Role of Marketing Boards in Kenya to the Economy

In: Business and Management

Marketing boards are state-controlled or state-sanctioned entities legally granted control over the purchase or sale of agricultural commodities. Since the mid-1980s they have declined in number under pressure from domestic liberalization and from international trade rules that increasingly cover agriculture. Where reforms have been widespread and successful, marketing boards have vanished or retreated to providing public goods, such as strategic grain reserves or insurance against extraordinary price fluctuations i.e the National cereals board, the Tea board of Kenya. Where reforms have been less successful, the weaknesses of private agricultural marketing channels have been revealed by the rollback of marketing boards, often leading to calls for reinstatement of powerful marketing boards. It is often suggested that an exporting country should set up a price stabilization fund to insulate farmers from fluctuations in the world market price, by collecting a proportion of farmers’ revenue when prices are high and paying it out when prices are low.
A typical price stabilization fund is set up for an export crop. In years when the world price is high, some of the returns are paid into the fund; in years when it is low, the accumulated revenues are used to bring up the price. There are many variations on this basic model. Some of the funds soon collapse, while others go on for years, surviving but not necessarily achieving their objectives.
The objectives of the fund are usually obscure, sometimes deliberately so. For example, farmers press for stabilization without making it too obvious that to them stabilization means a lower limit to prices rather than an upper limit: in other words, they want a higher average price. Consumers think of price stabilization as imposing minimum prices rather than both maxima and minima....

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