Agriculture Reference
In-Depth Information
move excess grain out of an area (Devereux, 2012). Seasonal price spreads can be explained
by storage losses, large post-harvest grain sales and lack of trader participation in isolated
markets during average and good years (Alderman and Shively, 1996). Thus price seasonality
is negatively related with production anomalies, where higher (lower) production will create
lower (higher) prices during the post-harvest season because of the inability or unwillingness
of households and traders to store grain. In general, however, markets that show seasonality
in food prices are less well functioning than markets that do not (Kshirsagar 2012).
Beyond variations in the weather, another source of seasonality in food prices in thin
markets is the seasonality of transportation costs. Little is known about the variability of trans-
portation costs in each of the markets of this study, but rainfall and poor roads, increased
demand for movement of goods and people during the rainy season, and the increased diffi-
culty of distributing fuel and other necessities for transportation make it likely that transporta-
tion costs more during the growing seasons (Alderman and Shively, 1996). Transaction costs
are the costs incurred in making an economic exchange: determining the price and the
demand for a good in a market, the cost of bargaining for a fair price and the cost of policing
and enforcement in the market (Asante et al ., 1989; Fafchamps, 2004). All of these costs are
also likely to be seasonal. These effects taken together mean that without targeted interven-
tions food prices and food availability is likely to be seasonal.
Cornia et al. (2012) describes the various government policy interventions that have been
used to deal with price increases:
• improving“productionbasedentitlements,”orprovidingsubsidiesaimedatincreasing
the amount of food produced and used for self-consumption;
• improving“tradebasedentitlements,”orpricestabilizationthroughmarketingboardsor
state-subsidized sales during periods of high prices;
• improving“laborbasedentitlements”ofthelaunchofpublic-workschemesthatcan
support household incomes during the lean season; and
• raising“transferbasedentitlements”orprovidingfoodaidorcashtransfersduringtimes
of extreme need (Devereux et al ., 2008).
The first two of these have been discouraged as a method of dealing with the underlying
problem of lack of adequate per capita food production, but the last two have been strength-
ened (Cornia et al ., 2012). The use of food imports to stabilize domestic production during
times of rapid price escalation has increased significantly during a period when international
commodity prices have also increased, reducing the effectiveness of these interventions
(Cornia et al ., 2012). The ineffectiveness of local food markets and transportation infrastruc-
ture to deliver adequate supplies during times of high food prices can be observed in wide-
spread food price seasonality. Seasonality and high local prices continue to be a significant
source of uncertainty and suffering in many least developed countries (Ehrhart and Gueri-
neau, 2011; Hazell, 2013; Kydd, 2009).
High and volatile international food prices, which could provide alternative goods to
poorly supplied local markets, make food production a critical component of the economy in
food insecure regions. With high prices and significant transportation costs to move grain
across long distances, producing more locally will become an important source of vitality for
programs focused on reducing poverty (Nin-Pratt et al ., 2011; Rakotoarisoa et al ., 2011).
Sourcing food from agricultural areas within each country keeps the profits from feeding
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