Hi, welcome to this blog on the topic: Price support and control to farmers.
Table Of Contents
- Price support to farmers
- Price control to farmers or price legislation
- Ways government agencies give price support to farmers
- Types of price control policy
- Objectives of price control policy
- Effects of price control policy
Price Support And Price Control To Farmers and Subsidy Programme
Price support: Price support is a deliberate government policy aimed at encouraging farmers by supporting the selling prices of their products at a level that farmers can make their profit.
The essence of price support by government through its agencies is to make sure that farmers do not suffer losses as a result of poor prices of their products. What government agencies does is to stabilize market prices. The government Agency buy farm products at the support price, store it and releases it back into the market if the market price rises to a prescribed trigger level of say, 140% of the support price. In this manner, the policy protects the Farmers against the risk of low prices but also protect the consumers against unusual high prices.
Ways Government Agencies Give Price Support to Farmers
1. Issuance of quotas to farmers: Government sometimes try to raise price artificially by limiting production. Each farmer may be issued a quota that stimulates how much he can sell in a given year. Limiting supply can raise market prices as long as government inspectors monitor the market to ensure that no production beyond the quota is sold for a lower price. While this policy raises prices, the only people who benefits are the individual farmers who receive the quotas when they are initially allocated. Because of their scarcity , the quotas immediately take on value. All future entrants must buy a quota to gain the right to sell the products. That raises the investment required to become a farmer and the cost of production. Once the original quotas are sold to new farmers, those farmers become a strong lobbying Force against ever given up quotas.
2. Paying farmers to take land out of production: More common than issuing quotas is the practice of requiring (or paying) farmers to take land out of production. This set aside approach rarely is very effective and supporting agricultural prices. Farmers are not stupid, they set aside their least productive land first furthermore, the policy that creates artificial scarcity of land induces farmers to intensify their production practices on each land that remains in production, raising its yield by the application of heavy doses of fertilizers and agricultural chemicals which tend to increase farm yield.
Price Legislation: Price legislation, also known as price control’s policy, refers to how the government or it’s agency fixes the price of essential commodities. Price control was carried out in Nigeria by the price control board.
Types of Price Control Policy
- Minimum price control policy: The minimum prices are the lowest prices by law, below which the specified goods and services cannot be sold or bought. Minimum prices may be fixed or can commodities if the aim is to protect producer (especially agricultural producers) from the income fluctuation brought about by poor harvests.
- Maximum price control policy: A maximum price control policy is the highest price level above which goods and services cannot be sold. Under this condition, nobody is allowed to sell goods and services above the maximum price but selling below it is allowed.
Objectives of Price Control Policy
The objectives of price control policy, both minimum and maximum, are:
- To prevent the exploitation of consumers by producers
- To avoid or control inflation
- To help low income earners, e.g, minimum wage earners.
- To control the profits of companies (especially monopolists).
- To prevent fluctuation of prices of some products, e.g, agricultural procedure.
- To stabilize the income of some producers, e.g, farmers.
- To make possible planning for future output.
Effect of Price Control Policy
- It stimulates excess demand, which cannot be satisfied, i.e, shortage in the markets.
- It encourages boarding of commodities by wholesalers and retailers.
- It leads to creation of black markets or under counter sales and its attendant high prices.
- It encourages conditional sales of products.
- It discourages shortages, which might result in queues and racketering.
Revision Questions
- What is price support to farmers?
- Mention two ways government agencies give price support to farmers.
- What is price control or price legislation?
- List and explain the two types of price control policy
- What are the objectives of price control policy?
- State five effect of price control policy