English

38 Pages·2015·0.68 MB·English

Pricing Policies
to Promote Rice Production and Marketing
November 17, 2015
th
at Pre-Conference Seminar of the 6 CARD General Meeting
Takanori SATOYAMA
General Coordinator
CARD Secretariat
Outline
1. Introduction
2. Critiques vs Justifications
3. Pricing Policies on Farm Inputs
4. Pricing Policies on Farm Outputs
5. Conclusion
1. INTRODUCTION
1. Introduction
Our desire is farmers to increase their rice production
Need to understand their economy, influencing decision making:
• Production Quantity = f (inputs, land, labor, water, climate and
other factors)
• Revenue = Products Quantity x Price of Farm Products
sum Cost Cost Cost Cost
• Cost = (Input , Labor , Rent, Water , Marketing )
• Profit = Revenue – Cost
Three scenarios; Positive, Negative, or Zero
Risks and other limiting factors: e.g. Postharvest loss, Market
access, financial capacity, limited access to land and water
1. Introduction
For farmers to produce more, their profit should be large
enough and their risks should be lowered
Profit = Revenue – Cost s um C C C C
Profit = Revenue (produce x price) – Cost (inputs , rent, labor , Mkting , other factors )
e.g. Price support, e.g. Subsidy, Grant
Price Stabilization
Pricing policies on Inputs and Outputs can increase Farmers revenue
Risks and other limiting factors
Counter measures against risks and other limiting factors
e.g. Introduction of new technologies (varieties, chemical), Crop
insurance, improved storage, irrigation and land development,
financial service provision,
1. Introduction
Main focus of this presentation is to answer the
following questions:
Is Pricing Policy bad news or good news for private
sector ?
If it helps private sector, How it should be done?
2. CRITIQUES VS JUSTIFICATIONS
2. Critiques vs Justifications
< Critiques >
• Markets should not be distorted
Alternative measures:
For Revenue- Social Safety net, more liberalized trade, private stock
Market-oriented risk management schemes such as insurance
For Cost – credit service, extension services, infrastructure
• Pricing Policies are too costly
Empirically, Input subsidy program can go far more than half of agricultural
budget (Howard and Mungoma, 1997) and Food price stabilization mechanism
can cost 3-5% of countries’ GDP (Jayne and Jones 1997, Minot and Rashid, 2013) .
(e.g. Cost of FISP in Malawi, Maize purchase program in Zambia, rice purchase
program in Japan and Thailand,)
• Gov’t interventions in input/output markets kill private sector
Public interventions will deprive private business opportunities (e.g. NMC
experience in Tanzania, fertilizer market in Malawi, cereal trade in Zambia)
• Pricing Policies are not sustainable
2. Critiques vs Justifications
< Justifications>
• Free market does not work since market is already distorted by politics at the
other side of the world (e.g massive subsidies on agriculture in developed countries)
• Market failure in Africa (due to weak infrastructure and institution, disorganized
markets, disintegrated value chain and asymmetric information)
• Considering its importance and impacts on society, Increasing Self Sufficiency
rate of major staple food crops can be justified for Food Sovereignty, food
security, political and national security
• This is critical in the Volatile World Food Market - particularly in thin and volatile
domestic and international rice markets
• Cost of “absence” of pricing policies (Though costly, it can be cheaper than
other options such as food aid and import, depending on methods and degree)
• Import substitution (preventing drain of foreign exchange)
• Killing Private sector ? Not necessarily.
(e.g. Early period of Malawi FISP, subsidy on seeds in Burkina Faso)
• Sustainability is not the question for main staple food crops
Anyways pricing policy globally prevails (Demeke et.al 2007),
and “How” is very important
3 PRICING POLICIES ON FARM INPUTS