Wheat Support Policy (Stabilization Price)

1. بسم الله الرحمن الرحيم • Wheat Support Policy (Stabilization Price) • Presented by: • Tomador Muzamill Mokhtar • National Center for Research

2. Introduction • The Sudan wheat situation is characterized by rapid growth in consumption, continuous and variable deficit between domestic need and local production. In that respect the national effort in increasing wheat production has been a priority. • Sudan grows wheat in the irrigated sector • Yields have varied considerably, sometimes below 1MT/ha but more often well above 2MT/ha, especially in recent years. Nevertheless, they are below the average for developing countries as a whole by 25-30%

3. Sudan's wheat consumption exceeds 2 million tons per year, while the country produces only 12 to 17 percent of annual consumption. • wheat consumption steadily increased during the past 20 years as a result of growing population, changing food preferences and socioeconomic change associated with urbanization.

4. Wheat areas increased from less than 27.5 thousand ha in the early 60s to 360 thousand ha in the 90s. • Areas declined during 2000–05 due to the unavailability of credits and late provision of inputs • During 2006-10 areas increased to around 277 thousand ha as a result of encouraging production policies and the expansion into new areas.

5. Wheat Production Areas in Sudan • Northern State (Traditional) • River Nile State • Gezira State (Gezira Scheme) – (non-traditional) • Kasala State (New Halfa Scheme) - (non-traditional) • White Nile State. (non-traditional)

7. Environmental constraints • Water and climate have been a limiting factor to wheat production, since wheat is a winter crop, and the winter in Sudan is too short. • The temperature in most of Sudan is too warm to realize large yields. In addition, wheat yields are very sensitive to planting dates (Konardeas 2009)

8. Socio-economic constraints • Lack of timely availability of credit funds • Unavailability of production inputs • Lack of clear sustainable strategic production and marketing policies. • Week technology transfer.

9. Wheat Support Policy • Support is required to enable the generation of improved and sustainable wheat based technologies and innovations suitable for different agro-ecological zones of Sudan, and enhance the sustainable dissemination, scaling-up and promotion of wheat based technologies and innovations along the value chain • In addition to the increasing trend in volume of wheat import , wheat prices (both producers’ and world market prices) have increased substantially over the last half-decade. Domestic price volatility is very high. Both price and volume of wheat imports already impose substantial challenges to policy maker

10. foreign currency reserve and annual trade balance, it is essential and timely to look into the exiting wheat production and productivity potentials and exploit these potentials through putting proper policies, institutions and market arrangements in place and create incentives to all farmer

11. Consumer surplus and product surplus Consumer surplus e Producer surplus

12. Consumer surplus and product surplus The equilibrium of a commodity's market is determined by the equivalent of the quantity demanded and the quantity supply. A surplus arises Consumer because some consumers are willing to pay a price higher than the equilibrium price. We call the difference between the two prices a surplus Product surplus arises because some producers are willing to sell the commodity in the market at a price lower than the equilibrium price. We call the difference between the two prices in the product surplus

13. Stabilization Price policy Concept: The stabilization price is the price determined by the Agricultural Bank, which is a stimulating and encouraging price for the product to cover the cost and achieve a reasonable profit for the product and is determined before the beginning of the season based on prices at the end of the previous agricultural season..

14. Stabilization Price policy: • In Sudan, the first wheat price was established in 2010 when the price of Shawwal rose to 98 Sudanese pounds. The problems of monopoly emerged by major traders, producers and exporters, which led to increasing demand for wheat and lack of supply. As wheat is a strategic commodity Wheat subsidy policy and focus price policy as a policy to encourage production and ensure sales so that the Ministry of Agriculture and the Agricultural Bank to buy from the farms directly without an agent • In 2015, the Wheat focus Price was determined by the Agricultural Bank and the policy of support and price of concentration was established

16. Figure:1

17. Price Year

18. Objectives of stabilization policy • Ensuring farmers' incomes • Easing consumer food expense burdens • Preventing price fluctuations in prices of wheat Adjusting supply and demand for wheat predetermined attractive wheat prices, 4. provision of productioninputs, 5. expansion into new areas Would lead to increased wheat production

19. Motivation of government to set stabilization policy • Wheat is considered a strategic and necessary commodity • Increased production input costs have led farmers to leave wheat cultivation • The monopoly of wheat by major producers and traders and put it after the season at high prices forced the government to develop a policy that supports and encourages small farmers • The economic crisis in the country and the decline of local currency price prompted the government to support prices and adjust the market

20. Farmers accept price policy In the first years of the beginning of the policy of support and price focus was turnout for sale to the bank achieves a desired success, but with the increasing economic crisis and low support rate, the farmer refused to sell to the bank and prefer to sell in the free market

21. Reference • Interviews with employees of the Agricultural Bank of Sudan • Interviews with employees of the Central agency of Statistics • Reports of the Ministry of Agriculture

22. Thank For You