Lim­i­ta­tions in agri­cul­tural based economies

Chronicle (Zimbabwe) - - Business - Agri­cul­ture Colum­nol­umn Ta­puwa Mashang­waangwa

THE world is driven­riven by a con­stant food sup­ply throughrough which ac­cess to ad­e­quate foodod is the ba­sic need for all on peo­plele earth. This makes agri­cul­ture one of the largest and most sig­nifi­f­i­cant in­dus­tries in the world. Agri­cul­tural pro­duc­tiv­i­tyty is im­por­tant not only for a coun­try’s bal­ancece of trade, but the se­cu­rity and health of its pop­u­la­tion as well.

Ac­cord­ing to an ar­ti­clee Top Agri­cul­tural Pro­duc­ing Coun­tries by Stephen­tephen D. Simp­son there are nu­mer­ous ways of as­sess­ing agri­cul­tural out­put, in­clud­ingding sheer ton­nage and the dol­lar vol­ume off the com­modi­ties pro­duced.

It is im­por­tant to look att both, as it is of­ten the case that com­modi­ties crit­i­cal to the food sup­ply of less-de­vel­oped coun­tries do not show up as high dol­lar-val­uelue crops.

Lim­i­ta­tions to­wards a fully de­vel­oped agri­cul­tural based econ­o­mymy in­clude; price in­sta­bil­ity, in­come in­sta­bil­i­ty­ity and gov­ern­ment in­ter­ven­tion, as ex­plained by D Gale John­son.

The in­sta­bil­ity of farm prices re­sults from sev­eral fac­tors.

One is the rel­a­tive slow­ness­wness with which farm­ers are able to re­spondd to changes in the demand for their prod­uct.

Farm­ers gen­er­ally mus­tust pro­duce on the ba­sis of ex­pec­ta­tions,cta­tions, and if their ex­pec­ta­tions turn out to be wrong, the re­sult­ing sur­plus or short­age can­not be cor­rected un­til the be­gin­ning of the next pro­duc­tion cy­cle.

Once a crop is planted, very lit­tle can be done to in­crease or de­crease pro­duc­tion in re­sponse to market prices.

As long as prices cover cur­rent oper­at­ing costs, such as the cost of har­vest­ing, it pays farm­ers to carry through their pro­duc­tion plans even if prices fall to a very low level.

It is not un­usual for the prices of par­tic­u­lar farm prod­ucts to vary by a third or a half from year to year.

This ex­treme vari­abil­ity re­sults from the rel­a­tively low re­spon­sive­ness of demand to changes in price, from the fact that in or­der to in­crease sales by five per­cent it may be nec­es­sary to re­duce the price by 15 per­cent.

The in­sta­bil­ity of farm prices is ac­com­pa­nied by in­sta­bil­ity of farm in­come.

While gross in­come from agri­cul­ture gen­er­ally does not vary as much as do in­di­vid­ual farm prices, net in­come may vary more than prices. I

n mod­ern agri­cul­ture costs tend to be rel­a­tively sta­ble; the farmer is un­able to com­pen­sate for a drop in prices by re­duc­ing his pay­ments for ma­chin­ery, fer­tiliser, or labour.

The in­comes of farm work­ers are gen­er­ally below those of other work­ers. There a re two ma­jor rea­sons for this in­equity. One is that in most economies the need for farm labour is de­clin­ing, and each year large num­bers of farm peo­ple, es­pe­cially young ones, must leave their homes to seek jobs else­where. The dif­fer­ence in re­turns to labour is re­quired to bring about this trans­fer of work­ers out of farm­ing; if the trans­fer did not oc­cur, farm in­comes would be even more de­pressed. The sec­ond ma­jor rea­son for the in­come dif­fer­ences is that farm peo­ple gen­er­ally have less ed­u­ca­tion than do non­farm peo­ple and are able to earn less at non­farm jobs. The dif­fer­ence in ed­u­ca­tion is of long stand­ing and is found in all coun­tries, de­vel­oped and un­de­vel­oped; it also ex­ists whether the na­tional ed­u­ca­tion sys­tem is highly de­cen­tral­ized, as in the United States, or highly cen­tral­ized, as in France. Gov­ern­ments have em­ployed var­i­ous mea­sures to main­tain farm prices and in­comes above what the market would oth­er­wise have yielded. Th­ese have in­cluded tar­iffs or im­port levies, im­port quo­tas, ex­port sub­si­dies, di­rect pay­ments to farm­ers, and lim­i­ta­tions on pro­duc­tion.

Tar­iffs and im­port quo­tas can be ef­fec­tive only if a nation nor­mally im­ports some of its sup­ply.

Ex­port sub­si­dies re­sult in higher prices to do­mes­tic con­sumers than to for­eign pur­chasers; their use re­quires con­trol over im­ports to prevent for­eign sup­plies from en­ter­ing the do­mes­tic market and bring­ing prices down.

Di­rect pay­ments­paym to farm­ers have been used to main­tain prprices to con­sumers at rea­son­able lev­els, while as­suringa farm­ers a re­turn above world-market lev­els.

Lim­i­ta­tions on pro­duc­tion, in­tended to re­duce sup­ply and thus in­crease prices, have been used main­lyma in Brazil (for cof­fee) and in the United StatesSta (for ma­jor crops).

The best wway for coun­tries to pro­duce more is by mmin­imis­ing lit­tle land al­lowed to go to waste aand en­sur­ing that in­fra­struc­ture like roads are well-de­vel­oped as prac­tised by most western coun­tries.

Un­for­tu­natUn­for­tu­nately in Africa and much of South Asia in­fras­truc­ture­in­frastr is ex­tremely un­der­de­vel­oped de­vel­ope­dun­derde­vel­oped and sim­ply get­ting crops to market (or in­puts lik­like fer­tiliser to the farms) can be a strug­gle.

Like­wise, ir­ri­ga­tion in­fra­struc­ture is lack­ing, leav­in­gleavin farm­ers much more ex­posed to the vari­abi­vari­abil­ity of weather.

Not sur­prisur­pris­ingly, then, a large fo­cus of gov­ern­ments in th­ese coun­tries is to try to build roads, im­prove ac­cess to wa­ter and en­cour­age the use of in­puts, like fer­tiliser.

Given the im­im­por­tance of agri­cul­ture and the im­por­tance ofo in­creas­ing yields, com­pa­nies that fa­cil­i­tate higher pro­duc­tion should find their prod­uct­sprod­uct in in­creas­ing demand.

Whether itit’s agri­cul­tural equip­ment like trac­tors, in­putsinpu like fer­tiliser and her­bi­cide, or higher-yield­ingyiel mod­i­fied seeds, com­pa­nies serv­ing the glob­alg agri­cul­ture market have a large and still un­der-served market to ad­dress.

The writer­writ is En­gi­neer Ta­puwa Jus­tice Mashangwa, a young en­trepreneur based in Bu­l­awayo, FounderF and CEO of Emer­ald Agribusi­ness Con­sul­tancy. He can be con­tacted on +263739096418 and email: t tj­mashangwa@gmail.com

Brazil­ian cof­fee beans

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