Agricultural Development Economics


Stabilizing price incentives for staple grain producers in the context of broader agricultural policies: debates and country experiences
ESA Working Paper 12-05
Mulat Demeke, David Dawe, James Tefft, Tadele Ferede and Winnie Bell
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Price uncertainty is a major constraint to a sustained increase in staple food production. This paper reviews the trends and patterns of addressing this age-old problem over the course of the past several decades. Farmers in most developed countries and many Asian and Latin American countries have relied on a variety of public support programs as well as market-based marketing and price-risk management instruments to boost grain production. By contrast, inadequate support programs and weak market-based production services have led to stagnating production and increasing dependence on food imports in many poor African countries. State-led stabilization efforts that utilize and support private sector operations, complement market-based risk management instruments and address coordination failure and missing markets provide a better incentive to increase grain production. A more coordinated market stabilization effort is required in the future as a number of long-term structural factors such as climate change, water scarcity, high oil prices, soil degradation, biofuel production, and speculation in financial markets, point to a scenario of more volatile grain prices.
JEL Codes
Q18, Q130, E64