Agriculture Reference
In-Depth Information
with Tsakok's approach, the quantification of price changes relating to policy changes is
considered to be complementary to measuring coefficients of protection and comparative
advantage which all contribute to effective policy analysis and design.
The treatment of prices needs to be highlighted at this point. The prices received by maize
producers represent the domestic prices employed in this analysis. These are also the prices
prevailing at the mill gate. Border price is the price prevailing at the point of entry (or exit)
for an internationally tradable commodity and represents its shadow price or opportunity
cost. For imported commodities, adjustments are made to accommodate the expenditures
on transportation, processing, and other post-harvest/marketing activities, in order to
equilibrate border prices with prices received by local farmers for the commodities. Internal
margins arising from milling must also be added if border prices are adjusted to mill-gate
prices. Due to shortage of sufficient time-series data, it was not possible to estimate the
price elasticities econometrically. However, these variables are expected to be quite low for
the following reasons:
1. The price elasticity of supply is expected to be close to zero because maize dominates the
cropping system and few food crops are available as close substitutes. Again, most of the
households grow maize for own-consumption so that price-effects on production are
minimal.
2. Maize production and consumption in Swaziland are governed by strong cultural
factors which means that price variations play a minimal role, especially in the dominant
subsistence sector.
3. The price elasticity of demand is also expected to be close to zero because maize is a
dietary staple with no close substitutes in the food system of Swaziland.
As a result, price elasticities of demand and supply were obtained from previous research
conducted to measure price distortions in the maize marketing system of South Africa
(Wright and Niewoudt, 1993). Results for South Africa are used because they are low
enough, being derived from studies that included communal areas where conditions and
dietary patterns are no different from what obtains in Swaziland. The price elasticity
estimates are also the nearest to a normal competitive marketing environment to allow for
the analysis of the welfare effects of alternative marketing arrangements for Swaziland. The
remaining parameters/variables were derived using the formulae as shown in Table 7.5.
7.3.8 Welfare effects of maize pricing and marketing policies in Swaziland
The results of the analysis with respect to welfare effects of the maize pricing and marketing
policies are presented in Table 7.7 for the six marketing seasons, 1998-2004 covered by the
study. Table 7.7 shows that both domestic and border prices have been increasing steadily
since the beginning of the reference period although they fell slightly at the beginning of
2003 after attaining a peak in 2002. It should be noted that the recent humanitarian and
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