Activities Chapter 4


 Activity 3:

 Analysis of regional pricing structures

1. Complete the graph below by filling in the market prices of maize which would prevail in
 surplus and deficit regions of the country under free market conditions, giving the border price
 of 300 suds/MT cif. (suds stands for the local currency of the hypothetical "Republic of
 Southland"), the marketing links as shown, and the transport costs per MT as indicated.

2. Clarify, why Rural Deficit Area II will exclusively be supplied from the Rural Surplus Region
 and not with imported grain.

3. What would be the likely implications of a pan-territorial pricing regime with producer prices
 fixed at 2,000 suds/MT, 3,000 suds/MT, or 4,000 suds/MT throughout the country (in com-
 parison to a free market economy) for the trade flows, the volume of grain imports, the vol-
 umes of grain production, supply, and consumption in the various regions, and for govern-
 ment interventions (including costs)? Give only rough tentative answers!

 Template 4A-4
 The Geographic Nature of Price Formation in Surplus and Deficit Regions


Rural deficit regi
Price: suds


A


t cost
is/MT


s


Rural surplus re
Price: sud


ion I


Harbour


s/MT Grain imports
 SCf price: 3. 000 suds/MT


ra ort costs Transpo costs
500 s/MT S00 ds/MT

 Transport costs
 Interior city 1,500 suds/MT
 Grain deficit
 I Price: suds/MT

 Transport costs
 1,000 ds/MT


 / \1


gion
s/MT


S1ransport costuis
1,000 suds/MT


" Rural deficit region II
 Price: suds/MT


Graph adapted from: FAO, Agricultural price policy: government and the market, Training materials for agricultural
planning 31, Rome 1992, page 202


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Transpo
1,500 st