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Comparative advantage and policy incentives for wheat production in Zimbabwe

Author: Morris, M.L.
Year: 1988
URI: http://hdl.handle.net/10883/1125
Abstract: Zimbabwe is unusual among SADCC countries in producing most of its own wheat. Between 1965 and 1975, rapid growth in wheat production transformed the nation from a net wheat importer to a net exporter. Although wheat consumption has since overtaken production and revived the need for imports, domestically produce wheat continues to make up the major part of supply. Recent developments suggest that Zimbabwe's current high level of wheat self-sufficiency may be threatened. Demographic and economic factors have increased the demand for bread and other wheat-based products more rapidly than domestic wheat production has been able to expand, forcing the government to rely on imports to make up the shortfall. Commercial imports averaged around 100,000 t in each of the last three years and would have been even greater had the government not imposed limits. Wheat is currently being rationed to millers, who claim that demand exceeds the available supply by at least 25-30%. While such figures are difficult to substantiate in the absence of reliable consumption data, the millers' claims are supported by the frequent appearance in Harare of bread lines. The widening gap between wheat supply and demand raises important policy questions. Some analysts have argued that wheat production could be increased considerably if official producer prices were raised to provide adequate incentives for farmers (Headicar 1987). Others have replied that wheat production is inherently unprofitable in Zimbabwe and that the country would be better off concentrating on traditional export crops such as tobacco and cotton to generate the foreign exchange with which to purchase wheat in global markets (Muir-Leresche 1987). The policy debate is complicated by the fact that most wheat is grown by large-scale commercial farmers; consequently, government policies affecting wheat are likely to have different impacts on commercial and communal producer groups. In an era of stagnating exports, spiralling food imports, and growing uncertainty about the future political climate in southern Africa, two central questions underlie wheat policy in Zimbabwe: 1) Is it an efficient use of resources for Zimbabwe to produce wheat, today and in the foreseeable future? 2) If it is now (or might soon become) efficient to produce wheat, what combination of policy incentives and technological change are needed to promote domestic wheat production? The objective of this paper is to provide answers to these two questions. The framework of analysis-involves the calculation of resource cost ratios to determine comparative advantage in the Middleveld and Highveld regions of Zimbabwe among six major crops--wheat, maize, soybeans, cotton, groundnuts, and tobacco. Crop budgets are used to assess private and social profitability of each ofthe six crops under current and potential future production scenarios. Social profitability can differ substantially from private profitability because of government policy interventions and market failures. Comparative advantage is determined by calculating the economic returns to domestic resources used in the production of each crop. The results of the budget analysis reveal the effects of current policies on resource allocation in commercial agriculture and provide a basis for judging whether agricultural policies have created producer incentives that are consistent with the national interest, in the sense of maximizing efficiency. The framework of analysis used in this paper should be of interest to analysts and policymakers not only in Zimbabwe, but also in other countries where difficult questions are being raised about how best to meet the rising demand for bread and other wheat-based products. The domestic resource cost (DRC) approach provides an operational method for measuring comparative advantage across crops and makes possible quantification of the cost of domestic wheat production vs. the cost of importing. Comparative advantage analysis thus has the potential to contribute to the food security dialogue in all countries.
Format: PDF
Language: English
Publisher: CIMMYT
Serie: CIMMYT Economics Working Paper
Copyright: CIMMYT manages Intellectual Assets as International Public Goods. The user is free to download, print, store and share this work. In case you want to translate or create any other derivative work and share or distribute such translation/derivative work, please contact CIMMYT-Knowledge-Center@cgiar.org indicating the work you want to use and the kind of use you intend; CIMMYT will contact you with the suitable license for that purpose.
Type: Working Paper
Country focus: Zimbabwe
Region: Southern Africa
Place of Publication: Mexico
Pages: v, 68 pages
Serie Number: 88-2
Country of Focus: Zimbabwe
Agrovoc: WHEAT
Agrovoc: AGRICULTURAL DEVELOPMENT
Agrovoc: ECONOMICS
Agrovoc: PRICE POLICIES
Agrovoc: PRODUCTION COSTS
Agrovoc: WHEAT
Agrovoc: AGRICULTURAL DEVELOPMENT
Agrovoc: ECONOMICS
Agrovoc: PRICE POLICIES
Agrovoc: PRODUCTION COSTS


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This item appears in the following Collection(s)

  • Socioeconomics
    Including topics such as farming systems, markets, impact & targeting, innovations, and GIS
  • Wheat
    Wheat - breeding, phytopathology, physiology, quality, biotech

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