Chapter 3


soybean would not give the farmer a profit in many regions, and that from the government's
point of view, there would be an efficiency loss from moving into soybean. Government
intervention to encourage or discourage food production has to be based on careful and
regionally specific analysis of the various costs and benefits, both to the farmer and to the
economy as a whole.

When analyzing the food system of a country, and how national and household food security
has developed over time, it is important to remember that food production is not just a
component of food availability, but that the process of food production provides the basis for
economic access to food, not just for farmers, but also for farm labour, who are dependent on
this process for their income. As the following sub-section examines, it is also the starting
point for the marketing chain which delivers food to rural and urban consumers.

1.3 The marketing function

Marketing systems have three broad functions: a logistical function; an informational
function and a distributional function. These are critical in determining how well the overall /
commodity chain operates, and in particular for food commodities, how effectively the
marketing system contributes towards maintaining food security.

The logistical function can, itself, be subdivided into three aspects: transformation over
space, transformation over time and processing. Transformation over space is another way
of saying that marketing systems transport food from point A where the food is in surplus,
and as a result the price of the food commodity is low, to point B where the food commodity
is scarce and the price relatively high. In the absence of inter-spatial arbitrage, surplus
production areas will experience both lower prices, and possibly greater price variation
between the pre-harvest and post-harvest periods than will be experienced in deficit areas.
State marketing institutions can also be responsible for transporting food from A to B. In
this case, very often the transportation is simply a result of planning decisions, rather than in
 response to price movements. Private sector commodity transport is usually triggered off by
 changes in price signals. Generally, this is the basis on which food moves from food surplus
 rural areas to urban areas or food deficit rural areas. A difference between international food
 prices and expected domestic prices is also the basis on which private sector importers make
 the decision to import food from abroad. In surplus years, price differentials between
 domestic and international prices may also encourage private sector export, which in turn
 should lead to an increase in the economic return to farmers and earning of foreign currency
 for the national economy.

 Transformation over time, or storing a commodity on both an intra-annual and inter-annual
 basis, is the second logistic function. In most countries, harvesting of a specific crop takes
 place over a relatively short period, but the commodity is consumed throughout the year.
 Farmers can store the crop on farm and release it slowly into the market. However, often
 they need the money they get from the sale of the crop to pay off debts incurred in the
 production process. They will sell the harvest to a trader, who in turn may sell it on to a
 wholesaler who has storage facilities and can release the commodity gradually onto the
 market. When farmers sell most of their harvest in the immediate post-harvest period, the
 market price falls in response to the temporary surplus. A trader who has the capital to buy