Food Security and Poverty, Downloads July 2008-June 2009: 8,

Dione, Josue

Tefft, James F.

English

Research Papers in Economics

Page 1
Africa Bureau
Office of West Africa Affairs
Sahel Regional Program
 
POLICY SYNTHESIS
for USAID - Bureau for Africa
Office of West Africa Affairs, Sahel Regional Program
Number 10 October  1996
   PRISAS/INSAH-MSU-USAID SAHEL REGIONAL FOOD SECURITY
PROJECT:  RESULTS AND IMPACT
By
Josué Dioné and James Tefft
Food Security II Cooperative Agreement between U.S. Agency for International Development, Global Bureau, Economic Growth Center,
Office of Agriculture and Food Security and Department of Agricultural Economics, Michigan State University 
BACKGROUND:  Since mid-1994, the
Regional Food Security Program (PRISAS) of
the Institut du Sahel (INSAH) has monitored and
analyzed the impact of the CFA franc devalua-
tion  on income and food security in West Africa.
This work has been conducted collaboratively
with national research teams throughout the
region.  Support for this work comes from
USAID’s Africa Bureau, Office of West African
Affairs, Sahel Regional Program, via the
USAID-Michigan State University Food Security
II Cooperative Agreement. This bulletin summa-
rizes some preliminary findings of the work on
the impact of the CFA franc devaluation.
METHODS:  In 1994/95, PRISAS researchers
and the affiliated Sahelian national research
teams designed and implemented four sets of
country-level studies (Chad, Mali, Niger and
Senegal) to examine the effects of the devaluation
on relative prices, income and production costs of
major food commodities and related services.
The results and policy implications of these
studies’ findings were presented and debated
among researchers and research-output clients in
a regional workshop in June 1995, and in
national round tables in January and February
1996.  Each of these meetings brought together
technical advisers and high-ranking repre-
sentatives from the cabinets of Prime Ministers;
ministries of agriculture/rural development,
finance, commerce and planning; agricultural/
rural development projects; parastatal marketing
organizations (especially for cash crops); the
Central Bank and the Chamber of Agriculture.
The number of key representatives and decision
makers from the public and private sectors who
participated directly in these meetings was 15 in
Chad, 30 in Mali, 20 in Senegal and 5 in Niger.
Although it is too early to discern what effect
these studies and the ensuing debates will have on
policy, there is evidence that policymakers are
becoming increasingly aware of and concerned
with important policy issues in several areas.
Chief among these is the pricing of cash crops.
KEY FINDINGS AND IMPACTS:
Cash Crops
Cotton: Along with the 64% increase in world
cotton price, the 50% devaluation of the CFA
franc resulted in a 228% increase in the nominal
world price, expressed in CFAF between January
1994 (when the devaluation occurred) and May
1995.  Farm prices of cotton were set for the
1993/94 season prior to devaluation, and hence
showed little increase in the year following the
devaluation (Table 1).  With inflation running at
25 to 35% in these countries in 1994, and
production costs increasing by 40%, real incomes
of cotton producers fell sharply in 1994.  By
1994/95, some of the price increases began to be
passed through to farmers.  Nonetheless, the
farmers’ share of the world price fell
dramatically after devaluation in all four
countries, from around 50% to 25% in 1994.
(For comparison, U.S. cotton farmers received
63% of the world price in 1992/93.)   By 1996,
the Sahelian farmers’ share of the world price
had recovered to between 29 and 40% (Table 2). AFR/WA
 
FS II Policy Synthesis No. 10
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The  transmission  of  devaluation-induced  price taking place in Senegal’s Peanut Basin to
incentives from the world market to West African generate  and  sustain  gains  in  agricultural
Sahelian producers has been impeded by the productivity and competitiveness (Diagana and
price setting mechanism for cotton, which is Kelly).
heavily dominated by the governments via the
national  cotton  parastatals  (CMDT  in  Mali, Debate on these findings has led to the following
Coton-Tchad  in  Chad,  SODEFITEX  in  Senegal recommendations by the participants in the
and Société Cotonnière in Niger).  A critical national  round-table  meetings  described  earlier:
policy question is how these parastatals and
governments will use the gains they are reaping In Chad: The workshop participants recom-
from  the  devaluation--i.e.,  whether  they  will mended further study of the option of privatizing
invest them in a way that will increase the  cotton  company.    More  immediately,  partic-
productivity and incomes throughout the ipants  suggested  that  the  price-setting  mechanism
subsector  (e.g.,  through  developing  improved be revised to guarantee full participation of all
varieties and modernizing textile plants). cotton subsector actors, especially farmers, in the
Peanuts:  The same phenomenon of weak pass-
through of prices to farmers applies to peanuts in In Senegal: The participants recommended that
Senegal, where prices are set by SONACOS, a access  to  and  profitability  of  fertilizers  be
peanut marketing parastatal.  Although the nomi- improved  through  greater  liberalization  of
nal farm price rose with devaluation, relative to agricultural  input  and  output  markets,  the
1993, the farmers’ share of the world price reduction of administrative costs and taxes that
declined by 63% in 1994 and 54% in 1995. increase marketing costs, and research to develop
The domestic supply response to these stagnant fertilizers.
or falling real prices in Senegal is striking.
Cotton area and output decreased from 1993 In both Chad and Senegal: The outdated
levels by 20% in 1994 and 23% in 1995.  Peanut statistical  base  of  consumer  price  indices  was
production  increased  modestly,  but  in  an acknowledged.  Senegal has already taken a step
environmentally unsustainable way.  The modest forward in improving this database by creating a
increases in peanut production are due only to working group of professionals at ISRA and
better rainfall, an increase in the area planted, CREA (University of Dakar) that is charged  with
and a significant increase in planting density--a designing an action plan for improving the qual-
technique that  increases the rate of land degra- ity and availability of economic data and infor-
dation and loss of soil fertility considerably. mation  in  the  multi-institutional  system  setting.
Moreover, the increase in area of peanuts
cultivated was achieved at the expense of food Food Crops
crops (millet and maize particularly), leading to a
decrease in food consumption by peanut-
producing households. 
For traditional export crops still under strong
state control, the price-setting mechanisms have
adversely affected investment in agricultural
inputs (especially fertilizers) and equipment
because these pricing mechanisms have impeded
the  generation of increased farm income.  For in-
stance, the bulk of animal traction equipment in
Senegal is at least 15-years old; however, the
ability to replace this equipment has decreased
due to sharp increases in equipment prices
relative to low and declining real farm income as
well as the failure of agricultural credit institu-
tions.  It thus appears that, in spite of the large
increase in the export price of peanuts (when
expressed in F.CFA), no significant investment is
price negotiation.
more appropriate/affordable types/formula of
Rice: Research indicated that a large proportion
of the higher domestic prices of rice brought
about by the devaluation was quickly passed
back to farmers in the Office du Niger, Mali’s
largest irrigated rice zone, because of the
competitiveness of the rice marketing system.
However, the  combination of rice exports from
Mali to neighboring countries (especially Burkina
Faso), which were now profitable because of the
devaluation,  and the maintenance of high pre-
devaluation levels of import taxes on  rice,
resulted in reduced supplies and higher prices of
rice on Malian markets during 1994/95.  In order
to reduce the pressure on soaring consumer
prices, the Malian government decided in early
1995 to reduce import taxes on rice from 49% to
11%.  Some policy makers feared that this would
undermine local production incentives. AnalysisAFR/WA
 
FS II Policy Synthesis No. 10
Page 3
by the Malian market information system (SIM) formation of agriculture in the Sahel.  These
and INSAH/PRISAS showed that even with the notes will focus on key issues of the debate
tax reduction, irrigated rice production in  Mali’s including:    (1)  sectoral  linkages  between  agri-
Office du Niger  zone  remained  highly  profitable.  culture and the rest of the economy, (2)
In 1996, the government  further  reduced  the reconciling structural adjustment programs with
import tax to 6%. sustainable  agricultural  growth  objectives,  and
In contrast to the experience in Mali, Senegal increasing  rural  incomes.
initially protected its consumers from the full
impact of the devaluation by fixing producer Health and Education
prices, thereby depressing net farm income from
rice.  Farmers have responded by shifting
increasingly to horticultural crops in the irrigated
perimeters of the Senegal River.  Based partly on
evidence from the studies’ findings, the
Government of Senegal has initiated policy
changes to allow consumer prices to reflect
increases in the costs of imported inputs and
commodities.  In July 1995, the Senegalese
administration put an end to producer price
fixing for rice.
Maize:  A pilot study of the opportunities and
constraints in the maize subsector in Mali was
conducted by IER-MSU with contributions from
the PRISAS/INSAH regional project with regard
to scientific, technical and financial support.
This study recommended, as a measure
accompanying the devaluation of the CFA franc,
a 5% substitution of maize flour for wheat in
bread in order to increase demand for maize and
reduce imports of wheat.  In line with this recom-
mendation, the bread-making industry agreed  to
produce and test bread made of 85% wheat flour
and 15% maize flour for one month (March
1996) on the Bamako market.  Moreover, the
maize-subsector pilot study is frequently cited as
a basic reference by policymakers in debates on
cereals policies and by the Malian national
agricultural research system in strategic planning
exercises.  In addition, the food technology unit
of the national agricultural research institute
(IER) has adopted the approach used in the pilot
maize-subsector study for its applied research  to
develop processed food products that add value
to domestic agricultural commodities and meet
consumer preferences.
Agricultural Transformation  
In recognition of its past and current contri-
butions to policy analysis and debate, the
PRISAS/INSAH regional project has been asked
to produce thematic notes which will feed into the
national and sub-regional debates aimed at
devising an action plan for structural trans-
(3) strategies for financing agriculture and
In 1995, INSAH/PRISAS researchers, in con-
junction with two Malian experts, conducted two
case studies on the impact of the CFA franc
devaluation on health and education in Mali. The
studies focused on cost-induced changes in
people's access and adjustment to health and
education.  The results were presented at a
WHO-UNESCO conference in Geneva on these
themes.  As a consequence, UNESCO submitted
a proposal seeking PRISAS/INSAH support to
develop training aimed at developing local
capacity for analyzing the impact of policies and
institutions on education and health in West
Africa.
Gender Issues
Specific work has yet to be undertaken on gender
issues.  However, work pertaining to the topic is
being designed and will be carried out  in the near
future.  Work in this area includes:
-  A study of the impact of policy reforms and
structural adjustment on the role and resources of
women in ensuring rural household food security
in Mali;
-  An analysis of the effects of the CFA franc
devaluation on intra-household food consumption
patterns in urban Côte d'Ivoire, with disaggre-
gation of the impacts and adjustment by gender;
and
-  Country studies of the impact of the devalu-
ation on investment, productivity and
competitiveness of selected food and agricultural
commodity subsectors, using approaches and
methods that allow disaggregation by gender.AFR/WA
 
FS II Policy Synthesis No. 10
Page 4
 Table 1
Evolution of Nominal Farm Prices for Cotton,
1992/93 - 1995/96 (CFA F/kg)
(Figures in parentheses indicate %  change from
previous year)
Mali Niger Senegal Chad
ab
1992/93 85 85 75 100 77
1993/94 85 97.5 100 110 89
(0) (15) (33) (10) (16)
1994/95 125 150 139 150 120
(47) (54) (39) (36) (35)
1995/96 125 155 164 170 120
(0) (3) (18) (13) (0)
a, b:  Under the contract-plan governing cotton marketing
in Mali, in addition to an initial payment for their cotton
(noted in column a), farmers receive an additional
payment, similar to a patronage rebate in a cooperative.
The level of the rebate depends on the profitability of the
cotton organization, CMDT.  The figure in column b
represents the sum of the initial payment and the rebate.
Table 2
Farmers’ Share of World Price of Cotton, 1989/93-
1995/96 (Farm Price/World Price)
Farm Mali Niger Senegal Chad
Price/ FOB
World
Price
*
#
Average,
1989-93
0.50 0.52 0.46 0.49
1994 0.25 0.26 0.28 0.23
1995 0.35 0.32 0.35 0.28
1996 0.38 0.42 0.40 0.29
 Both prices expressed in fiber equivalent.
*
Mali farm price is before farmer rebate.  See Table 1 note.
# 
For more information on cash crops,  see:
Tefft, James. 1996. Comment profiter de
l’aubaine cotonière. Politique
d’Actualité: PRISAS Informations
Bulletin No. 96-02.  Bamako: PRISAS.
Diagana, Bocar, and Valerie Kelly.  1996.
Will the CFA Franc Devaluation
Enhance Sustainable Agricultural
Intensification in the Senegalese Peanut
Basin?  MSU Policy Synthesis No. 9.
East Lansing: Michigan State University. 
The research summarized here was carried out under the
USAID-Michigan State University (MSU) Food Security II
Cooperative Agreement, through MSU’s collaborative program
with the Institut du Sahel (INSAH) on regional food security
issues in the Sahel (PRISAS program).  Funding was provided
by USAID’s Africa Bureau, Office of West African Affairs,
Sahel Regional Program. The views expressed in this document
are exclusively those of the authors.
Josué Dioné is Coordinator of the PRISAS program at INSAH
and a Visiting Associate Professor of Agricultural Economics,
Michigan State University.  James Tefft is a Research Specialist,
Department of Agricultural Economics, Michigan State
University, based at INSAH.  

PRISAS/INSAH-MSU-USAID Sahel Regional Food Security Project: Results and Impact

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