AN ANALYSIS OF THE EFFECTS OF GOVERNMENT FOOD GRAIN PRICE POLICIES IN SOMALIA, 1971-1983

Abstract

This paper is a retrospective analysis of the effects of Somalia's price policies for maize and sorghum between 1971 and 1983. Maize and sorghum are the two most important dietary staple foods and represent over 96 percent of the cereal production of the country. Since the early 1970's, the government has pursued an economic policy framework which emphasized the public sector and parastatals were given a prominent role in agricultural production and marketing activities. Private trade in maize and sorghum was banned during this period, and a government agency took over the grain marketing and distribution activities in the country. Despite the government's goals to increase cereal production, maize and sorghum output stagnated during the period and declined on a per capita basis. The purpose of this paper is to provide the information necessary for understanding the impact of the price policies pursued by the government for these two major crops on farmer's incentives, production and consumption patterns, and economic efficiency. The paper examines the various effects of the pricing policies through an analysis based on the limited data available about the country. The analysis is expected to reveal the social costs and/or gains of cheap food-grain policies, and the tradeoffs involved between consumer subsidization and attempts to persuade farmers to increase output. It is necessary, however, to point out here that this analysis is solely based on the static, short-run effects of lower product prices and is by no means an advocacy of price fundamentalism. Although prices play a major role in influencing the quantities produced and consumed of individual crops and aggregate agricultural output, this paper does not downplay the importance of technological advancement and supporting services in agriculture as a crucial part of comprehensive government policy packages required for increasing agricultural productivity and output.