Agriculture Reference
In-Depth Information
Again, the yield figure used for computing the level of maize output per tonne and the
revenue is at the top end of the possibilities based on optimal adoption of improved
varieties. In addition, government tries to protect farmers from import competition by
raising domestic prices above import parity price. In spite of these favourable government
programmes which have created conducive production and marketing environments for
maize farmers, losses are still occurring in the maize industry. This means that if all subsidies
and other forms of support are eliminated, losses will be quite high. How serious this will
be is evidenced by the high negative social profitability shown in Table 7.9. We thus have a
situation where the maize industry is both privately and socially unprofitable. This means
that the maize industry is uncompetitive and the country has no comparative advantage in
the production of maize, at least within a regional context.
7.3.11 Distorting policies and market failures
In the analysis of the Swaziland Maize Industry, four distinct divergences have been examined,
namely the output transfer, the tradable input transfer, domestic input transfer, and the net
transfer price. These transfers measure the effects of distorting policies rather than market
failures. Along with these measures, a set of ratios were calculated using the same output,
price and value figures employed in the enterprise budget and the associated PAM.
Output transfer looks at the size of the actual revenue realized from maize production in
relation to what is potentially realizable. If there are no distortions, and in the absence of
market failures, the potential can be realized. The actual revenue is derived by expressing
the actual physical production in current market value terms, while the potential revenue
is derived by shadow pricing the current physical output. This measure therefore makes
a judgement on the effectiveness of the system in meeting the production objective of
maximum output at the minimum social costs.
Table 7.9 shows that a positive output transfer of SZL 250 was realized in this study. This
means that if there were no government interventions in the sector, revenues would fall by
SZL 250. Thus, the distorting policy of government setting domestic prices higher than
international prices favours domestic producers while hurting the economy at large. The
extent to which the policy favours private prices is indicated by the Nominal Protection
Coefficient ratio (Table 7.10).
An NPCO value of 1.29 was obtained for the Swaziland maize industry, implying that the
market prices in Swaziland are 29% higher than their true scarcity value. This means that
the government of Swaziland has policies in operation that raise the domestic market price
for maize. This in fact is true. Earlier, it has been revealed that maize prices in Swaziland are
slightly elevated to encourage domestic maize production in line with the national objective
of self-sufficiency in maize production.
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