Thursday, February 24, 2011

Food price controls

I was looking up information on the Kenya maize price controls from last year to find out if they were still in effect. I found several copies of the same article with a headline that really misses the point. The headline is:
Maize Price Controls Rejected
But that's not what the article is about. Farmers petitioned the Kenyan government: if you're going to go around setting prices, the least you could do is tell us what the prices will be before we plant the seed so we can be prepared. The government's answer was that such a policy would be "an utopian market situation" but that's just not how the Real World works. The government has not ruled out setting prices, or making its grain reserves purchasing and selling practices more transparent (though progress has been made in that direction), but has only decided that it will not set prices at the "utopian" timing that would allow economic actors to plan appropriately.

Aid Thoughts featured two anonymous guest posts on the Malawian fertilizer subsidies, neither of which is as robustly positive as most reactions. The first argues that operational efficiency is the wrong metric to use to evaluate the subsidies because mere technical efficiency does not address opportunity costs or sustainability. What else could be done with the same funds (s/he suggests irrigation investment or investment outside agriculture as two possible counterfactuals)? The second also asks to what extent the program is encouraging overall economic growth and movement out of subsistence agriculture. Without lasting growth of some kind, all the gains would disappear should the subsidy be removed the next time there is a financial crisis.

Fairlie has argued that the livestock sector performs an essential role in reducing downward risk for cereal farmers. If farmers have a good harvest, they don't have to worry about prices crashing through the floor because the animals will eat it. This encourages higher average production, lower average grain prices, and less elastic/less volatile grain markets. This function is then a key public good that livestock provide.

Meanwhile, Syria has been increasing cash payments to poor people, reducing prices on basic foods, and introduced a heating fuel subsidy (72%) for public sector workers just days after Tunisia's leader left office.

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