Agricultural pricing systems and transportation policy in Africa

Abstract

When agricultural production is taxed, the system of producer prices, transport logistics, and decisions on investments in transport for exports must be considered together. Many African states raise revenue by taxing export crops. A common tool for this purpose is marketing boards. Marketing boards purchase crops at depots established near areas of cultivation, at prices that yield a profit to the board. The boards also arrange for processing and the transport of the product from depots to port. The cost of transport to the farmer, given the price offered for his crop at the depot, will affect his decision on production and on the use of his own transport resources. The author evaluates the benefits available from alternative uses of the instruments available to the marketing board. Returns to transport investments are largest under pan-territorial pricing, lower under optimal pricing, and the least under a pure export tax. The author also examines different patterns of depot location. Unless depots are densely spaced, farmers may deliver their crops to the depot nearest to them. The paper demonstrates the interdependence of agricultural pricing policy and marketing board logistics with transport use and the demand for transport investments.Economic Theory&Research,Markets and Market Access,Access to Markets,Banks&Banking Reform,Municipal Financial Management