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2 The price paid for farmers' produce

Main points in Chapter 2
The price paid for farmers' produce

What influences prices under the new system?

Traders prefer to go where roads are good…
… and will pay higher prices

A trader will be happier to make a visit if he can collect sizeable quantities and doesn't have to visit farmers individually.


Under the old system, the price paid by the marketing board for maize was set by the government. In most countries this price had two important characteristics: it was the same throughout the country and it was the same throughout the year.

Paying the same price throughout the country was seen as being fair to all. However, the problem with this policy was that it often encouraged farmers in remote areas to grow maize when they should have grown other crops which cost less to transport. Transporting large quantities of maize over distance was one reason why marketing boards ran into financial difficulties.

Paying the same price throughout the year meant that farmers were keen to deliver their maize to the marketing board as soon as possible. They had no incentive to store grain until the price went up. Farmers only invested in stores large enough to hold their families' own consumption needs over a year or so. They did not store maize meant to be sold. Now that the system has changed farmers are in a difficult situation because most do not have enough adequate storage, particularly for hybrid maize. As is discussed later in this Guide, hybrid maize requires a different kind of store because it is best stored shelled, not on the cob.


Under a liberalized marketing system, the prices which traders are prepared to pay vary throughout the country. This reflects the different costs that traders have to meet in getting the maize from the farmer to the market. Under the new system, the price will almost certainly rise over the season. Prices can be expected to be lowest immediately after harvest and then go up as supplies become scarcer. Thus, under the new system there is no such thing as a maize “price.” There are many prices and these may even vary within the same area, with some traders offering more than others at any particular time.

Under the old system governments usually tried to fix the maize price so that it was greater than the cost of production. This was in order to give the farmer a reasonable return for his labour. Under the new system, however, when there is a large surplus farmers may sometimes have to sell their maize for less than the cost of production. This is a problem faced by farmers throughout the world when prices are decided by market conditions.


There are a number of factors which influence the prices of products. These include:

Supply and demand

Prices of most products generally respond to both the quantity supplied and the quantity demanded of that product. In theory, when prices go up there will be a fall in demand and an increase in supply. In time, the amount supplied at a particular price will come to equal the amount demanded.

In the case of staple foods such as maize the situation is not so straightforward. Farmers do not, in the short term, have much control over how much of a product is produced. They can, for the following season, reduce the amount of maize they produce by using less fertilizer, not planting such a large area, growing other crops, or do just the opposite by increasing maize output. For any particular harvest, however, the prices they receive are very much influenced by the total amount produced in the country and region which, in turn, is mainly influenced by the weather.

Quantities of maize supplied by farmers to the market at a particular time will depend on several factors, including:

Figure 2

Demand for maize which farmers have available to sell will, likewise, depend on a range of factors:

It is important to stress that demand is a commercial concept and is not the same as need or requirements. For example, consumers in a country may each need to consume the equivalent of 150 kg of maize a year in order to obtain the required level of nutrition. But many may not be able to afford 150 kg. Effective demand for maize represents what people can afford to buy, together with anything the government may buy in order to feed poorer people. Demand may therefore be significantly less than 150 kg per capita.


While the supply and demand of maize will influence the general level of prices and the price trends, the actual price at which the farmer can sell his maize will depend on other factors as well — location is one of them.

Some reasons for this are discussed below:

Time of the year

While the level of prices will vary every year according to the general level of price inflation and the size of the harvest, they will almost always follow the same seasonal pattern. For a country which begins its harvest in April or May, it can be expected that consumer prices will be rising in the December to March period. In April they may stay more or less the same until the end of the month and then prices will begin to fall as a lot of new maize becomes available. Prices will continue to fall until June and will start to rise slightly in July, rising more steeply towards the end of the year.

The consumer price mirrors the price paid to the farmer. Normally, the farmer prices rise and fall a couple of weeks before the consumer price does as it takes some time for changes in the price of the raw material (maize) to filter through into changes to the maize meal price. However, this may not always be the case. A sudden shortage in the city could lead to a meal price rise which would only later result in higher maize prices to farmers. Factors affecting the seasonal price pattern are:


The extent to which various kinds of market information are available has an important influence on prices.

Collecting price information

Examples of information and how it can be used are:


In the days of marketing boards there usually existed standards relating to moisture content, damaged kernels and foreign-matter content. One of the factors contributing to the problems of the boards was that these standards were sometimes inadequately applied, if at all. Under the private marketing system there are rarely formal standards for domestic trade, although standards remain very necessary for international trade.

Although there may be no formal standards, traders and millers are still very aware of quality and, in effect, apply their own, unofficial standards. This may explain why they may offer one price to one farmer and a different price to another farmer in the same village.

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