Using a
dataset that combines information on rainfall, agricultural production, prices and
transaction costs, I exploit rainfall variation to estimate the impact of drought on
grain market performance between 1997 and 2006. Time series tests suggest that
grain markets in Niger respond to supply shocks and that markets are more
integrated during drought years. Exploiting the exogeneity of extreme rainfall in a
difference-in-differences framework supports these findings: drought reduces grain
price dispersion across markets. This impact is stronger as a higher percentage of
markets are affected by drought, as was the case in 2004/2005, the year of a
severe food crisis. The results suggest that early warning systems in West Africa
should focus on the spatial impact of drought at the sub-regional level, as well as
monitor prices in key forecasting markets during the harvest period.