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Market-Smart Subsidies: Not a magic bullet
Market-Smart Subsidies: Not a magic bullet
Market-Smart Subsidies: Not a magic bullet
Market-Smart Subsidies: Not a magic bullet
Market-Smart Subsidies: Not a magic bullet
Market-Smart Subsidies: Not a magic bullet
Market-Smart Subsidies: Not a magic bullet
Market-Smart Subsidies: Not a magic bullet
Market-Smart Subsidies: Not a magic bullet
Market-Smart Subsidies: Not a magic bullet
Market-Smart Subsidies: Not a magic bullet
Market-Smart Subsidies: Not a magic bullet
Market-Smart Subsidies: Not a magic bullet
Market-Smart Subsidies: Not a magic bullet
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Market-Smart Subsidies: Not a magic bullet

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Derek Byerlee (World Bank) …

Derek Byerlee (World Bank)
24th July 2009, International Food Policy Research Institute, Washington D.C.

Published in: Business, Technology
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  • 1. Derek Byerlee 24th July, 2009
  • 2.  “”While I had a fairly open mind about fertilizer subsidies when I began this g review, I am now considerably more skeptical about them….. it is my view that y subsidies should be used very cautiously and very selectively”  Dana Dalrymple, Evaluating Fertilizer Subsidies in Developing Countries, USAID, 1975.
  • 3. 1. A strong case for market smart subsidies 2. 2 But not easy to implement 3. Even when well implemented, they are not a magic b ll t t i bullet
  • 4. 4.00 300 Cereal Yield ( ) (t/ha) Fertilizer use ( g p (kg per 3.50 irrigated equiv ha) 250 3.00 200 2.50 Asia SS Africa 2.00 150 Lat Am Asia SS Africa L America 1.50 MENA MENA 100 1.00 50 0.50 - 0 61 64 67 70 73 76 79 82 85 88 91 94 97 00 03 06 61 64 67 70 73 76 79 82 85 88 91 94 97 00 03 06 196 196 196 197 197 197 197 198 198 198 199 199 199 200 200 200 196 196 196 197 197 197 197 198 198 198 199 199 199 200 200 200 Adoption of improved varieties much greater than fertilizer
  • 5.  Agreeon critical importance of improved seed and soil fertility in sub-Saharan Africa.  Fertilizer use extremely low in Africa Africa.  Prices double other regions  There is a good theoretical case to subsidize inputs in the early stages  Market failures--many specific to fertilizer  Economies of scale, learning, risk and credit constraints  Countries should own their food security policies
  • 6.  Traditional “blanket” subsidies have not worked blanket in Africa  Inefficiencies of parastatals  Rent capture by large farmers  Fiscally unsustainable  “Market smart subsidies” could work?  Help build markets vouchers for private dealers markets—vouchers  Well targeted to not displace commercial sales  Exit strategy
  • 7.  Often still state directed  Not well targeted—larger farmers male etc targeted larger farmers, Displace commercial sales E Expensive i as a share of budget h fb d t Crowd out investments in core public goods  Political capture
  • 8. Subsidy Some None subsidy (2 bag/hh) ( 1 bag/hh) Value of assets (K/hh) 15,850 8,755 6,500 Land holding ( a) a d o d g (ha) 1.22 09 0.91 08 0.81 Female head hh (%) 18 26 30
  • 9.  Measures to strengthen private sector equally important  Kenya success story of reducing transactions costs and no. input dealers from 8 km to 3 km  Not by fertilizer alone. Need for balanced approaches—Kenya organic matter  Need for manage price volatility  Funding for long-run investments  Irrigation, R&D
  • 10. STEADY RISE IN DECLINING MARGINS FOR FERTILIZER USE FERTILIZER DISTRIBUTION 500000 600 Nominal USD per metric ton DAP 400000 500 etric tons 300000 400 000 me 200000 300 100000 200 N 0 90 92 94 96 98 00 02 04 06 100 1990 1992 1994 1996 1998 2000 2002 2004 2006 Commercial imports Total Consumption c.i.f. Mombasa wholesale markets, Nakuru Donor Imports
  • 11. Source: Marenya and Barrett, 2008a
  • 12. PRICE OF UREA ($US/T) SHORTAGE OF PHOSPHATE? 450 12 400 10 350 300 8 Gas ($/GJ) Urea ($/t) 250 6 200 Urea G Nat gas 150 4 100 2 50 0 0 Source: Cline (2007) Doubling of oil prices increases Peak extraction by 2034 grain prices by about 20% 12
  • 13.  Can provide rapid gains (if it rains)  Monitor Monitor, learn adjust for long run learn, sustainability T Target better, involve the private sector t b tt i l th i t t  Imbedas part of a wider agricultural development strategy d l t t t

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