International Perspectives and Lessons Gained

Abstract

Experiences recorded from countries that are pushed into reforming their agricultural market by varied forces yield a mixed picture. The western developed countries, the transition and the centralized economies and the less developed countries of Africa are all examples of how difficult and uneven the path of reforms can be.

Notes

3.1.1 Grain Marketing Systems in the USA and Canada and Role of State Control

The USA is a large grain-producing country in which the domestic market has the dominant place although exports are also voluminous. The expansion of commercial grain farming was historically associated with settlements in Midwest, the Great Plains and the West and the development of railway networks. The country became one of the largest exporters of wheat since the latter half of the nineteenth century accounting for 44 % of world wheat trade back in the 1890s. This dominance was sustained barring a period in the 1930s.

Similarly, human settlement led to the evolution of the grain economy and its commercialization in Canadian Prairies aided by the growth of railroads. Major differences between the two countries arise from the fact that (a) despite the smaller volumes, exports are more important in Canada than in the USA, and (b) production and consumption centres are dispersed, shipping being done by a variety of transport modes like trains, trucks and barges in the USA whereas the two sets of centres are more concentrated in Canada, railways being the key means of transportation. However, what essentially distinguishes the marketing systems in the two neighbouring countries is the way the state interferes in the markets and the extent of privatization.

Historically, both countries had witnessed extensive development of farmers’ cooperatives in the 1920 but with little success that in any case ended with the Depression. The paths taken by them diverged thereafter. In Canada, nearly 80 % of the primary elevators are owned by cooperatives, and the government deeply regulates the transactions in the primary stage including the rates charged for handling and storage. In the USA, the role of cooperative is much less extensive, and the government does not interfere in fixing the rates. In the USA, the terminal markets evolved at inland ports under the dominant role of the private sector, while in Canada, these markets are much more concentrated geographically and are in control of the government or cooperatives. The transformation industry is in private hands in both countries, but processing is more important in the USA where livestock and the feed industry enjoy special importance. In Canada, railroads both public and private and some ferrying by waterways characterize transportation while trucks and river barge movements have provided alternatives to railways. Technological innovation and lower level of regulation have given more choices and flexibility for market responses in the USA while Canada fell behind.

In Canada, the Grain Board which was established during World War1 and became a target for agrarian protest against falling prices (Treleavan 1975) subsequently continued to regulate sales across interprovincial and international borders of grains meant for human consumption. It fixes prices using ‘pooled pricing’⁴ and a ‘delivery quota’⁵ with welfare maximizing objectives. This system helps to ensure uniform prices. In fact, the state guarantees minimum prices to producers regardless of the particular time of sale in order to manage the flow of grains in the market. This method at times forces producers to hold large inventories.

The Board however has no internal facilities and obtains services on contracts from various cooperative and private companies that include also private grain companies based in the USA. Thus, the central control is backed by support from private enterprise in Canada. In the case of the USA, grain is sold through the open market so that prices vary across producers and fluctuate even with time. Private traders are active at all stages of marketing. There are evidences of growing concentration⁶ downstream, five of the largest multinational export firms handling 90 % of the US grain exports and 70 % of world trade.

3.1.2 Transitions in Communist China

Initially, a supplementary system of ‘negotiated purchase sanctions’ at prices higher than the quota prices was agreed with the farmers. However, trading with non-government agents was permitted only in 1983, but this remained contingent on the fulfillment of the purchase plans of the state grain market agencies (SGMAs). Significantly, in 1985 the national quota was reduced to give leeway to free market prices. Urban rations were reduced in 1992–1994 on account of budgetary burdens. Ration prices were increased but urban residents were compensated with cash transfers. Retailers involved in rationed sales gradually transformed themselves to commercial trader. The SGMAs were partly commercialized, and devolution of power was made to regional governments in the conduct of the food market.