Limitations in agricultural based economies
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 email@example.com
Brazilian coffee beans