Chapter 4


* the capital, technical and management costs involved in food storage.

* risks of economic and physical losses involved in food storage.

Apart from the general dilemmas of administered prices already indicated, there are some
specific problems involved in pan-seasonal pricing which likely affect overall efficiency of
the food marketing system:

* There is no incentive for farmers or traders to store food over time, resulting in

* high pressure on a (generally limited institutional and physical) marketing infrastructure
 to absorb all marketed crops during the procurement campaign, a relatively short period
 after harvest,

* high financial requirements for crop purchases during this procurement campaign or else
 delayed payments to the farmers,

* need for large bulk storage facilities,

* substantial amounts of capital being invested and 'parked' in stocks,

* storage costs, to be borne by the government,

* risk of large carry-over stocks in times of repeated good harvests.

Again, most of these effects are well substantiated by the Zambian case study (Box 4.5).

The efficiency problems and budgetary burdens associated with pan-seasonal pricing are the
main reasons for discarding such pricing regimes under structural adjustment programmes.

 Fig. 4.9: Floor and ceiling prices and hypothetical price movements

 price

 Begin of harvesting season


 .--- Ceiling price

 * ** Market price
 1   Floor price


 -- time
 Purchases | Sales Purchases t

 Periods and types of government market interventions
 -- actual market prices (with intervention when prices reach limits of guaranteed price range)
 counterfactual free market prices withouth intervention)


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