The impact of government intervention on agricultural prices in Tunisia

November 4, 1980 THE IMPACT OF GOVERNMENT INTERVENTION ON AGRICULTURAL PRICES IN TUNISIA I. INTRODUCTION Government intervention in such forms as fixed prices, subsidies, taxes and physical quotas has had a considerable impact on agricultural prices in Tunisia. This annex concentrates on the cereals, durum wheat, bread wheat and barley, and the meat products, beef and lamb, which are generally produced in rainfed areas. It investigates the impact of government intervention in the mid and late 1970s on the rainfed producer and the consumer who purchases these cereal and meat products. It also analyzes the impact of continued government inter- vention on government revenue, consumer prices, foreign exchange earnings, and total domestic production and consumption. II. MARKETING AND PRICE DETERMINATION Cereal Marketing and Pricing (i) Role of the Controlled Market Cereal marketing in Tunisia is dominated by the controlled market which operates under the direction of the Office of Cereals (OC).-1/ In essence this 1/ The controlled market has handled since 1972 about 8.5 million quintals of wheat and barley per year. This is estimated to account for over 70% of the total amount of these cereals marketed in Tunisia. Stati9tics on cereal production, collection and importation are shown in Appendix 1. -2- official system is assigned a dual role. With regard to production, it is expected to act as a price support operation which buys all grain offered at a given price while at the same time allowing farmers to enjoy higher prices in the non-controlled market when these occur.- From the standpoint of consumption, it is expected to limit the rate of growth of cereal product prices to politically tolerable levels. The official system is able to perform this dual role because (i) it is allocated the subsidies that are necessary to isolate consumer prices from producer and import prices, and (ii) it is able to import enough cereal to avoid any upward pressure on consumer prices due to domestic shortages. In order to carry out its role, the OC directs the operations of over 150 collection centers where wheat and barley are purchased and stored generally temporarily. Almost all of this purchased grain is eventually transported to central storage elevators and/or delivered to large mills, in the case of wheat, or animal feed factories, in the case of barley, for processing. The grain imported by the OC is also stored in central storage elevators until it is like- wise delivered to the large, basically privately-owned, mills or animal feed factories. The large mills then sell or transfer their output to numerous whole- sale outlets or to other facilitites for further industrial processing, while the animal feed factories sell their concentrates to the OC or the private sector for distribution. About 20% of domestically collected grain is either retained by or transferred back to collection centers for sale in the form of grain to individual purchasers. 1/ Tunisian government regulations specify that all wheat and barley which is not used by the farm on which it is produced must be sold to government collection centers. However, these regulations are not enforced. -3- (ii) Price Determination within the Controlled Market A series of different prices and margins, all of which are officially fixed, are crucial to the operation of the official or controlled system. These prices and margins are shown in Appendix 2. The base producer prices (prix de base"a la production), which are the prices paid for collection center deliveries, are determined yearly by the OC in consultation with other government agencies and farmer and miller organizations. These base producer prices are generally announced at harvest time, and kept uniform during the year throughout the country. Although no differentials are paid for transport and storage costs, fixed premiums are paid for higher quality and reductions are made for impurities or damaged grain. Producer taxes, which average about 7% of the bare producer price, are also deducted and hence the actual producer purchase price (prix d'achat moyen a la production) is somewhat lower than the base price. From Tunisia's independence in 1956 until the mid-1970s, base producer prices were changed only three times for wheat and five times for barley; however, since 1974/75 these prices have been increased virtually every year. The decision to increase prices appears to be based primarily on the desire to increase both domestic cereal production and the quantity of cereal traded within the controlled system. The mill or factory delivery prices, (prix de cessation 'a la minoterie/ usine) are also set once a year on the basis of desired ultimate retail prices to consumers. These prices have increased since the mid-1970s along with increases in base producer prices. However, the increases in these delivery prices have not been large enough to offset rising base producer prices and hence cereal deliveries have been subsidized, generally at increasing rates, since 1974/75. Individual grain sale prices (prix de vente aux menages) for collection center sales are in theory set equal to the base producer price plus a marketing -4- margin to cover the costs of the center, which can include a transport charge for cereals sold at a center other than the original purchasing site. A subsidy has been in use since 1974/75 to moderate the increase in individual grain sale prices that would have otherwise materialized due to increased base producer prices. The per quintal subsidy on individual grain sales is generally less than half of the per quintal subsidy on mill/factory deliveries. Both subsidies are made routinely available to the OC from the Caisse Generale de Compensation (CGC). The Office of Cereals strictly controls the processing margins of the large mills and animal feed factories. A single gross milling margin (marge de mouture) set to cover the supposed costs of grinding and allow some profit, is imposed on all large mills. This margin remained unchanged from 1948 until the early 1970s and has been raised only twice since then.- The ex-mill selling price for each grade of flour or semolina is determined by the OC in accordance with the mill delivery price, the gross milling margin and the extraction rate used for the product. The price of bran and other residues is also determined the OC. The ex-factory selling prices for nine different standard mixes of animal concentrates are also set by the OC in accordance with input delivery costs and a standard processing margin. In order to avoid having to increase fixed processing margins, and hence consumer prices, whenever the price of an input into the manufacturing operation is officially increased, subsidies from the CGC are all6cated to the manufacturing operation to cover increased costs until the time that the processing margin itself is actually increased. Ex-mill and ex-factory selling prices remained constant throughout the mid-1970s and were not increased until 1979. 1/ A third increase was tentatively scheduled for mid-1980. -5- Wholesale and retail prices are also fixed for many cereal products at levels that likewise remained constant throughout the mid-1970s and were not increased until 1979. These prices are set to cover costs and allow some profit except for the fixed price of 670 gram bread, which traditionally has not covered the cost of flour plus the standard baking margin. Bakers have received a CGC subsidy, set in terms of dinar per quintal of flour baked into 670 gram bread, in order to compensate for the low fixed price. (iii) The Non-Controlled Cereal Market The non-controlled market, which is also called the tolerated or parallel market, encompasses all cereal trade which is not under the direction of the OC. This market continues to exist despite the desire of government to eliminate it, because there are circumstances in which it can offer producers better terms and consumers better quality and/or availability than the controlled market. The grain channeled through the non-controlled market is milled in local mills and generally sold by small local distributors. (iv) Price Determination in the Non-Controlled Market Prices are determined in the non-controlled market by the interaction of domestic demand and supply. Although the government does not interfere 1/ directly in this quasi-legal market,- it has a considerable indirect impact on parallel market price levels. The non-controlled market price can only go below the official prices by the extent to which potential suppli.ers can avoid official taxes, added transport charges and possibly other costs by trading on the non- controlled market. On the other hand, non-controlled market prices can only go 1/ Government interference can be considered to be direct to the extent to which the fixed wholesale or retail prices are honored for various products (such as flour or couscous) provided through the non-controlled market. -6- above official prices by the extent to which consumers prefer non-controlled market products or cannot conveniently find controlled products. Indeed as official taxes average only 7% of base producer prices, well-supplied government centers exist in most areas, and pronounced preferences for uncontrolled products seem to be held by a small percentage of the population, it appears reasonable to conclude that once official prices are set, the fairly narrow range within which parallal market prices can be expected to fluctuate, is also determined. Beef and Lamb Marketing and Pricing (i) The Basic Free Market Operation Beef and lamb are basically marketed inside Tunisia within a free market system. Wholesale and retail prices have been traditionally fixed at as low and as constant a level as judged possible. .These prices have generally been enforced only in larger urban areas and even in these urban areas actual prices are frequently alleged to exceed fixed prices. This is the case in particular for fixed retail beef prices, which seem not to permit adequate quality differentials or rates of return to the butcher. Persistent supply shortages in larger cities led to the freeing of domestic lamb prices in 1979; however, beef prices still remain controlled. (ii) Role of the Government and El-Louhoum In order to assure the supply of meat to the Tunis area at low prices, the Tunisia Government intervenes primarily through Societe El-Louhoum, a national society, in three different ways; namely by attempting to increase the supply of domestic output, by contracting with various butchers in Tunis to -7- ensure the delivery of a certain amount of meat at fixed subsidized prices and by importing additional quantities when supply shortages appear likely. The attempt to increase domestic output is probably the most important element of. the government's strategy. It has involved the maintenance of low concentrate prices, free veterinary services, credit-related subsidies and since 1974, support of the FAO/SIDA beef fattening project, which now accounts for over 10% of total domestic beef production. Participants in the FAO/SIDA project benefit from a contract with El-Louhoum that guarantees a remunerative purchase price, which exceeds the fixed price received by El-Louhoum on contract sales. The difference between the two prices is financed by a subsidy from the CGC. El-Louhoum is the monopoly importer and exporter of live animals for slaughter and frozen beef and lamb. Frozen meat is imported for distribution to institutions although some frozen lamb and possibly beef is marketed at fixed prices to the general public. The decision to import live animals for slaughter is made on an ad hoc basis generally to alleviate domestic supply shortages and/ or to take advantage of favorable price arrangements. Imported products are sold at fixed, or for the present case of lamb prevailing, domestic prices and as a general rule, El-Louhoum is not expected to import an item if the costs involved exceed the domestic price. Given the unsystematic nature of the decision to import, imports however cannot be expected to materialize whenever the differential between world and domestic prices indicates the possibility of profitable trade. Import duties and other taxes for meat products exist on the books; however, the extent to which these taxes have been actually applied is not known. Marketing and Pricing of Inputs (i) Fertilizers Nitrogen fertilizers, primarily ammonium nitrate, are imported, while phosphate fertilizers are supplied from local production. Although fertilizers -8- are exempt from import duties, t7aey are subject to various other taxes and fixed marketing margins. Most domestic fertilizer is purchased by the OC for distri- bution at its collection centers. The collection center prices, which are the same countrywide,are kept constant for as long a period as possible. The collection center prices of phosphate fertilizers did not change between 1971 and 1979, while the price of ammonium nitrate changed only once during this period. Since at least 1974, the purchase price of the OC has exceeded its sales price with the difference being financed by a subsidy made available through the CGC. (ii) Herbicides Herbicides are imported for distribution primarily at OC collection centers. Although they are subject to various domestic taxes, most herbicides are exempt from import duties. To encourage the use of herbicides, collection center prices are kept as low and stable as possible, with, for example, the price of phosdrin changing only once between 1971 and 1979. The difference between the cost of herbicides to the OC and the sale price is financed by various subsidies. (iii) Concentrates Five standard concentrate mixes for ruminants are prepared by animal feed factories, primarily for sale at OC collection centers. The primary raw material inputs, barley, soybean meal and bran, are delivered to these factories at subsidized prices, which have.remained constant since at least the mid-1970s. The subsidies on imported barley and soybean meal and on domestically procured barley are financed by the CGC, whereas the bran subsidy, which is not explicitly acknowledged as such, is financed implicitly by the consumers of wheat products. -9- The hidden subsidization of bran is attributable to the fact that, although the value of bran as an animal feed is no less than 12% of the value of barley,-/ the mill receives and the feed factory pays a fixed price for bran which is only about 33% of the average cost of imported barley. In order to encourage meat and milk production, concentrate prices are kept as low and stable as possible. Concentrate prices remained constant from 1971 until 1979 when they were increased an average of 22% for ruminant con- centrates to cover increases in the costs of inputs other than barley, bran and soybean meat. In the few years preceeding this output price increase, increas- ing costs were apparently covered by operating subsidies. (iv) Seeds The grain purchased by individuals from collection centers can be used as ordinary seed. In essence, the means that the collection center price of ordinary seed is identical to the individual grain purchase price. Certified seeds for improved varieties are also sold by collection centers at prices designed to cover the costs related to the domestic production of these seeds. However, farmers are permitted to exchange up to a fixed number of quintals of ordinary grain for an equal or almost equal number of quintals of certified seeds and hence in practice the subs.idization of certified seeds can be sub- stantial. (v) Labor Although the various labor markets in Tunisia are judged to be quite competitive individually, it is generally felt that in Tunisia as elsewhere in- 1/ If the emphasis is on protein content instead of carbohydrate content, bran can even be considered more valuable per unit weight than barley. -10- the developing world, wage rates substantially overstate real labor productivity. This dichotomy between wages and labor productivity can be explained by a large number of factors, including minimum wage legislation and social security taxes. Undoubtedly such factors as the willingness of an employer to pay more for obviously reliable employees, unionization, political power, imperfect knowledge, limited access to training and tradition also play a role. In addition, a stable hierarchy of wage differentials (unindicative of productivity differences) is expected to persist between various types of jobs with'the consequence that the relationship between wages and productivity may be more out of line in certain job markets than in others. (vi) Credit Agricultural short-term credit is made available through the National Bank of Tunisia (BNT) and assorted other institutions at the rate of 6% per annum for small and medium farmers and cooperatives, and 7% for larger farmers. A number of different funds, of which FOSDA is the most important, are used to provide medium and long-term credit. FOSDA, which is funded through official budgetary allocations, offers more favorable credit terms than would be possible commercially. Generally 10-20% of the loan is.covered by a grant, the borrower's equity contribution is set at 10% and an interest rate of 6% per annum is applied to the remaining 70%-80%. An interest rate of 6% or 7% compares favorably with Eurodollar interest rates, domestic inflation rates and the returns that can be expected from domestic in-%estment,especially in agriculture. However, it should be noted that the institutional credit available to the agricultural sector is limited,perhaps more limited than in many other countries at a similar stage of development, and hence the cost of institutional credit is only relevant for a small proportion of total producers. .-11- (vii) Machinery Services Most machinery services are either provided by a farmer's own machiner or by rental from a facilitywith surplus machinery. Almost all machinery and spare parts are imported and subject to import duties and production taxes (tax de production). Most of the gas oil and lubricants used in machinery operation are likewise imported and subject to import duties and assorted other taxes. As a partial counterbalance to these taxes, agricultural users are granted a 15% rebate on gas oil purchases. In addition, prior to 1977, credit-related subsidies were available for all machinery. Since 1977, these subsidies have applied only to smaller equipment across the board and to larger equipment pur- chased by cooperatives. Because machinery services are not readily available at reasonable rates in a number of locations, a small public corporation, presently called SONAM, also exists in order to provide these services to small and medium- sized farmers. SONAM, which is supposed to cover its costs, has tended to run substantial deficits year after year. Private hire rates are alleged to be similar to SONAM's rates in areas where SONAM operates and to exceed SONAM's rate rates in a number of areas where SONAM does not function.- 1/ In certain areas, private rates may be excessively high due tu collusion designed to force small producers to relinquish their land. SONAM still accounts for only 1% of total tractors i-a use in Tunisia. -12- III. IMPACT' OF GOVERNMENT INTERVENTION ON PRICES Definition of the Nominal Protection Coefficient The impact of government intervention on the prices of tradable commoditiesiL can be measured by the calculation of a nominal protection coefficient (NPC) which is equal to the ratio of the actual domestic price to a hypothetical price, called the border price, which would pr'vail in the absence of government intervention. The formula can be expressed as follows: Pd NPC. i 'P Pi where i = ith tradable commodity d P = existing domestic price P = hypothetical border price The border price of a commodity for which -;niia is a net importer, or would be a net importer if trade were not controlled, is based on the CIF import price. In the case of a commodity for which Tunisia is, or would be, a net exporter, the border price is based instead on the FOB export price. All 2/ foreign prices are converted into border prices at the official rate of exchange- It can be seen from the formula that a NPC greater than unity indicates that positive protection is accorded to the domestic supply of the commodity or alternatively that the domestic supplier is subsidized while the domestic nIrchaser is taxed. The opposite is the case for a NPC less than unity. 1/ A commodity is considered a tradable if it or its primary component is traded internationally 2/ It should be noted that due to enormous quantification difficulties, the impact of overall intervention on the exchange rate is ignored and the .official exchange rate is used throughout the analyses. -13- Each NPC indicates the degree of protection accorded to all the domestic producers, including the middlemen, involved in the process of making a specific commodity available at a specific point in the marketing chain. Therefore, to arrive at comparable border prices, import or export price data must be adjusted by appropriate marketing margins. These marketing margins should themselves be expressed in border prices, which reflect the real cost to the economy, in terms of foreign exchange foregone, of the marketing operations. The effort required to estimate border prices for each marketing activity can be substantial. For this reason, accounting ratios, which represent an indicative ratio of the border price to the domestic price, can be applied instead to domestic prices to provide a reasonable order of magnitude :for border prices. Gordon Hughes estimated a series of accounting ratios from 1975 data in his study "Shadow Price and Economic Policy in Tunisia" prepared for the World Bank, May 1980. His study indicates that accounting ratios for marketing margins range from .4 - .9. These estimates are all below one primarily due to domestic wage rates which overstate the real value of the economy of labor. In this Annex, an accounting ratio of .75 is applied to all marketing margins.- 1/ The term marketing margin includes all per unit handling, transport, storage and processing charges. While the accounting ratio for any one commodity may have changed considerably between 1975 and 1980, this is not likely to be the case for marketing margins, which are a composite of many different items. -14- Nominal Protection of Cereals and Cereal Products (i) Collection Center Deliveries and Sales NPCs for cereals delivered to collection centers and grain purchases from collection centers are shown in Table 1 for 1972/73 - 1979/80. The dom- estic prices used to calculate these coefficients are equal to producer purchase prices for collection cente. deliveries and to grain prices for collection center sales (see Appendix 2), while the border prices are based on 1/ CIF import prices adjusted by appropriate marketing margins- in order to arrive at collection center border prices. Table 1: NOMINAL PROTECTION COEFFICIENTS FOR COLLECTION CENTER TRANSACTIONS Durum Bread Durum Bread Wheat Wheat Barley Wheat Wheat Barley Deliveries to -m-Collection Center Sales-- ----Collection Centers---- 1972/73 .65 .65 .53 .81 .83 .61 1973/74 .47 .45 .41 .57 .58 .45 1974/75 .68 .70 .63 .76 .78 .72 1975/76 .91 .94 .78 1.02 1.05 .88 1976/77 1.24 1.26 .93 1.38 1.41 1.05 1977/7S 1.10 1.20 .88 1.25 1.38 1.03 1978/79 .93 .95 1.00 1.05 1.07 1.12 1979/80 1.02 1.08 .97 1.12 1.19 1.07 These coefficients indicate that cereal producers were taxed in the 1972/74 period. This taxation of production, which is in contrast to the subsidization of production throughout the 1960s, arose because world price increased dramatically in 1972 - 1974, while domestic prices remained constant until 1974/75. The situation, 1/ The appropriate marketing margin is defined as the port to mill margin minus the the handling, transport and storage margin between the collection center and mill all multiplied by an accounting ratio of .75. -15- however, changed in the mid-1970s, when domestic producer prices were substantially increased to account for such factors as the mammoth 1972/74 increase in world market prices, increased domestic production costs, and decreased domestic production due to poor weather. NPCs for wheat in excess of unity and NPCs for barley close to unity for 1976/78 are a consequence- of these increasing domestic producer prices combined with declining world prices. During the 1978/80 period world market prices for wheat gradually caught up with domestic producer prices, while for barley domestic producer prices finally reached world levels. As a result, the recent situation appears to be one of relative equivalence between world and domestic producer prices. Domestic consumer grain purchase prices have followed the same trend as domestic producer prices with the average consumer price set about 10 percent higher than the average producer price. The coefficients for all three cereals generally are similar with the bread wheat coefficient tending to exceed the durum wheat coefficient and the durum wheat coefficient tending to exceed the barley coefficient. This ooservable difference from the point of view of production means that producers have had less of an incentive relative to world norms to produce barley than wheat. From the point of view of con- sumption, the observable difference among the coefficients has amounted to the "implicit" subsidization of poorer non-urban groups who tend to consume barley and more durum wheat than bread wheat. (ii) Mill and Animal Feed Factory Deliveries NPCs for wheat delivered to large mills and barley and bran delivered to animal feed factories are shown in Table 2. The coefficients for wheat and barley are equal to the domestic mill/factory delivery price divided by the CIF import price increased by the appropriate port to mill margin.- For bran, the NPC equals the 1/ Port to mill margin multiplied by the accounting ratio of .75. -16- Table 2: NOMINAL PROTECTION COEFFICIENTS FOR MILL AND FACTORY DELIVERIES 1975/76 1976/77 1977/78 1978/79 1979/80 Mill Deliveries Durum Wheat .80 1.01 .80 .73 .88 Bread Wheat .75 .95 .82 .75 .90 Animal Feed Factory Deliveries Barley .50 .58 .49 .51 .45 Bran .37 .43 .37 .38 .34 domestic delivery price of 20 millime per kg divided by 88% of the border price of barley. These coefficients indicate that mill and factory delivery prices have been maintained below world levels for the past five years. The subsidization of barley and bran used for the production of animal products has been clearly more pronounced and consistent than the subsidization of human cereal consumption. (iii) Consumer Sales of Wheat Products The nominal protection coefficients for wheat products shown in Table 3 indicate the relationship between the price that consumers have actually paid for final products and the price they would have paid if wheat prices bran and other by- product prices and marketing margins were set at international opportunity levels. They are equal to the ratio of the domestic prices shown in Appendix 3 to the border prices derived in the same Appendix. These coefficients indicate that during the past five years consumers have 1/ paid more or less world prices for semolina and flour! , prices in excess of world prices for 300 gram bread and prices only slightly below world levels for 670 gram bread. 1/ Flour is used here to refer exclusively to bread wheat flour -17- Table 3: NOMINAL PROTECTION COEFFICIENTS FOR WHEAT PRODUCTS Sales from Wholesale or Retail Outlets 1976 1977 1978 1979 1980 Semolina - 1.15 .98 .89 1.03 Flour .90 1.11 .99 .87 1.02 670 Gram Bread .91 1.05 .97 .85 .92 300 Gram Bread 1.09 1.23 1.15 1.07 1.14 These results are surprising given thehigh degree of subsidization of wheat has illustrated in Table 4, which shows the ratio between the price that a consumer has explicitly or implicitly paid for a quintal of semolina or flour and the hypothetical price which would have prevailed if all wheat-related subsidies/taxes were removed, but everything else remained the same.1/ Table 4: RATIO OF CONSUMER PRICE OF A QUINTAL OF SEMOLINA/FLOUR TO THE HYPOTHETICAL PRICE IF ALL WHEAT-RELATED SUBSIDIES/TAXES WERE REMOVED Sales from Wholesale or Retail Outlets 1976 1977 1978 1979 1980 1. Semolina - .99 .78 .72 .83 2. Flour used in 670 Gram Bread .53 .67 .55 .46 .55 3. Flour used in 300 Gram Bread & Other Products .74 .94 .80 .73 .85 These wheat-related subsidies have not inevitably resulted in NPCs for final consumer products below unity because the mill-to-consumer margins have overstated the real cost to the economy of these marketing operations. These marketing 1/ More explicitly, this means that mill delivery prices are set at CIF import prices plus delivery charges to the mill; domestic marketing margins are used; domestic bran prices are used;and baking and milling subsidies per unit of flour are eliminated. -18- margins have been overstated because (i) inputs, such as labor, utilities and equip- ment, into the marketing operations have been priced higher in domestic prices than justified by their productivity or import costs- and (ii) bran, which is a by- product of the milling operation, has been underpriced in terms of its value to the economy as a potential substitute for barley in animal feed. This failure to price bran appropriately means that the net milling margin, which equals the gross milling margin minus the value of by-products, has been considerably larger in domestic prices than in border prices. The average NPC for 670 gram bread is less than unity only because a sub- stantial baking subsidy has operated over time to counterbalance the effect of overstated marketing margins. It should be noted in this regard that the NPCs for 670 gram bread, which is the basic staple of the urban poor, are lower than the NPCs for collection center sales of barley and durum wheat see Table 1), which are the basic staples of the rural poor. 2/ Nominal Protection of Beef and Lamb- Owing either to a lack of information or the erratic nature of available data, annual NPCs are not calculated for beef and lamb. However, five year averages covering 1975/76 through 1979/80 and based on available evidence, are presented in Table 5 to provide some idea of the degree of protection accorded to these items. These NPCs for beef and lamb are based on the average ratios of fixed domestic prices to hypothetical import prices for live animals for slaughter. These prices are shown in Appendix 2 Table 4. The derivation of hypothetical import prices is fraught with 1/ It is only for highly processed products such as bread that the NPCs are somewhat sensitive to the choice of the accounting ratio. If the accounting ratio used for the gross mill to retail marketing margin were increased from the .75 used here to 1.00, the NPCs for 300 gram breadp would average only .96 and the average NPC for 670 gram bread would decrease to .82. 2/ Lamb is used loosely here to refer to both lamb and sheep. -19- Table 5: AVERAGE NOMINAL PROTECTION COEFFICIENTS FOR 1975/76-1979/80 FOR BEEF AND LAMB Sale of beef animals from the FAO/SIDA beef fattening project to El-Louhoum .96 Sale of beef carcasses by El-Louhoum to contract butchers in Tuni .79 Sale of lamb for slaughter 1.14 difficulties, not only because world price series for live animals are not available, but also because any particular price that Tunisia is observed to pay is not necessarily indicative of the price that Tunisia would have to pay if the quantity purchased were either increased or decreased. Nonetheless, due to a lack of any real alternative, hypothetical import prices are assumed to equal actual average CIF import prices except for beef animals for 1978-1980, for which projected trends are used instead of actual average import prices. It should be noted that these problems do not exist for cereals or most inputs, where there are much clearer world prices and Tunisia is obviously a price taker. If consumer preferences are ignored, or considered to be relatively in- significant, and fresh beef is assumed to be identical to frozen imports, the NPCs for beef can be recalculated on the basis of border prices defined by the CIF import prices of frozen meat. These would yield NPCs of approximately 2.10 and 1.60 for sales of animals to El-Louhoum and carcass sales by El-Louhoum respectively. From this point of view, beef production can be said to be subject to a high degree of protection and beef consumption to a high degree of taxation due to the failure of the government to make imported beef readily available to the general public.l/ 1/ Imported beef is sold to institutions by El-Louhoum at cost, and some imported beef may be made available at present to butchers in Tunis. -20- Because imported frozen lamb is made readily available to the public at prices that are not substantially above costs, it cannot be argued as for beef that the NPC needs to be revised upward on the basis of marketing restrictions. The NPCs for livestock should be.viewed with caution, because official price data, except for transactions which pass through El-Louhoum and possibly for sheep prices since they were freed in 1979,are assumed to under- state actual domestic prices. This means that on average the actual NPCs for beef and lamb may be somewhat higher than the NPCs presented here. In addition, considerable seasonal fluctuations in both domestic and world prices, especially for lamb, mean that the NPC can fluctuate substantially from month to month. Indeed, it is possible that in various months in certain years, the NPC for lamb may have even dropped below one, indicating a failure of the government to export lamb when world prices exceeded domestic prices. Nominal Protection of Inputs (i) Collection Center Sales of Fertilizers, Herbicides, and Concentrates Nominal protection coefficients for fertilizers and two different concentrate mixes sold at collection centers are shown in Table 6. These coefficients indicate that these inputs have all benefitted from a sub- stantial degree of subsidization. The degree of protection accorded to triple super phosphate appears to average one-third more than that accorded to ammonium nitrate. This may help to explain why phosphate application rates are judged reasonably adequate while nitrogen application rates are seen to be far below adequate. -21- Table 6 NOMINAL PROTECTION COEFFICIENTS FOR FERTILIZERS AND CONCENTRATES Collection Center Sales 1976 1977 1978 -1979 1980 Ammonium Nitrate .52 .90 .78 .69 .58 Triple Super Phosphate .28 .62 .58 .58 .39 Beef Fattening (mix #5) .54 .60 .52 .52 .56 Sheep Fattening (mix #9) .52 .58 .49 .50 .55 Owing to a lack of data, NPCs are not calculated for herbicides. However, it is generally felt that domestic herbicide prices have tended to average about 50% of world prices. (ii) Nominal Protection of Machinery-Related Inputs Owing to a lack of information annual NPCs are not calculated for machinery-related inputs. However, as for beef and lamb, five year averages covering 1975/76 through 1979/80 can be estimated on the basis of available information. These estimates, which are presented in Table 7, range from 1.11 - 1.48. They reflect the impact on domestic prices of import duties, other taxes and overstated domestic marketing margins. The full impact of these taxes is mitigated in the case of machinery by credit-related subsidies and in the case df.gas oil by the rebate on purchases by agricultural,users. It should be noted that if spot prices were used for petroleum products instead of the average import prices used here, the border prices would be at least twice as high as domestic prices and hence the NPCs would be less than unity. The NPC of 1.40 for the rental of machinery servicesL/ indicates that farmers are charged about 40% more for custom services than they would 1/ Machinery services include the use of tractors with attachments and self- propelled combines. -22- Table 7: AVERAGE NOMINAL PROTECTION COEFFICIENTS FOR 1975/76-1979/80 FOR MACHINERY-RELATED INPUTS Sale of agricultural machinery to farmers 1.11 Sale of spare parts to farmers 1.25 Sale of gas oil to farmers 1.42 Sale of lubricants to farmers 1.48 Rental of machinery services to farmers 1.40 be charged in the absence of government intervention. This high implicit taxation of custom services is due to relatively high levels of taxation of the tradable components of gas oil, lubricants, machinery and spare parts combined with a relative shortage of machinery that means that the return to capital investment in agricultural machinery is far above normal profit rates. In the case of SONAM, which does not take advantage of the possibility of above-normal profits, official wage rates which far exceed real labor productivity operate instead of capital shortages to help keep custom service rates above international opportunity levels. -23- IV. IMPACT OF GOVERNMENT INTERVENTION ON VALUE ADDED IN AGRICULTURAL PRODUCTION Definition of the Effective Protection Coetficient While the nominal protection coefficient expresses the effect of govern- ment intervention on the price of a particular commodity, for the-producer what matters is not only the output price but also the costs of inputs. The combined effects for the producer can be measured by a coefficient called the effective protection coefficient (EPC), which measures the impact of intervention on the value added by, or the return to, the primary factors of production employed in the production of a given commodity. This coefficient is equal to the ratio of value added in domestic prices per unit of output to a hypothetical measure, based on border prices, of per unit value added without intervention. The general formula can be expressed as follows: d - d P iTaijP. j=1 EPC. = b _ n b P iI. aijP j=l where i = ith output j = jth input = existing domestic price Pb = hypothetical "border" price aij = quantity of jth input required to produce one unit of the ith output -24- The farmgate border prices used here in the calculation of the EPC are determined in a similar manner to that used for the border prices for the NPC. As for the NPC, an accounting ratio of .75 is applied to all domestic marketing margins to arrive at appropriate border margins. There are a few minor inputs for which the effort required to derive individual border prices is deemed too demanding relative to their significance. For these items, which include jute bags, drugs and plastic sheets (to cover silage), accounting ratios suggested by Gordon Hughes are used to convert domestic prices into border prices. Value added is defined here to include the return to all the primary factors, namely labor, land, capital and draft animals, ergaged in on-farm cereal, fodder or livestock production. It does not, however, include the return to primary factors engaged in marketing operations or machinery repair. In the case where machinery services are hired, the return to the labor and capital employed in the provision of these services, is also excluded from the value added by on-farm production. This is done because the value added by these services is "captured" by the owners/operators of the machinery themselves and not by the farms that use these services.- Effective Protection of Grain and Livestock Production In this annex, average EPCs for the 1975/76-1979/80 time period are calculated for: (i) a modern large-scale cereal producer, who hires no labor, owns his own machinery and purchases certified seeds. 1/ The primary factors, which are excluded as generators and recipients of value- added, must be bordered price along with the other inputs. The use of border prices for primary factors is a break with tradition, but nonetheless useful if one wishes to focus on the producer instead of the economy as a whole. -25- (ii) an average medium-sized cereal producer, who hires machinery services, hires no labor other than that related to machinery services and plants his own seed. (iii) a traditional cereal producer, who hires no labor, uses draft animals and plants his own seed. (iv) a modern livestock producer who participates in the FAO/SIDA beef fattening project, hires no outside labor and owns his own machinery. (v) a modern livestock producer engaged in lamb production on the basis of improved pastures who hires no outside labor and owns his oWn machinery. (vi) traditional lamb producer engaged in lamb production on the basis of grazing of fallow. The EPCs shown in Table 8 are based on information provided in Appendix 4. They indicate that the net result of government intervention iii the past five years has been the- protection of wheat and meat production and the taxation of barley production.1_/ The EPCs for each cereal are close both to each other and to the average NPCs of 1.03, 1.07 and .90 for durum wheat, bread wheat and barley respectively. The EPCs for livestock production are invariably higher than both the EPCs for cereal production and the NPCs for livestock. In the case of beef fattening,the negative nominal protection of output is transformed into the clearly positive protection of production by a domestic price for concentrates which averages only 60% of its border price equivalent. For cereals, the existence of EPCs which are less than or only slightly greater than the NPCs is somewhat unexpected given the high degree of subsidization of such modern inputs as fertilizers, herbicides and certified seeds. The minimal 1/ This taxation of barley is due to the impact of 1975/78. If only the past two years 1978/80 are considered barley production appears to have been taxed only slightly if at all. -26- Table 8: AVERAGE EFFECTIVE PROTECTION COEFFICIENTS OVER THE 1975/76 - 1979/80 PERIOD Durum Bread Cereals - Wheat Wheat Barley 1. Modern Large-Scale Producer 1.07 1.09 .81 2. Average Medium-sized Producer .96 1.06 .79 3. Traditional Producer 1.03 1.07 .89 Lamb on Beef Impr)ved Lamb on Livestock Fattening Pasture Fallow 1. Modern Pooducer 1.32 1.26 - 2. Traditional Producer --- 1.33 impact of such subsidies on the EPCs is due to the fact that for cereals and other crops, tradable inputs account for a small enough portion of the total value of output that modern input subsidies by themselves are unable to have an appreciable effect on domestic value added. Furthermore in the case of cereals in Tunisia, domestic machinery hire rates have exceeded border price equivalents to the extent that they have counteracted, completely or almost completely, the limited but positive impact of input subsidies. The modern large-scale cereal producer has benefited from a slightly higher rate of effective protection than the average medium-sized producer because he has used greater amounts of the highly subsidized modern inputs. In addition, the negative impact of higher domestic machinery service charges has been spread over a larger number of quintals of output in the case of the modern large-scale proudcer and by ownership of his own machinery, the large-scale producer has paid only about 440 millime per hour for the capital and labor components of machinery services versus 620 millime per hour for the medium-sized producer who has had to -27- rent the same services. The EPCs for the average medium-sized producer are lower than for the traditional producer who uses no machinery due to the negative impact of machinery services on the EPC. V. OTHER EFFECTS OF GOVERNMENT INTERVENTION Macro-Modelling of the Impact of Cereal Price FPIicy Present cereal price policy tends to generate high levels of cereal consumption with only minor price increases by sacrificing some domestic production, fair amounts of foreign exchange and considerable amounts of government revenue. The orders of magnitude involved in the coming decade can be derived by .comparing the situation called the base case, which represents the continuation of present policy, with the non-intervention situation, which would occur if domestic prices were decontrolled and allowed to reach border or world prices. The base case can also be compared with a limited-intervention situation, in which domestic cereal prices are set at world levels but the domestic price of bran is maintained at its present level. The cereal balances presented in "Rapport de la Mission de Preparation du Projet de Stockage de Cereales en Tunisie" FAO, Rome January 18, 1980 Annex 1, Tables 9 and 10 are used to deri.e the base case quantities which are presented here in Tables 9 and 10. The net change in stocks is assumed to be zero so that the total available is equal to the total used. The producer and consumer prices shown in Table 11 for the base case are equal to fixed 1979/80 prices, which are assumed to be indicative of both controlled and parallel market prices. The border prices are based on projected mill/factory 'delivery costs of 9800, 9000 and 7500 dinar per quintal for imported durum wheat, bread wheat and barley respectively. The border price of bran is -28- Table 9 ChPEAL BALANCE FOR THE MID-1980s - in millions of quintals of grain - Durum Bread Wheat Wheat BarLey Total Available Domestic Production 8.3 2.3 2.4 13.0 (of which officially collected) (4.9) (1.9) ( .8) (7.6) Net Imports .4 3.2 .6 4.2 Total Available 8.7 5.5 3.0 17.2 Used Human Consumption 7.8 5.3 .6 13.7 Animal Consumption - - 1.9 1.9 Seeds .9 .2 .5 1.6 Total Used 8.7 5.5 3.0 17.2 assumed to equal 88% of the factory delivery cost of barley. For collection center-type grain transactions, actual 1979/80 collection center to mill marketing margins are subtracted from mill/factory delivery costs to arrive at border prices, while for sales of wheat products, actual mill through retail marketing margins net of the border value of bran are added to these delivery costs to obtain border prices. The limited intervention price is derived in the same manner as the .border price except that bran is valued at the domestic price of 20 millime per kg instead of at its border value. The level of domestic production and consumption in the non- intervention and limited intervention situations can be derived by the use of appropriate price elasticities of demand and supply, which indicate the quantity changes that would occur as a consequence of changing both producer and consumer prices to border prices. Each price elasticity for each commodity must indicate the percentage increase or decrease in output or consumption associated with a one per cent increase in the average price of this commodity over the -29- Table 10: TOTAL CEREALS USED BY FORM OF CONSUMER PURCHASE IN THE MID-1980s - in millions of quintals - Durum Wheat Semolina from Large Mills 3.5 Bran from Large Millsl/ 1.7 Grain from Collection Centers, Parallel Market or Home Production 3.5 Total 8.7 Bread Wheat Flour for 670 Gram Bread 3.4 All Other Flour from La ge Mills2/ .4 Bran from Large Mills 1 1.3 Grain from Collection Centers, .4 Parallel Market or Home Production Total 5.5 Barley Barley Delivered to Animal Feed Factories 1.0 Grain from Collection Centers, 2.0 Parallel Market or Home Production Total 3.0 1/ Includes all by-products, which are transferred to animal feed factories for use in the manufacture.- of concentrates 2/ Includes all flour and baked products except 670 gram bread. next decade under the circumstances that all cereal prices are set at world levels. Limited statistical evidence exists for Tunisia in the area of cereal price elasticities; however the aggregate production and human consumption responses cannot be overwhelming, given the absence of much additional land to place in cereals, the fact that rate of adaption of higher-yielding technology responds to a number of factors of which price is relatively minor and the existence of cereals as the basic staple in the Tunisia diet. The price elasticity of demand for barley -30- Table 1!1: AVERAGE PRICES FOR THE MID-1980s - in 1980 constant millime per quintal of grain - Collection Center-Type Durum Bread Grain Transactions Wheat Wheat Barley Producer Price 7,998 7,160 5,487 Consumer Price 8,800 7,900 6,100 Border Price 8,110 7,502 6,117 Limited Intervention Price 8,110 7,502 6,117 - in 1980 constant millime per quintal of semolina/flour - Flour for Other Sales of Wheat Products Semolina 670 Gram Bread Flour Consumer Price 14,500 7,223 10,500 Border Price 15,892 11,924 11,924 Limited Intervention Price 17,827 13,370 13,370 - in 1980 constant millime per quintal - Sales to Animal Feed Factories Consumer Price 2,000 3,000 Border Price 6,600 7,500 Limited Intervention Price 2,000 7,500 used in concentrates is especially difficult to estimate, because it depends not only on the price elasticities of demand for livestock products but also on the portion of total production costs that can be attributed to barley as the price of this input changes. As a working hypothesis, price elasticities of demand of - .4 and price elasticities of supply of + .3 are assumed for all commodities in the non-intervention situation. The same price elasticities are used in limited intervention situation except for barley for concentrates, for which the price elasticity of demand is changed to - .6 to account for the fact that the domestic price of bran, a close substitute, is maintained at its present low level. In all cases, the quantity of bran, a milling by-product, is a function of the amount of semolina and flour milled by large mills. Table 12: COMPARISON OF THE PROJECTED IMPACT OF PRESENT CEREAL PRICE POLICY WITH NON-INTERVENTION'AND LIMITED INTERVENTION SITUATIONS FOR AN AVERAGE YEAR IN THE 1980s Non- Limited Base Intervention Intervention Unit of Measure Case Situation Situation Domestic Production millions of quintals of grain 13.00 13.10 13.10 Net Imports 4.20 2.20 1.23 Total Used 17.20 15.30 14.33 Price of 670 Gram Bread 1980 millime per loaf 80 105 113 'Price of Concentrate Mix #5 1980 millime per quintal 4,350 8,8001/ 7,2501/ Per Capita Human Consumption kg. of grain per person 181 163 154 Consumer Price Index (CPI) CPI = 100 in base case 100 103 103 2/ Net Foreign Exchange- million of 1980 35.5 19.2 11.2 Expenditure on Cereals constant dinar Government Subsidies 32.8 - - Implicit Bran Subsidy 13.8 - 11.2 1/ Assumes world prices also for soybean meal. 2/ Assumes CIF import prices of 9.38, 8.58 and 7.08 dinar per quintal for durum wheat bread wheat and barley respectively and a FOB export price of 6.80 dinar per quintal for barley for the non-intervention and limited intervention sifuations. -32- The comparisons shown in Table 12 between the base case and the non- intervention and limited intervention situations is based on the indicated price elasticities. Per capita human grain consumption is based on the assumption that, other than for seeds, all wheat and 40% of barley grain con- sumption will be for human consumption and .that the population will contain 7.4 million people. For the calculation of the consumer price index (CPI), it is assumed that the CPI will increase by the following percentages for every 100 percent increase in the price of each item: durum wheat grain: 0.7%; bread wheat grain: 0%; barley grain: 0.1%; flour for 670 gram bread: 1.7%; other flour: 1.8%; semolina: 2.6%; barley for concentrates 0.4%; bran: 0.4%. The government subsidy is equal to the difference between what the government pays for domestic and imported cereals and what the government is eventually paid for these cereals, while the implicit bran subsidy is equal to the difference between the international opportunity value of bran deliveries and what the factories pay for these deliveries. Clearly, the situation of non-intervention offers several major advantages; namely, the complete elimination of the 32.8 million dinar of govern- ment subsidies indicated in Table 12, the eradication of the implicit bran subsidy of 13.8 million indicated in the same table and a 54 percent reduction in net foreign exchange expenditure on qereals. The limited intervention situation offers the similar advantage of the complete.elimination of the 32.8 million dinar of government subsidies, but combines this advantage with a larger reduction, 68 percent,in net foreign exchange expenditures but only'a minor reduction in the implicit bran subsidy. Both of these situations also permit Tunisia to be virtually self-sufficient in durum wheat and to become a net exporter of barley. In addition, domestic cereal production1would increase by one percent in both of these situations. -33- However, these advantages must be weighed against the disadvantages, par- ticularly the 10-15 percent decrease in per capita human grain consumption and the increase in consumer prices. Although the non-intervention and limited inter- vention situations both generate a 3% increase in the overall consumer price index, wheat product prices increase less and animal product prices more in the non-intervention situation than in the limited intervention situation. The lower increase in animal product prices in the limited intervention situation is made possible by the regressive bran subsidy, by which'wheat product consumers are implicitly taxed for the benefit of animal product consumers. For the nutritionally vulnerable members of Tunisian society who can be assumed to consume close to one loaf of 670 gram bread per day, a 31 or 41 percent increase in the price of bread would mean an increase in per capita bread expenditure from 29.2 dinar per year to 38.3 or 41.2 dinar per year. Budgetary Impact The subsidies routinely allocated to the cereal and livestock subsector through the CGG are shown in Table 13. These subsidies tend to account for 5-7% of total current governmental expenditure. If such amounts were reallocated to finance capital development instead of consumption, official capital - expenditure in 1977 could have been increased by about 7% in 1976 and 1977 and by- over 10% in 1978 and 1979. It can be seen from Table 13 that except for meat and milk, the routine subsidization of the other five items grew at an annual rate in excess of 40% per year between 1976 and 1979. This high rate of growth is clearly in excess of Tunisia's domestic inflation rate (about 6-8% per annum) and the rate of growth in current prices in the world market for cereals and fertilizers. -34- Table 13: ESTIMATED ROUTINE EXPENDITURES OF THE CAISSE GENERALE DE COMPENSATION - in millions of current dinar - 1980 Item Subsidized 1976 1977 1978 1979 Projected Marketing of Locally.-V Produced Cereals 5.7 5.0 9.1 13.3 4.8 Importation of Wheat 4.1 4.4 7.1 11.0 8.1 Importation of Animal Feedstuffs 3.9 7.0 6.8 10.0 13.7 Milling and Baking 1.3 3.6 4.9 5.8 10.5 Meat 2.6 2.6 3.1 2.4 1.5 Milk - - - - 1.3 Fertilizers 1.0 2.0 3.0 4.0 6.6 Total 18.6 24.6 34.0 46.5 46.5 1/ Covers the difference between delivery/individual grain purchase prices and the costs incurred by the OC in supplying domestically procured cereals to large mills, animal feed factories and individual purchasers. It should be noted that despite the proportionally small .amounts allocated to meat and milk, the actual direct and indirect subsidization of animal products through the CGC accounts for a substantial proportion of the totals shown in Table 13. This is because all the subsidy on imported animal feeds, much of the subsidy on domestically procured barley and the entire implicit bran subsidy represent in fact animal product subsidies. For example, of the 39.9 million dinar projected for cereal, meat and milk subsidies for 1980, 2.8 million dinar are allocated to the domestic purchase of meat and milk, 0.3 million to the domestic purchase of barley to be used -35- in animal ceeds, 13.7 million to the importation of animal feedstuffs and 10.4 million implicitly to bran (and other milling by-products) which are to be made available for animal feed at about two dinar per quintal when the international opportunity cost of bran, based on its value as a barley substitute, is about six dinar per quintal. This means that animal products should benefit, directly .and indirectly, from 27.2 million dinar of subsidies or 68% of the total projected cereal, meat and milk subsidies. A number of other subsidies are allocated to the cereal and livestock subsectors through other means than routine expenditures of the CGC. These subsidies include the gas oil rebate, herbicide subsidies and the subsidization of various ad hoc operations such as the importation of fodder in 1978. Bi-monthly cereal storage charges, which do not seem to be considered in the setting of cereal prices, may also represent a substantial implicit subsidy to cereal producers and consumers, but this has yet to be studied. (ii) Tax Collection A number of different taxes are collected by the government at various stages in the marketing of inputs, cereals and meat. These taxes include producer taxes on cereals, import duties on machinery, gas oil and possibly livestock,and production and occasionally consumption taxes on most inputs. No effort is made in this paper to estimate the total amount of revenue generated by these taxes. However there appears to be no doubt that the tax revenue generated is far less than the total amount allocated to subsidies. Distorted Relative Prices The fact that relative prices inside Tunisia are not indicative of the relative prices at which Tunisia can engage in international trade means that -36- domestic resource allocation based on domestic prices must be non-optimal from the point of view of economic efficiency. With regard to cereal production, this allocative inefficiency can materialize in many different ways. For example, farmers may opt to produce durum wheat when, if guided by world prices, they would plant barley. Alternatively, farmers may be relatively careless about the use of relatively cheap inputs such as triple super phosphate (TSP), which has cost the Tunisian farmer in the last few years an average of 60 kg of bread wheat per quintal versus a world price of about 130 kg per quintal of TSP. The allocative inefficiency within the livestock subsector may be even more pronounced than in the cereals subsector. The lack of variation in the domestic price of barley, soybean meal, maize and bran used in the domestic manufacture of concentrates means that the composition of standard feed mixes is not varied in Tunisia as it is elsewhere to take advantage of international changes in relative prices. The low price of concentrates tends to encourage fattening operations at the expense of grazing and pasture development, which are generally lower cost operations. Furthermore, this low price tends to discourage the on-farm production and consumption of all animal feedstuffs. Indeed, at present prices, farmers should be motivated to sell all their barley to collection centers at 5487 millime per quintal and purchase animal concentrates at 4190-5290 millime per quintal.1/ Miscellaneous Costs and. Benefits There are a number of other costs and benefits of government intervention that have not been explicitly treated in this Annex. They include the: (i) Positive nutritional impact on nutritionally vulnerable groups of cereal subsidies. 1/ The fact that this is not happening on a large scale indicates that concentrate supplies are not accessible in unlimited quantities. The distortions which can arise due to relatively cheap cereal products must be watched to avoid the classical Eastern European situation where cheap bread is fed to livestock. -37- (ii) Positive impact on planning and investment activities of stable prices and markets. For example, the Tunisian cereal producer faced gradually rising prices in the mid and late 1970s instead of the extreme price cycles experienced by his counterpart elsewhere. This stability furthermorehad the advantage of not being overly rigid given the policy of -annualreview and the existence of non-controlled markets. (iii) Negative impact on government's scarce resources of the high costs associated with the administration of marketing.and pricing operations. A reduction in this type of intervention would release these scarce funds and managerial resources for their possible employment in other areas such as extension and research, where they are critically needed and cannot substitute for private sector resources. For a number of other variable the net impact of government intervention is less obvious and can only be clarified after additional study. These variables include: (i) employment (ii) degree of mechanization (iii) income distribution other than within the cereals subsector. (iv) optimum use of fertilizer and other modern inputs. VII CONCLUSION In Tunisia, agricultural price intervention, although pervasive, does not appear to result in any pronounced and severe distortions. It is basically designed to maintain stability and to limit consumer price increases to tolerable levels without impairing production incentives. The interventionary procedures -38- are institutionalized but the orders of magnitude are determined on an ad hoc basis and, except for certain inputs, tend not to deviate for very long from levels defined by international trade. In the past five years, despite the existence of a substantial degree of subsidization in a fiscal sense, the net impact of overall government intervention has been the taxation of the purchasers of grain, lamb and 300 gram bread, the subsidization of the consumers of 670 gram bread and the tendency to neither really tax nor subsidize flour, semolina and possibly beef consumers. From the point of view of production, meat producers, in particular those who fatten animals on purchased concentrates, have tended to gain and cereal producers have, tended neither to benefit nor lose from intervention. The major problem at present in Tunisia as elsewhere appears to be how to prevent government subsidies from reaching unmanageable levels. This is especially important in the case of the increasing amounts allocated to animal products. CEREAL PRODUCTION, YIELI:, uLUL6TION AND NIT TPOP' TN --NISIA - Quantities in thousands of tons; yields in kg per hectare - Collection Yearl/ 1970/71 1971/72 1972/73 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 1979/aOV Production Durum Wheat 299 428 652 490 655 803 723 460 663 614 Bread Wheat 150 218 262 200 202 162 195 114 79 63 Barley 151 146 236 212 228 310 230 95 208 284 Total 600 792 1,150 902 1,085 1,275 1,148 669 950 961 Yields Durum Wheat 399 618 756 566 661 876 571 511 756 629 Bread Wheat 536 1,000 992 1,022 1,036 1,087 1,548 1,140- 782 887 Barley 368 431 613 530 594 801 400 257 419 507 Total 416 619 763 586 691 87/ 584 4G3 344 50? Official Collection Duruim Wheat 95 162 262 187 253 331 257 171 272 173 Bread Wheat 87 123 106 75 78 71 67 46 65 46 Barley 27 28 44 24 26 33 38 15 26 47 Total 209 313 412 286 357 435 362 232 363 266 Net Imports Durum Wheat 117 88 32 - - -12 67 280 225 223 Bread WheaL 259 173 106 292 285 280 400 336 360 279 Barley - 8 - - 44 37 - 15 104 84 47 Total 368 261 138 336 322 268 482 720 669 549 Source: "Rapport de la Mission de Preparation du Projet de Stockage le Cereals en Tunisie", FAQ/World Bank, January 18, 1980, 1/ For 1970171, reference is to the 1970 harvest, but the 1970/71 collection year, and so fo:th. 2/ Collection and import data for 1979/80 only cover July 1, 1979 to February 28, 1980. MEAT PRODUCTION AND IMPORTS IN TUNISIA - In thousands of tons carcass weight - 1/' 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979- Production Beef 16.5- 19.0 21.3 23.8 26.2 28.7 34.7 38.5 39.0 44.1 Lamb/Mutton 17.4 18.9 19.7 19.9 21.5 22.6 29.9 28.0 23.4 25.4 Goat Meat 1.8 2.2 2.5 2.7 3.1 3.6 4.2 5.5 6.0 5.9 Poultry 9.2 10.2 12.6 13.6 15.7 18.2 20.0 24.8 Internal OrganE 5.4 6.0 6.5 7.0 7.6 8.2 10.3 10.8 10.3 11.3 Other Meat2/ .9 1.1 1.0 1.0 1.0 1.0 '.8 .6 -6 .6 Total 51.2 57.4 63.6 68.0 75.1 82.3 99.9 108.2 108.4 118.8 Imports Beef Animals 1.7 2.2 2.3 2.0 3.4 3.8 2.6 2.8 2.1 1.3 Ovine Animals 1.3 1.4 1.1 1.4 j.9 1.1 1.3 1.0 .6 - Frozen Beef - .3 .1 .5 .4 2.2 1.9 3.0 3.4 1.5 Frozen Lamb - - .1 - .1 .2 1.7 .1 .7 .6 Frozen Chicken - - .1 - - .2 .3 - .2 .1 Total 3.0 3.9 3.7 3.9 5.8 7.5 7.8 6.9 7.0 3.5 Source: "Retrospective decennale 1970 - 1979 De L'Elevage" Ministry of Agriculture", November 1979. 1/ 1979 date is provisional; 1979 import data does not cover the entire year. 2/ Includes meat from camels, donkeys, horses and. pigs. The statistics cover only the animals slaughtered in government 1 controlled slaughterhouses. TUNISIA PklCING STUDY: ESTIMATED PRICES, MARGINS, TAKES AND SUBSIDIES FOR DURUM WHEAT - in millimes per quintal - Crop Year: 1972/7:1 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 1979/80-1/ EARD WHEAT Average Prices 1. Producer Purchase Price 4,577 4,777 5,662 6,120 6,120 6,620 7,054 7,998 2. Base Producer Price 5,100 5,100 6,100 6,600 6,600 7,135 7,600 8,600 3. Delivery Price to 1111 5,271 5,271 5,271 5,970 5,970 5,670 6,393 8,000 4. Grain Price2/ 5,700 5,700 6,300 6,800 6,800 7,535 8,000 8,800 5. Import Price (CIF) 7,140 10,160 8,820 7,220 5,630 6,800 8,400 8,800 Marketing Margins 6. Transport and Handling Charges3/ 171 171 690 690 860 1,000 1,030 1,270 7. Storage ChargesA/ 230 230 350 350 420 420 420 420 8. Port to Mill 280 300 320 340 360 380 400 420 Taxes/Subsidies 9. Producer Taxesi/ 523 323 438 480 480 515 546 602 10. Subsidy on Mill Deliveries6/ - ' - 1,519 1,320 1,490 2,465 2,237 1,870 11. Subsidy on Grain Sales/ - 429 - 429 490 490 660 600 630 1,070 12. Storage Subsidy§ 230 230 350 350 420 420 420 420 11 Based on Office of Cereal estimates. 2/ Price charged to grain purchasers at collection centers (prix de vente aux menages). 3/ Includes equipment fund (fonds d'equipment et marge de retrocession), operating margin (marge nette-de retrocession) and transport charges (perequation de transport). 4/ See "Rapport de le Mission de Preparation du Project de Stockage de Cereales en Tunisie" FAO/IBRD January 1930 Annex 6 for storage charges (primes de magasinage). The storage charges before 1976/77 are rough estimates. 5/ The producer purchase price is equal to the base producer price minus these producer taxes, which average 7% of the base producer price (i.e. 1 = 2-9). 6/ This subsidy (called indemnite compensatrice) is equal to the base producer price plus transport and handling charges minus the delivery price to the mill or factory (i.e. 10 - 2+6-3). 7/ This subsidy is equal to the base producer price plus transport and handling charges minus the grain price (/i.e. 11 = 2 + 6 c4). 8/ Equal to storage charges. TUNISIA PRICING STUDY: ESTIMATED PRICES, MARGINS, TAXES AND SUBISIDES FOR BREAD WHEAT - in millimes per quintal - Crop Year: 1972/73 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 1979/80-= Average Prices 1. Producer Purchase Price 4,007 4,007 5,102 5,560 5,560 6,060 6,404 7,160 2. Base Producer Price 4,500 4,500 5,500 6,000 6,000 6,535 7,000 7,700 3. Delivery Price to Mil1 4,726 4,726 4,726 4,930 4,930 4,880 5,712 7,250 4. Grain Price2/ 5,100 5,100 5,700 6,200 6,200 6,935 7,200 7,900 5. Import Price (CIF) 6,250 8,900 . 7,730 6,330 4,930 5,640 7,360 7,700 Marketing Hargins 3/ 6. Tra,-sport and Handling Charges3/ 226 226 630 630 750 880 910 1,198 7. Storage Chargesl/ 170 170 250 250 300 300 300 300 8. PorL to Mill 280 300 320 340 360 380 400 420 Taxes/Subsidies 9. Producer Taxes 5/ 493 493 398. 440' 440 475 506 539 10. Subsidy on kill Deliveries.6/ - - 1,404 1,700 1,820 2,535 2,198 1,648 11. Subsidy on Grain Sales/ - 374 - 374 .430 430 550 480 710 998 t2. Storage SubsidyV. 170 170 250 250 300 300 300 300 See previous table for footnotes. TUNISIA PRICING STUDY ESTIMATED PRICES, MARGINS, TAXES AND SUBSIDIES FOR BARLEY - in millimes per quintal Crop Year: 1972/73 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 1979/80= Average Prices 1. Producer Purchase Price 2,650 2,797 3,701 4,159 4,159 4,659 5,093 5,487 2. Base Producer Price 3,000 3,000 4,000 41500 4,500 5,035 5,500 5,900 3. Delivery Price to Factory 2,300 2,300 2,300 3,000 3,000 3,000 3,000 3,000 4. Grain Price2! 3,036 3,036 4,200 4,700 4,700 5,435 5,700 6,100 5. Import Price . 5,050 6,840 -6,200 5,800 4,920 5,810 5.600 6,400 MarketingMargingo 6. Trav:nport and Handling.. Charges3/ 196 196 . 595 595 714 820 850 1,143 7. Storage Charges4/ 140 140 200 200 240 240 240 240 8. Port to Factory 280 300 320 340 360 380 400 420 Taxes/Subsidies 9. Producer Taxes V 350 203 299 341 341 376 407 413 L. Subsidy on . Factory Deliveries- 896 896 -2,295 2,095 2,214 2,855 3,350 4,043 Li. Subsidy on Grain Sales.11 160 160 395 395 514 420 650 943 L2. Storage Subsidy-d 280 300 200 200 240 240 240 240 See previous table for footnotes TUNISIA PRICING STUDY: PRICES FOR BEEF AND LAMB - in millimes per kg of carcass- Beef 1976 1977 1978 1979 1980 1. Producer Price-- 960 960 960 1050 1050 3/ 2. Wholesale Price- 720 720 720 950 950 3. Average CIF Import Price (live animals)- 820 870 1050 960 4. Adjusted CIF Import Price.5/ 820 870 960 1190 1260 5, CIF Import Price (meat)AI 392 470 434 533 570 Lamb 1. Producer/Wholesale Price 1382 1460 1460 1980 1800 2. Average CIF Import Price (live animals)-6/ 1245 1314 1390 1492 - 3. CIF Import Price (meat).i 409 527 502 567 676 1/ The carcass yield is assumed to be 56% for beef and 50% for lamb. 2/ Price received by producers for contrast deliveries to El-Louhoum. 4 3/ Price paid by butchers for contract deliveries from El-Louhoum. 4/ According to "Retrospective Decennale 1970-1979 de 1'Elevage" Ministry of Agriculture. 5/ Based on a projection of average 1976 and 1977 import prices. 6/ As quoted by El-Louhoum. TUNISIA PRICING STUDY SELECTED INPUT PRICES 1970/71 1971/72 1972/73 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 1979/80 Certified Seeds (millime per quintal) Durum Wheat - - - - 8,378 8,993 9,072 10,220 11,005 11,575 Ordinary Bread Wheat - - - - 7,263 8,093 7,957 9,228 9,889 10,459 Barley - - - - 5,555 6,170 6,249 7,529 8,166 8,166 Fertilizers (millime per quintal) Ammonium Nitrate 4,000 3,000 3,000 3,000 3,000 5,000 5,000 5,000 5,000 5,000 Triple Super Phosphate 3,600 3,600 3,600 3,600 3,600 3,600 3,600 3,600 3,600 3,600 Chemicals 'CiET7lTme per liter) Phosdrin 2,350 2,350 2,350 2,350 2,350 2,350 2,350 2,350 2,350 2,350 2, 4-D - 460 460 500 500 500 500 700 870 700 Animal Concentrates (millime per quintal) Beef Fattening (mix #5) 3,600 3,600 3,600 3,600 _ ,600 3,600 3,600 3,600 3,600 4,350 Sheep Fattening (mix #9) 3,400 3,400 3,400 3,400 3,400 3,400 3,400 3,400 3,400 4,190 Equipment (dinar per unit) Tractor 70 hp - - - 3,153 3,854 4,502 5,285 5,800 6,460 7,400 Combine Harvester --- 6,700 7,500 9,000 10,600 14,000 14,000 18,500 Three-disk Plow - - - - 380 453 530 779 800 850 Source: "Evolution des Prix des Principaux Intrants (1968-1980)", Ministry of Agriculture, March 1980. (D Appendix 3 Table 1 1/ DERIVATION OF DOMESTIC PRICES OF SEMOLINAY In Millime Per Ouintal of Grain 1977 1978 1979 1980 1. Base Producer Price 6,600 7,135 7,600 8,600 2. Marketing Margin through to l-2/ 1,280 1,420 1,450 1,690 3. Su'sidy or mill Deliveries 1,910 2,885 2,657 2,290 4. Mill Delivery Price (1 + 2 - 3) 5,970 5,670 6,393 8,000 In Millime per Kg of Semolina 5. Mill Delivery Price 72 68 77 119 6. Gross Margin, Mill through Retail 34 38 38 44 7. Value of By-Products 4 4 4 12 8. Milling Subsidy 2 2 1 6 9. Net Margin, Mill through Retail (6 -7 -8) 28 32 33 26 10. Retail Price 100 100 110 145' 1/ Normal (or fine) grade of semolina 1976-79, supergrade 1980 based on a 83% extraction rate through 1979 t-r.d 67% for 1980. 2/ Actual transport, handling ai storage cbarges (see Appendix 2' Table 1). 3/ Uses the official estimate of '205 k of by-products for a 83% extraction rate and .49 kg of by-products for a 67% extraction rate. Appendix 3 Table 2 DERIVATION OF BORDER PRICES FOR SEMOLINAY! In Millime Per Quintal of Grain 1977 1978 1979 1980 1. CIF Import Price 2/ 5,630 6,800 8,400 8,800 2. Margin, Port to Mill2/ 270 285 300 315 .3. Mill Delivery Price (1 + 2) 5,900 7,085 8,700 9,115 In Millime Per Kg. of Semolina 4. Mill Delivery Price 2/ 71 85 105 136 5. Gross Margin, Mill through Retail-- 25 28 28 33 6. Value of Bran3/ 9 11 10 28 7. Net Margin, Mill through Retail (5-6) 16 17 18 5 8. Retail Price (4 + 7) 87 102 123 141 1/ Normal (or fine) grade of semolina 1976-79, super grade 1980 based on a 83% extraction rate through 1979 and 67% for 1980. 2/ 75% of actual margin shown in Appendix 3 Table 2 3/ Assumes .20 kg and .475 kg of by-products per kg of semolina for 1976-79 and 1980 respectively. The border price of these by-products is assumed to equal 88% of the border price of barley. DERIVATION OF TVf "O"ESTIC PRICES OF BREAD WhEAT FLOUR/ AND BREAD 1976 1977 1978 1979 1980 In Millime per Quintal of Grain 1. Base Producer Price 6,000 6,000 6,535 7,000 7,700 2. Marketing Margin through to Mill 880 1,050 1,180 1,210 1,498 3. Subsidy on Mill Deliveries 1,950 2,120 2,835 2,498 1,948 4. Mill Delivery Price (1 + 2 - 3) 4,930 4,930 4,880 5,712 7,250 In Mi.llime per Quintal of Flour 5. Mill Delivery Price 6,573 6,573 6,507 7,616 9,667 6. Gross Margin, Mill through Wholesale 1,646 1,704 1,773 1,833 2,036 7. Value of Bran 666 666 666 666 666 8. Milling Subsidy 103 161 164 133 537 9. Net Margin, Mill .through Wholesale (6- 7 - 8) 877 877 943 1,034 833 10. khclesale Price of Flour (5 + 9) 7,450 7,450 7,450 8,650 10,500 11. Baing nargin (670g Bread) 6,356 6,356 6,611 7,074 7,577 12. Baking Subsidy (670g Bread) 1,781 1,781 2,036 2,774 3,277 13. Retail Price (10 + 1 - 12) (670g Bread) 12,025 12,025 12,025 12,950 14,800 11. Baking Margin (300g Bread) 7,750 7,750 7,500 9,'350 9,500 12. Baking Subsidy (300g Bread) - - - 1 Retail Price (10 + 1 - 12) (3Q0g Bread) 15,200 "15,200 15,200 18,000 20,000 In Millime per Loaf 14. Retail Price. (670g Bread) 65 65 65 70 80 14. ReLail Price (300g Bread) 38 38 38 45 50 1/ Ordinary flour (faxine PS) based on an extraction rate of 75%. F ( 2/ Assumes 185 loafs per quintal of flour for 670g bread and 400 loafs per quintal of flour for 300g bread. X DERIVATION OF THE BORDER PRICES FOR BREAD WHEAT FLOUR1/ AND BREAD In Millime per QuintalNof Grain 1976 1977 1978 1979 1980 1. CIF Imrport Price 6,330 4,930 5,640 7,360 7,700 2. Margin Port to Mil12/ 255 270 285 300 315 3. Mill Delivery Price (1 + 2) 6,585 5,200 5,925 7,660 8,015 In Millimeper Quintal of Flour 4. Mill Delivery Price 2/ 8,780 6,933 7,900 10,213 10,687 5. Gross Margin, Mill through Wholesale- 1,234 1,278 1,330 1,375 1,527 6. Valua of Braa_/ 1,728 1,472 1,728 1,664 1,888 7. Net nargtn, Mill through Wholesalc (5 - 6) - 494 - 194 - 398 - 289 - 361 S. Whoinsale Price of Flour (4 + 7) . 3,286 6,739 7,502 9,924 10,326 9. Baking Margin (670g Bread) 4,767 4,767 4,958 5,306 5,683 10. Retzil Price (670g Bread)(8 + 9) 13,053 11,506 12,460 15,230 16,009 9. taking Margina/ (300g Bread) 5,812 5,812 5,812 7,012 7,125 1j, Vcail Price (300g Bread)(8 + 9) 10,098 12,551 13,314 16,936 17,451 in Millime_per Loaf J/ 11. Retail Price (670g Bread) 71 62 67 82 87 11. Retail Price (300g Bread) .. 35 31 33 42 44 1/ Ordinary flour (farini PS) based on an extraction rate of 75%. 2/ 75% of actual margin shown in Appendix 4, Table 3. 3/ Assumes 32 kg. of bran per quintal of flour. The border price of bran is assumed to equal 88% of the V border price of barley. 4/ Assumes 185 loafs per quintal of flour for 670 gram bread + 400 loafs per quintal of flour for 300 gram bread. PRODUCTION COSTS-/ - MODERN LARGE-SCALE CEREAL PRODUCER (Average 1975/76 - 1979/80) Prices are in millime per unit of measure; costs are in millime per quintal of output Input, Input Norm per Average Average Costs in Costs in Unit of Norm per Quintal Domestic Border D mestic Border Inpts Measure Hectare of Output- Prices Price Prices Prices Durum Wheat TSP quintal 1.00 .050 3,600 7,200 180 360 AN quintal 2.50 .125 5,000 7,140 625 892 2,4-D liter 1.30 .065 650 1,300 42 84 Certified Seeds/ quintal 1.00 .050 7,578 9,500 378 475 Bag Rental 80 kg bag 25.00 1.250 35 28 43 35 Fertilizer Transport quintal 3.50 .175 185 137 32 23 Machinery Services.! hour 15.00 .750 2,160 1,500 1,620 1,125 Cereal Transport./ quintal 22.20 1.110 142 106 157 117 Total 3,077 3,111 Bread Wheat TSP quintal 1.00 .041 3,600 7,n00 147 295 AN quintal 2.50 .100 5,000 7,140 500 /14 2,4-D 3/ liter 1.30 .054 650 1,300 35 70 Certified Seeds- quintal 1.07 .044 6,885 8,500 .302 374 Bag Rental 80 kg bag 30.00 1.250 35 28 43 35 Machinery Services hour 15.00 .625 2,160 1,500 1,350 .938 Fertilizer Transport quintal 3.50 .145 185 137 26 19 Cereal TransportV quintal 26.35 1.097 142 106 155 116 Total 2,558 2,561 Barley TSP quintal 1.00 .041 3,600 7,200 147 295 AN quintal 1.10 .045 "5,000 7,140 225 321 2,4-D liter 1.30 .054 650 - 1,300 35 70 Certified Seeds3/ quintal 1.00 .041 4,354 6,700 178 274 Eag Rental 80 kg bag 26.25 1.250 35 28 43 35 Machinery Servicesi! hour 12.00 .625 2,160 1,500 1,350 938 Fertilizer Transport quintal 2.10 .087 185 137 16 11 Cereal TransportS/ quintal 26.20 1.091 142 106 .154 115 Total 2,148 2,059 1/ Based on crop budgets used by the Ministry of Agriculture. 2/ The yield assumptions are 20 ql/ha for durum wheat, 24 ql/ha for bread wheat and 24 ql/ha for barley. HI > 3/ The domestic price of certified sfeeds is equal to 1.2 times the average producer purchase price. The border price is assumed . to equal the actual purchase price of certified seeds. 4/ The per hour border price used here is equal to the total per houc cost in border prices minus the cost in border prices of X che driver's wages and interest payments. The per hour domestic price is equal to the per hour hire rate of 2.6 dnar per hour minus actual interest charges of 138 millime per hour and minus actual driver's wages of about 300 millime per hour. 5 _ncludes the transport between the fLrm and collection center of cereal to exchange for seeds, seeds and 100% of final output. PRODUCTION COSTS- - AVERAGE MEDIUM-SIZED CEREAL PRODUCER (Average 1975/76-1979/80) Prices are in millime per unit of measure; costs are in millimu per quintal of output Input Input Norm per Average Average Costs in Costs in Unit of Norm per Quintal of Domestic Border Domestic Border Inputs Measure Hectare Output2/ Price Price Prices Prices Durum Wheat TSP quintal 1.00 .062 3,600 7,200 223 446 AN quintal 1.20 .075 5,000 7,140 375 535 2,4-D liter 1.30 .081 650 1,300 52 105 Seeds.V quintal 1.00 .062 6,315 . 6,404 392 397 Bag Rental 80 kg bag 20.00 1.250 35 28 43 35 Machinery Services hour 15.00 .938 2,600 1,850 2,439 1,735 Fertilizer Transport quintal 2.20 .138 185 137 26 19 Output Transport quintal 16.00 1.000 142 106 142 106 Total 3,692 3,378 Bread Wheat TSP quintal 1.00 .059 3,600 7,200 212 424 AN quintal 1.50 - .088 5,000 7,140 440 628 2,4-D liter 1.30 .076 650 1,300 49 98 Seeds-l quintal 1.07 .063 5,595 5,631 352 355 Bag Rental 80 kg bag 21.25 1.250 35 28 43 35 Machinery Services hour 15.00 .882 2,600 1,850 2,293 1,632 Fertilizer Transport quintal 2.50 .147 185 137 27 20 Output Transport quintal 17.00 1.000 -142 106 142 106 Total 3558 3,298 Barley TSP quintal 1.00 .048 3,600 7,200 172 345 AN quintal 1.10 .052 5,000 7,140 269 371 2,4-D liter 1.30 .062 650 1,300 40 80 Seeds-I quintal 1.00 .048 4,212 4,908 202 236 Bag Rental 80 kg bag 26.25 1.250 35 28 43 35 Machinery Services hour 12.00 .571 2,600 1,850 1,485 1,056 Fertilizer Transport quintal 2.-0 .100 185 137 18 14 Output Transport quintal 21.00 1.000 142 106 142 106 Total 2,362 2,243 1/ Based on crop budgets used by the Ministry of Agriculture. 2/ The yield assumptions are 16 ql/ha for durum wheat, 17 ql/ha for breadwheat and 21 ql/ha for barley. 3/ Farmers are assumed to withhold seeds from marketing and hen-e prices are equal to collection center producer prices minus transport between the farm and the collection center. PRODUCTION COSTS-/ - TRADITIONAL CEREAL PRODUCER (average 1975176 - 1979/80) Prices are in millime per unit of measure; costs are in millime per quintal of output Input Input Norm per Average Average Costs in Costs in Unit,of Norm per Quintal of Domestic Border Domestic Border Inputs- Measure Hectare Outputl/. Price Price Prices Prices Durum Wheat Seeds-V Quintal .75 .107 6,315 6,404 676 685 Equipment hour 12.65 1.807 80 72 145 130 Total 821 815 Bread Wheat SeedsW7 Quintal .50 .055 5-595 5,631 308 310 Equipment hour 18.00 2.000 80 72 160 144 'Total 468 454 Barley SeedsA/ Quintal 1.20 .120 4,212 4,908 505 589 Equipment hour 19.75 1.975 80 72 158 142 Total 663 731 1/ Based on crop budgets presented .in "Couts de Production des Cerealesdans la Tunisie du Nord" Ministry of Agriculture December 1976. 2/ Other'inputs such as feed for horses and construction materials are excluded because of their relative insignificance. 3 > The farmer provides his own seeds and consumes his own output. D.0 3/ Yield assumptions are 7 ql/ha for durum wheat, 9 ql/ha for bread wheat and 10 q1/ha for barley. 4/ Farmers are assumed to withhold seeds from marketing and hence prices are equal to collection center producer prices minus transport between the fazm and the collection center. P: vIiO:: COST3 - P;laT:cICIFNT IN: rA0/SIDs EEEF FArT::ING PP.OJECT (A e 1975/76 - 1979/89) Pries ae a npr unit of r,!asure; c,ste ar.. in per kg. carc-a Produ= Korn per lu Input Vor= per kg. Of Ccrt in Cests in. Norm perBog.er Levt of Arimal weipght Doestic Dorder De-estic oorder d Price ?rice _r __e, Sn 4.6> 5? 660 7,767 2~4 L35 n^rel - .012 1jo 750 12 - td ess an L'a 1-00 .01 >,no 1,9 4 14 k: 3O -- 30 71 G kp. 33.80 4~31, 72 i5 31 33.50 .4 " 1 i 11 ,ur h,.70 0~2 2,1 1,500 11 1C0 60 .012 5.0 3 qnan- al 059 27 21 1 .) .' > 1,6m "d ~ :ec FA0/&iD,* Pro !Let. -~ ~~h 2=.. 3~~vruge aninniýs g' 140 kg:-. lwt. or 78.4 kgs. caciswep1rt. -- ~ ru~c4 ?r~ni:4, T,Ou1 LAMB PRODUCTION COSTS- - (average 1975/76-1979/80) Prices are in millime per unit of measure; costs are in millime per kg. of carcass produced Noria per Input Input Norm kg. of Costs in Costs in Unit of per weight2/ Domestic Border Domestic Border 1sa of Medio Pasture Mcasure Lamb gained- Price Price Prices Prices Concentrates quincal .22 .016 3,558 6,739 57 108 Drugs lamb 1.00 .074 500 400 37 30 Building and Equipment Related Expenses lamb 1.00 .074 800 480 59 36 Am:monium Nitrate kg. 2.00 .148 50 71 7 11 TSP kg. 21.00 1.556 36 72 56 112 Fodder Seeds kg. 2.00 .148 110 110 16 16 Machinery Services2/ our .80 .059 2,160 1,500 127 88 Transport of Concentrates quintal .22 .016 360 270 6 4 lamb Transport lamb 1.00 .074 500 375 37 28 Ewe,Depreciation3/ kg. of carcass 2.25 .167 1,616 1,414 270 236 wool (minus) kg. 2.80 .207 800 640 - 166 - 132 Total 506 537 Use of Fallow Concentrates quintal .56 .043 3,558 6,739 153 290 Building and Equipment Related Expenses lamb 1.00 .077 400 240 31 18 Transport of Concentrates quintal .56 .043 360 270 15 12 Lamb Transport lamb 1.00 .077 1,100 825 85 64 Ewe DapreciationAd kg. of carcass 2.50 .192 1,616 1,414 510 271 Vool (minus) kg. 2.50 .192 800 640 - 154 - 123 Total 440 532 11 Based on data provided by the Office de 1'Elevage at des Paturages. > 2/ Assumes the average lamb produced on medic pastures weighs 27 kg. 1wt or 13.5 kg. carcass weight when sold, while the average 3 lamb grazed on fallow weighs 26 kg. lwt or 13 kg carcass weight when sold. 3/ See footnote 4, Appendix 4, Table 1 4/ Assumes a breeding life of 10 years and a carcass weight of 22.5 kg. The ewe on medic pastures produces 10 lambs during this time, while the ewe grazed on fallow produces 9 lambs.