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Recommendations

The basic aim of a food price policy is to maintain low and stable prices for consumers, and particularly for the most under-privileged segments of the population. Whatever the method employed, the product range selected should be such that their increased consumption will result in improved nutritional status. Products of a high caloric and protein density would go a long way toward eliminating protein-energy malnutrition and should be given priority in product selection. The price policy should also allow for a reasonable standard of living and satisfactory nutritional status for those employed in producing and marketing the products. It must also be borne in mind that few developing countries can afford food subsidies, especially over long periods.

Consideration should therefore be given to the following.

1. Extension of the product range to include other basic foodstuffs such as smoked herring, salted fish, split peas and other dried peas and beans, macaroni, and spaghetti.

2. Adoption of the constant dollar mark-up method in arriving at wholesale/retail price levels.

3. Government participation in all food industries receiving a subsidy.

4. Expansion and decentralization of the Central Marketing Agency to handle importation and marketing of all basic foodstuffs.

5. Strengthening the staff of the Prices Commission so that supply and demand and items of all basic foodstuffs can be more deftly monitored.

6. Include, as one criterion in arriving at price control levels and minimum guaranteed prices, the nutrient-cost concept so as to provide incentive for the more nutritious products.

7. A complete change in orientation and operation of price control and subsidy programmes might be considered. The basic idea is to combine food price control with a consumer subsidy on a graduated scale according to income position. More liberal price control levels should be effected to ensure that those employed in food distribution do not experience hardships. Volume turnover and the constant dollar mark-up principle should be taken into account when establishing wholesale and retail price levels. The price increases that would be caused by such a move would be alleviated by coupons for specified products, and distributed to consumers according to their income position and family size (the greater the household income the less the total value of coupons), and location. An adjustment should be made for increased distribution costs. The coupons would be used to purchase specified commodities from retailers, who would, in turn, use them to procure supplies from wholesalers, manufacturers, or a Government import agency. The coupons would be redeemable from the Government within a certain period, but only by specific food agencies. Preferably, the coupons should not be redeemable on a cash basis but in exchange for supplies of the specified commodities. The establishment of a single import agency for basic foodstuffs, and Government participation in firms producing basic commodities locally, would facilitate such a system.

TABLE 1. Flour Prices and Government Subsidy, Trinidad and Tobago 1 January-30 September, 1974

Source: National Flour Mills, Ltd., Trinidad and Tobago

TABLE 2. Flour Prices and Government Subsidy, Trinidad and Tobago 1 October-31 December, 1974

Source: National Flour Mills, Ltd., Trinidad and Tobago

TABLE 3. Modal Transportation Cost by Product and Major Population Centre, Trinidad and Tobago, 1976

Source: Marketer's Response

TABLE 4. Production, Net Imports, and C.l.F Prices of Rice, Trinidad and Tobago, 1966 - 1975

Source: Central Statistical Office, Overseas Trade, various issues. Production data from Ministry of Agriculture, Land, and Fisheries.

TABLE 5. Concentration and Inspected Slaughter of Beef by Location, Trinidad and Tobago, 1975

Surce: ref. 5, p. 45

TABLE 6. Market Concentration for Imported Beef, Trinidad and Tobago, 1974 Type of activity

Source: Ref. 5, p. 44

TABLE 7. Minimum Guaranteed Prices, Cents per lb, for Selected Commodities, Trinidad and Tobago, 1968, 1973, 1974, and 1977

Source: Central Marketing Agency

References

1. Central Statistical Office, Trinidad and Tobago, Quarter/y Economic Report, July-September, 1975. Port-ofSpain, Central Statistical Office Printing Unit, 1976, p. 26.

2. R.N. Henry, "A Note on Income Distribution and Poverty in Trinidad and Tobago." CSO Research Papers, Portof-Spain, 1975.

3, National Nutrition Council and Caribbean Food and Nutrition Institute, "Food and Economic Planning, Trinidad and Tobago" Seminar Proceedings (27 - 30 Nov.1972).

4. Central Statistical Office, Overseas Trade, 1972 - 1974.

5, K.l. Beckles, "The Performance of the Beef Marketing System in Trinidad and Tobago." Unpublished M.Sc. thesis, University of the West Indies, St. Augustine, Trinidad, 1976.

6. Caribbean Food and Nutrition Institute Food and Nutrition Survey, Trinidad and Tobago, 1970.

7, C.E. McIntosh and M. Lim Choy, "The Performance of Selected Marketing Agencies." The University of the West Indies, St. Augustine, Trinidad, 1975,

Additional bibliography

Alexander, M.N., "Some Factors Affecting the Demand for Starchy Roots and Tubers in Trinidad." In: The Economics of Root Crops, University of the West Indies, St. Augustine, Trinidad, 1967.

Candler,W.,and G. Kennedy, "Food Cost Stabilization Using Food Coupons." Canad J. Agric. Econ., 23 (3): 33 45, 1975.

Food and Agriculture Organization, "An Enquiry into the Problems of Agricultural Price Stabilization and Support Prices. "FAO, Rome, 1960.

Government of Trinidad and Tobago, "Oil and Food" (Basic Discussion Paper), Government Printery, Port of Spain, Trinidad, 1975.

Jones, W.O., Measuring the Effectiveness of Agricultural Marketing in Contribution to Economic Development: Some African Examples Stanford University Food Research Institute, Stanford, California, 1970.

Manchester, A.C., "Some Thoughts on Agricultural Marketing Research." Agricultural Economics Research, U.S. Dept. of Agriculture, Vol. 21, No. 2, April, 1969.

McDowell, J., "A Review of Information on Trinidad and Tobago with Particular Reference to Agriculture and Food." Caribbean Food and Nutrition Institute, 1973.

Meerhaeghe, M.A.G., Prince Theory and Price Policy, Longmans, Green add Co. Ltd., London, 1969.

Morgenstern, O,, "Thirteen Critical Points in Contemporary Economic Theory: An Interpretation." Economic Literature, X: 4 (Dec. 19721, 1163 - 1189.

Rogers, A.B., "Pricing Systems and Agricultural Economics Research." Agricultural Economics Research, 22: 1, 1971.

Smart, W., "An Economic Evaluation of the Broiler Industry in Trinidad and Tonago." Unpublished M, Sc. thesis, University of the West Indies, St. Augustine, Trinidad.

St. Cyr, E.B.A., "Rising Prices: An Explanatory Theoretical and Empirical Study of Trinidad and Tobago." Research Papers 7, Central Statistical Office, Port of Spain, Trinidad, 1974.

"Prices, Wages and Incomes in Contemporary Trinidad and Tobago." Mimeo: 1 - 19, 1974.

Yudelman, M., "Nutrition and Income Distribution." Cajanus 4 (4); 286 - 288,1972.

Discussion

Kenneth Leslie

To put the problem of malnutrition in a regional perspective, more than 1 per cent of the children in the West Indies are severely malnourished, 12 per cent are moderately malnourished, and 40 per cent suffer from milder degrees of undernutrition. This is more than half of the child population of the West Indies. The mortality rate of children one to four years of age is three to six times that in North America and Europe. Anaemia associated with inadequate intake of folate is common.

Among affluent adults, overweight and frank obesity, with the attendant problems of diabetes and cardiovascular disease, are becoming important public health concerns in the region. Existing data based on national food availability show figures on food energy supplies that vary from being adequate to meet requirements to 30 per cent above daily requirements, and protein supplies are also well above requirement levels.

This clearly indicates the degree of maldistribution of food supplies, especially considering the large proportion of low-income families who have to spend 80 per cent of their income on food.

As noted by Allen and McIntosh, the extent of government intervention in the food marketing system is greater in Jamaica than in Trinidad and Tobago. In Jamaica, the democratic socialist government supports the idea of a mixed economy and recognizes that adequate nutrition is an important objective in overall socio-economic development.

McIntosh made several particularly useful points that clearly illustrate the situation in Trinidad and Tobago. One is his recommendation for Use of coupons: "The price increases that would be caused . . . would be alleviated by coupons for specified products and distributed to consumers according to their income position and family size [the greater the household income, the less the total value of coupons] "

My question is: How do you determine income level when many of the people are self employed? Problems might be encountered here.

Another consideration is how coupons would fit in with existing institutions. Would it be necessary to create a new institution to implement coupons? Would the benefits derived compensate for all of the costs incurred?

Flavio Machicado

Concerning Jamaica, the problem with Allen's approach is that the solution is based in a bureaucratic context rather than on creating the social conditions that would ameliorate malnutrition.

First of all, in a plantation economy like that in Jamaica, the Dominican Republic, and all of the countries of the Greater and Lesser Antilles, there is a limit to how much more land can be brought under cultivation. This is obviously a crucial factor for increasing food production.

Second, production is geared primarily toward export crops that use the best land and resources to sustain this kind of economy, resulting in a high rate of unemployment. The consequence is a commercial system that fosters speculation among intermediaries. Therefore, if the smaller producers are not organized in the first place, and neither consumers nor the rest of society are able to absorb part of the effect of speculation when market prices fluctuate, I cannot see how a price or subsidy policy would apply in a massive food policy.

Both McIntosh and Allen discuss the nature of prices and subsidies on the basis of a given demand that does not involve the whole population. In other words, what prices should these economies fix so that the entire population would have access to a basic food basket? The price would necessarily have to be low and thus the subsidy would be very costly.

To avoid such a high subsidy-one the economy, in any event, could not sustain in the long run-the solution is to increase agricultural production for local consumption, which cannot be done without land reform. Any price policy, however commendable its aims, that fails to consider structural changes and land reform is doomed to failure.

When we discuss price policy or food policy, we are talking about a process, not the establishment of a policy set at a fixed time. The question is how capable a society is to formulate a price policy that would allow sustained production and consumption. Unless there are grass roots organizations in place, I doubt that a price policy could be successfully monitored. Unfortunately, it is difficult to build the necessary infrastructure to carry out a food price policy without risk of cumbersome bureaucratic hindrances that eventually render the policy ineffective.

With regard to the nutritionist's inability to convey the importance of nutrition to the economist, I think the problem of malnutrition has become so widespread that to think of nutrition only in terms of economics is too narrow a concept. Malnutrition is is a social problem.

Price policy, as it has been discussed at this Workshop, often means a subsidy, whether it compensates the producer's costs or replaces part of the consumer's income. If such a policy applies to all income groups, those who have political influence may take advantage of the situation to the detriment of lower income groups.

In the case of import policies in the Dominican Republic and Chile, as they affect supply and demand, the apparent goal is to increase the availability of goods on the market. Actually, they reflect the activity of the commercial economy and the market and compensate only to a limited degree for lack of available goods, especially in the Dominican Republic over the past five years. The policies in these countries have not increased the availability of food.

Shlomo Reutlinger

I have a few brief comments, not so much on the papers presented, as on their implications for the subject of this Workshop. Without over-emphasizing prices, if you know something about economics, you can focus on a specific policy for purposes of discussion. For example, I pressume that the real object of price controls in Jamaica and Trinidad and Tobago is to control inflation.

It is virtually impossible to control inflation in inflationary periods by keeping the dollar profit margin constant, because the entrepreneurs want to gain a certain amount of profit in working capital. Inflation means that profits decrease, and when that happens, the first system to break down is price controls.

To analyze the kind of economic system that is in place and to try to determine who is making a profit, the structure of the market has to be considered. In Jamaica, for example, it would be fruitless to look for excess profit margins among the 14,000 peddlers, none of whom could have a monopoly in such a competitive trade.

Similarly, to understand sales, it is necessary to know how small retail stores operate. Naturally, the retailers want to make as much profit as possible, but when certain items are under price control, they cannot overprice those or the consumer will simply go to another store where controls are maintained. Retail profits have to be made from sales of goods that do not come under price control, and this is where the retailer maintains his overall volume of working capital.

When the price of specific foods is controlled, luxury goods can be marked up, which, in effect, subsidizes the cost of controlled items. This would mollify the bureaucrats monitoring the retail stores, and would allow the shopkeeper some leeway to keep his working capital steady.

Lance Taylor

I should like to ask further questions of McIntosh regarding land reform. Is it a solution politically or intellectually? Trinidad is an oil-exporting country, so I suspect that it is not desperately dependent on sugar exports. Would it not be conceivable to expropriate the sugar plantations and distribute the land to the peasants who could produce foods? I am convinced that this is a structural problem behind a price problem that must be faced; or, goods could be produced for export that would bring cash to buy the necessary foods. Perhaps that could be done with the sugar?

My other concern has to do with monitoring. I agree with Machicado that it is a very bureaucratic solution to the problem, if, in fact, it is a solution at all. Consider the experience with the Junta de Abastecimiento y precios (Price and Supply Council) created especially in poor areas of cities in Chile during the Allende period, which, by the way, was a popular initiative, not a government initiative. I am not certain what the outcome was, but as I understand the organization's function, it was established to put together information about people's basic needs and to receive goods directly from the government's distribution system at the official price for distribution to the poor. The trouble is, of course, that if there is incredible inflation, it would make such a plan difficult to implement, but it is encouraging that it was attempted. The affluent have black markets.

Curtis McIntosh

In Trinidad, most of the sugar land is in the hands of the government. Pricing, although conceived within the bureaucracy, was not supposed to operate bureaucratically. Wholesalers, distributors, and small shopkeepers were brought into the decision-making process, and there was no thought of fixing prices. The initial plan was simply to make distribution of food supplies more equitable. Once requirements for basic foods were determined, if there was a need for price control on some item, this could have been implemented. Currently, the Agricultural Marketing Corporation and the Prices Commission set the price controls on foods. They are not very effective, but they do exist.

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