Agricultural Policy: Types and Importance
In general, agriculture is a basic and strategic sector of the national economy; therefore, the need for explicit study of agricultural policy easily becomes apparent.
Agricultural policies can be classified in several ways, depending on their objectives, the instruments used, and the commodity system they are primarily focused on, etc.
The three broad groups that agricultural policies are classified into by government are price, structural and marketing policies.
The study of agricultural policy has become an essential part of every government sequence in agricultural economics and extension, and it is not an exaggeration to say that it is an essential part of every economist and rural development expert.
This is because of the importance of agricultural policy to economic development of a nation. Policy is defined as the course of action chosen by government towards an aspect of the economy, including the goals that the government seeks to achieve, and the choice of methods to pursue those goals that have to be justified.
Agricultural policy is a term which is collectively used for a bundle of policies related to the agricultural sector.
Conceptualization of Public Policy
Agricultural policy represents a sub-sector of economic policy. It should be noted from the onset that our primary concern here is with public agricultural policies, as opposed to private policies of agribusiness firms, individuals or groups.
Public policies are made by governments, ministries, departments and agencies (MDAs) that is, public institutions, in the process of executing their mandate, while private policies are made by private entities, enterprises or individuals.
The term ‘policy’ refers to a plan of action to guide decisions and achieve predetermined goals. It may apply to any public or private sector institution or organization, groups, individuals. Here, we discuss the concept of policy only in context of public (government) policy.
It comprises the actions of the government and the intentions that determine those actions. Policy is defined as the course of action chosen by government towards an aspect of the economy, including the goals that the government seeks to achieve, and the choice of methods to pursue those goals.
It is also defined as a set of interrelated decisions by a public actor or group concerning the selection of goals, and the selection of the means of achieving them within a specified situation, where those decisions should in principle, is within the power of the actor or group to achieve.
The three important points are clear from the definition.
1. Policy is concerned with both the selection of the means of attaining such goals.
2. Policy-making is done within the framework of an institution so that it could commandeer the necessary resources and authority for its implementation.
In fact, all public policies are made by public institutions to realise their mission. In this regard, it should be pointed that not all decisions of government or public institutions are part of public policy. Only those decisions that are of a strategic of guideline nature are covered by the term policy‘.
3. Those setting policies must have the mandate or responsibility to do so. Bearing these in mind, agricultural policy can be conceived of as a series of interrelated decisions taken by governments and their ministries, departments and agencies (public institutions) concerning the selection of goals for the agricultural sector and the means of achieving them from available alternative strategies, which are intended to guide present and future actions (and inactions) in the sector.
Usually, policies are set for the different sectors of the national economy to promote optimum utilization and canalization of the nation‘s resources; and the agricultural sector is one of the leading sectors of any economy.
Policy represents the intentions and plans of action‖ of the policy-maker which are often reflected in programmes, and projects.
In fact, the successful implementation of a policy requires that a programme or package of decisions, activities, projects or schemes be designed. Necessary resources will then be appropriated for such programmes and projects to ensure their execution and the realization of policy goals.
The need for budgetary appropriations to ensure policy realization cannot be over-emphasized.
Policy represents hard pattern of resource allocation represented by programmes and projects designed to respond to perceived public problems or challenges requiring governmental action.
What is Agricultural Policy?
Agricultural policy is a statement of action and a fundamental tool employed in achieving agricultural development. A programme, on the other hand is a comprehensive plan that includes objectives to be attained, specifications of resources required and stages of work to be performed.
Agricultural policy is government’s intentions, ambitions, and goals for agricultural sector and the means for attaining such goals given available resources, technologies, preference patterns, and institutional capability.
The importance of studying agricultural policy lies in its potential for promoting problem-solving interventions and skills in the sector, influencing future course and directions of policy, and in general improving capacity for better prescriptions and advocacy of solutions and strategies in the sector.
Also, the survival of the national economy depends on the provision of foods and raw materials which often require the investment of public resources that have to be justified.
Agricultural policy is a term which is collectively used for a bundle of policies related to the agricultural sector.
It may comprise a number of policies, such as land tenure and land reform policy, price policy, trade policy, marketing policy, credit policy, crop insurance policy, water policy, food policy, fertilizer policy, farm power policy, etc.
These policies are framed by the government to achieve the specific goals related to the farm sector. As agriculture in the developing countries is a state subject, apart from the national agricultural policy, state governments also prepare their own agricultural policies and also regulate the supply of various agricultural products through some rules, acts and regulations.
Types of Agricultural Policies
Markets and production methods sometimes lag behind requirement of the time, and in the absence of intervention, farmers are subject to low and fluctuating incomes.
In developed countries, there is the tendency of rapid technology advancement to cause production to rise faster than demand which lead to low prices and income.
At the same time, biological nature of agriculture leads to unplanned fluctuation in production which causes sharp fluctuation in price and hence the farmers income.
In many developing countries on the other hand, the problem is that of agricultural production lagging behind requirement.
To deal with these problems, governments have policies in agriculture which can be divided into three main groups:
1. Price policies
2. Structural policies
3. Marketing policies
Let us look on details
1. Price policies
Agricultural price policy is common with prices which the farmers receive for their product (the farm gate price) and the prices at other stages in the distribution chain. Attention is generally focused on farm gate prices and the individual policies are generally concerned with stabilizing and frequently raising them.
Agricultural price policies can be pursued either nationally or internationally. National policies have used many methods such as tariffs or variable levies on import, import quotas, subsidies, support buying, production control, statutory marketing organization and various combinations of these. Policies of these types which are generally protectionist in their effort are not confined to agricultural products alone. Many countries give protection to manufactured products.
In most developing countries today however, the protection given to agriculture is more comprehensive than that given to most industries.
Objectives of price policies: In principle, price policies could be aimed at:
i. Increase prices
ii. Decrease prices
iii. Stabilize prices
The objectives are always related to more general economic growth and income distribution objectives which can be reached by a combination of different instruments on different markets.
2. Structural policies
Structural policies are those designed to improve the structure of agricultural production i.e. the size, layout and the equipment of farms as well as the rural infrastructure, electricity and water supplies, educational and advisory services and in a broad sense, social facilities in the country sides.
3. Marketing policies
Marketing policies are concerned with changes in the distribution chains between farmers and consumers, the objective which may be to strengthen the farmers bargaining position by for example, encouraging the development of producers-controlled marketing organizations or to improve hygiene or quality, or to reduce the cost of marketing.
Analysis of Specific Agricultural Policies
Agricultural policies can be classified in several ways, depending on:
i. Their objectives
ii. The instruments used
iii. The commodity system they are primarily focused on.
We will use the classification which classifies policies in three categories:
1. Policies that affect producer‘s incentives, which include:
i. Output price policies
ii. Trade and exchange rate policies
iii. Other policies that influence incentives
2. Policies that grant producers access to resources, among which we can identify:
i. Food policy and food security
ii. Land tenure policies
iii. Water access policies and irrigation
iv. Agricultural technology policies
3. Policies that influence access to factors ‘markets, most importantly:
i. Labour market
ii. Credit market
Such a classification is more in line with the modern view of government intervention in the agricultural sector.
The importance of agricultural policy
In general, agriculture is a basic and strategic sector of the national economy; therefore, the need for explicit study of agricultural policy easily becomes apparent.
More specifically, agricultural policy is studied for the following reasons:
1. To improve the management and use of resources in the agricultural sector in order to attain stated objectives.
2. The growth and contribution of the agricultural sector to the national development is enhanced, and the welfare and well-being of farmers and rural people promoted, when we understand and properly adopt the right‖ agricultural policies.
3. Agricultural policies are intended to resolve problems and challenges in the agricultural sector, to the benefit of farmers and the society in general.
4. To enable us analyze and understand the consequences of selected agricultural policy in advance and hence institute appropriate mitigation measures to contain unintended effect during implementation.
5. It helps to build and improve the capacity for policy analyses in the agricultural sector.
6. Government intervention in the agricultural sector often entails the investment of large chunks of public resources. There is therefore the need to ensure proper harnessing of these funds to the greatest benefit of society, through the right‖ agricultural policies.
7. Agricultural policy analysis is also undertaken to ensure that the right policy instruments are employed for the selected policy objectives.
8. Policy result in a more orderly and predictable pattern of development of the agricultural sector. This helps to promote both intra-and-inter-sectoral growth stability.
9. Policy guides the selection of programmes and projects and hence the pattern and direction of resource allocation in the agricultural sector. In this connection, it should be noted that policy is like a compass, which guides the direction of government actions and interventions in the sector.
10. Agriculture is a risk-prone and environmental-dependent enterprise. Therefore, policy is needed to minimize the effects of uncertainty, variability in environmental variables, and risk on performance and outcomes in the sector.
11. Recently, increased attention to policy design in the agricultural sector derives from the contemporary experience of partial attainment or outright failure of policy in the area, with dire consequences for the teeming population of food consumers, poverty-stricken farmers and input merchants in the country.
12. With economic development, agriculture faces increasing competition with other sectors of economy.
Terms of trade between agriculture and other sectors will likely decline in favour of other sectors due to implicit production costs in agriculture. This will dampen incentives for continued participation in the agricultural sector.
In the absence of suitable policies to rebuild incentives for agricultural production, the sector faces the unfortunate prospect of being neglected with tremendous consequences for the survival and food security of the nation; the worsening poverty for millions of poor farmers who depended on agriculture for their subsistence.
Conclusion on
In this article you have learnt about the concepts of policy and agricultural policies, especially knowing the three major things that are necessary in explaining what policy is.
Therefore, at this end article, we believe you must have understood the meaning of public policy and agricultural policy: The term ‘policy’ refers to a plan of action to guide decisions and achieve predetermined goals. It may apply to any public or private sector institution or organization, groups, individuals.
Policy is defined as the course of action chosen by government towards an aspect of the economy, including the goals that the government seeks to achieve, and the choice of methods to pursue those goals.
Policy is concerned with both the selection of the means of attaining such goals. Policy-making is done within the framework of an institution so that it could commandeer the necessary resources and authority for its implementation.
In fact, all public policies are made by public institutions to realize their mission.
Those setting policies must have the mandate or responsibility to do so. Agricultural policy can be conceived of as a series of interrelated decisions taken by governments and their ministries, departments and agencies (public institutions) concerning the selection of goals for the agricultural sector and the means of achieving them from available alternative strategies, which are intended to guide present and future actions (and inactions) in the sector.
Agricultural policy is government’s intentions, ambitions, and goals for agricultural sector and the means for attaining such goals given available resources, technologies, preference patterns, and institutional capability‖.
The importance of studying agricultural policy lies in its potential for promoting problem-solving interventions and skills in the sector.
Agricultural policy is a term which is collectively used for a bundle of policies related to the agricultural sector.
We have introduced the types and importance of agricultural policies as well as done analysis of specific agricultural policies along the types. You have learnt: Types of agricultural policies, namely: Price policies, Structural policies, and Marketing policies, objectives of price policies: increase prices; decrease prices, and stabilize prices and classification of policies which classifies policies in three categories:
Policies that affect producer‘s incentives, which include: Output price policies; Trade and exchange rate policies; and other policies that influence incentives.
Policies that grant producers access to resources, among which we can identify: Food policy and food security; Land tenure policies; Water access policies and irrigation; and Agricultural technology policies.
Policies that influence access to factors markets, most importantly: Labour market policies and Credit market policies. Importance of agricultural policies.
