Upper Volta - Agricultural issues study

Report No. 329-UV Upper Volta Agricultural Issues Study October 29, 1982 West Africa Region FOR OFFICIAL USE ONLY Document of the World Bank This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Fank authorization.  FISCAL YEAR January 1 - Decenmber 31 EXCHANGE RATES -/ 1970 US$1.00 = CFAF 277.71 1971 US$1.00 = CFAF 277.03 1972 US$1.00 = CFAF 252.21 1973 US$1.00 = CFAF 222.70 1974 US$1.00 = CFAF 240.50 1975 US$1.00 = CFAF 214.32 1976 US$1.00 = CFAF 238.98 1977 US$1.00 = CFAF 245.67 1978 US$1.00 = CFAF 225.64 1979 US$1.00 = CFAF 212.72 1980 US$1.00 = CFAF 210.00 hNEIGHTS AND HEASURES: METPSIC SYSTEM British/US MIetric equivalent 1 Kilometre (Kin) = 6.2 miles 1 hactare (ha) - 2.47 acres 1 liter (1) - 1.057 quarts 1 rLetric ton (MT) = 1.1 tons 1 Kilogram (kg) = 2.2046 pounds 1/ Period average  FOR OFFICIAL USE ONLY UPPER VOLTA AGRICULTURAL ISSUES STUDY Table of Contents Page No. List of Abbreviations Executive Summary ................................................ v-vii Summary and Evaluation .. ............. . ........................... 1-20 A. Scope of the Agricultural Issues Study ...................... 1 B. Background to the Sector .. . 2 C. Evaluation of Options for Increasing Agricultural Growth .... 3 D. Orientations of a Sector Strategy ........................... 9 E. Specific Recommendations Concerning Agricultural Production ...... . . ........................... 12 F. The Role of Agricultural Services in a Sectoral Development Strategy ... ...... .... .. . . . . .......... ................ 13 G. Public Finance Aspects of a Sectoral Strategy ............... 18 H. Implications for Donors' Lending Strategy in the Sector ................ .. .................. 19 Chapter 1: Analysis of Agricultural Production ................. 22 1.1 Introduction .................. * ........................... 22 1.2 Background ................................................ 23 A. Physical Features ..................................... 23 B. Climate ............................................... 24 C. Demography ......................... .......................... 25 D. Macroeconomics ....................................... . 25 E. Prices ... ............................................. 27 F. Government Strategy ................................... 29 1.3 Description of Agricultural Production .................... 31 A. Regions .... ........................................... 31 B. Crop Production ........... . .... ................. 33 C. Production Techniques ..... . .......................... . 36 D. Constraints .......................................... 47 E. Policies .................. .................................... 50 1.4 Irrigation and Erosion Control ..... ....................... 58 A. Irrigation ................ . .......................... 60 B. Erosion Control ... .......... ....... ................. 63 C. Recommendations ..... ............ ...................... 65 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  - ii - Table of Contents Cont'd Page No. 1.5 Seeds and Fertilizers ..................................... 66 A. Seeds ................. . ................................ 68 B. Fertilizers ........................................... 73 Manufactured Fertilizers . ........................... 73 Expanded Use ...................................... 73 Physical Returns .................................. 75 Financial Evaluation ................. ... ............ . 81 Economic Evaluation ... ............................ 84 Rock Phosphates ..................................... 90 Other Fertilizers . . ................... .......... 94 1.6 Animal Traction ........................................... 96 A. Evolution ..... ... ............................ 99 B. Advantages ............................................ 98 C. Disadvantages ......................................... 102 D. Economic and Financial Considerations ................. 102 E. Constraints ...................................... ............ 108 1.7 Agricultural Research ..................................... 111 A. Organization ....... .............. ..................... 112 B. Expenditure ........ ............. ...................... 113 C. Policy and Results ............... .. ................... 116 D. Conclusions ........... ...................... .......... 116 Chapter 2: Agricultural Institutions and Services .... .......... 121 2.1 Extension and the ORDs .................................... 121 A. Introduction .......................................... 121 B. Background . ............................................ 123 C. The present situation ................................. 123 D. Recommendations to improve the extension service ... ... 133 2.2 Cereals Marketing ................ ... .................. .. 138 A. Introduction .......................................... 138 B. Government intervention in cereals marketing .... ...... 138 C. Evaluation of Government marketing policy ....... 143 D. Redefining the role of OFNACER ........................ 147 E. The special case of rice marketing .................... 152  - iii - Table of Contents Cont'd Page No. 2.3 Marketing of Fruits and Vegetables ........................ 155 A. The role of UVOCAM .................................... 155 B. Further potential for development of vegetable marketing ................................ 158 2.4 Input Delivery and Credit ................................. 160 A. Introduction ......... ................................. 160 B. Input delivery: Existing systems of procurement and distribution ..... ................ 161 C. Issues and recommendations regarding input delivery ... 166 D. Credit ............. ................................... 169 Chapter 3: Public Finance Issues in the Agricultural Sector . 174 3.1 Introduction ............. ................................. 174 3.2 The Financial Structure of the Rural Sector .... ........... 178 A. The Macroeconomic context ............................. 178 B. The financial situation of the ORDs .... ............... 183 3.3 Possibilities for Improvement in the Net Contribution of the Rural Sector to Public Finances ..... ............... 188 A. Reduction of input subsidies and an increase in net cotton marketing revenues ................ ............ 188 B. Improvement of oilseeds marketing revenues .... ........ 192 C. Increasing direct fiscal revenues from agriculture and livestock . ........................................ 194 D. Reducing personnel expenditures ...... ................. 194 E. Improvements in financial management ..... ............. 195 3.4 Conclusions ............................................... 195 Statistical Appendix Tables 1-1 Agriculture in the National Accounts 1-2 Evolution of Production of Selected Crops 1-3 Breakdown of Crop Production 1-4 Trends in Per Capita Cereal Production 1-5 Geographic Distribution of Agricultural Production 1-6 Agriculture in Exports 1-7 Agriculture in Imports 1-8 Evolution of Major Prices  - iv - Table of Contents Cont'd Tables (con't) 1-9 Evolution of Official Commodity Prices 1-10 Evolution of Agricultural Input Prices 1-11 Agricultural Terms of Trade 1-12 Prices Used in Economic Analyses 1-13 Major Irrigation Sites 1-14 Use of Modern Agricultural Inputs 1-15 Labor Hiring Practices in Upper Volta 1-16 Some Response Rates for Fertilizers 1-17 Crop Yield Potentials 1-18 Animal Traction Information 1-19 Yield Effects of Animal Traction in Research Trials 1-20 Cost of Equipment Rental in Upper Volta 1-21 Agricultural Research Personnel and Financing 1-22 Agricultural Research Stations in Upper Volta 1-23 Allocation of Foreign Aid Commitments to Agricultural Sector 1-24 Selected Seed Varieties 1-25 Regional Evolution of Cotton Production 2-1 Positions within the Agricultural Extension System 2-2 Farm Family/Extension Agent Ratios in ORDs 2-3 OFNACER Cereals Operations 1971/72-1978/79 2-4 OFNACER Existing and Planned Cereals Storage Capacity 2-5 Food Aid Accorded to Upper Volta, 1972-80 2-6 UVOCAM Purchases of Fruits and Vegetables 1969/70-1979/80 2-7 Variations in Input Pricing among ORDs 2-8 OFNACER Marketing Campaign 1978/79 2-9 Minimum Producer Prices Needed to Cover Cash Cost of Improved Cereal Production 3-1 Upper Volta Contributions of Rural Development Sector to National Budget Revenues 3-2 Upper Volta Share of Expenditure on Rural Development in National Budget 3-3 AP/CFDT (SOFITEX) Cotton Marketing Operations 1975/76-1978/79 3-4 Caisse de Stabilisation des Prix des Produits Agricoles (CSPPA): Financial Accounts 3-5 Expenditure on Major Subsidized Inputs 3-6 Consolidated Central Government Revenue and Expenditure: Rural Sector 3-7 ORD Financial Resources, Expenditure, and Population Size 3-8 ORD Income Statements, April 1, 1977 to March 30, 1978 3-9 Personnel Charges for ORD Professional Staff Based on Current Staffing and 1980 Pay Scale 3-10 Farm Budget Projections Under Different Input/Output Price Assumptions - Cotton 3-11 Farm Budget Projections Under Different Input/Output Price Assumptions - Sorghum 3-12 SOFITEX Projected Cotton Marketing Revenues to 1984/85 3-13 Projected Expenditure on Input Subsidies to 1985 3-14 CSPPA Net Export Marketing Revenues 1976/77-1979/80 3-15 Major Externally-Financed Agricultural Development Projects 1972/80 (2 parts)  v Table of Contents Cont'd Tables (con't) FIGURES 1. Organization Chart of Ouagadougou ORD 2. Organigram of Ministry of Rural Development (former) 3. Organigram of Ministry of Rural Development (revised 1981) MAPS 1. Upper Volta: Agricultural Resources and Physical Features (IBRD #15166) 2. Upper Volta: Population Density and Agricultural Infrastructure (IBRD #15152) ANNEXES (under separate cover) 1. Analysis and Derivation of Farm Budgets 2. Derivation of Financial and Economic Prices  - vi - LIST OF ABBREVIATIONS AP/CFDT - Association en Participation/Compagnie Francaise pour le Developpement des Fibres Textiles ARCOMA. - Atelier Regional de Construction de Materiels Agricoles ATAS - Agent Technique Agricole Specialise AVV - Autorite des Amenagements des Vallees des Volta BCEAO - Banque Centrale des Etats de l'Afrique de l'Ouest BND - Banque Nationale de Developpement CCCE - Caisse Centrale de Cooperation Economique CEAO - Communaute des Etats de l'Afrique de l'Ouest CERCI - Centre d'Etudes et de Recherches sur les Cultures Irriguees CFJA - Centre de Formation des Jeunes Agricultures CILSS - Comite Permanent Interetats de Lutte Contre la Secheresse dans le Sahel CIMMYT - Centro Internacional de Mejoramiento de Maiz y Trigo CNCA - Caisse Nationale de Credit Agricole COREMMA - Cooperative Regionale de Montage de Materiels Agricoles CSPPA - Caisse de Stabilisation des Prix des Produits Agricoles CSRA - Comite Specialise de la Recherche Agronomique CTAS - Conducteur de Travaux Agricoles Specialise DGRST - Direction Generale de la Recherche Scientifique et Technique DSA - Direction des Services Agricoles FAC - Fonds d'Aide et de la Cooperation FED - Fonds Europeen de Developpement GCRAI - Groupe Consultatif de Recherche Agricole Internationale GERDAT - Groupement d'Etudes et de Recherches Pour le Developpement de l'Agronomie Tropicale ICRISAT - International Crops Research Institute for the Semi-Arid Tropics IDR - Ingenieur de Developpement Rural IFDC - International Fertilizer Development Corporation IFPRI - International Food Policy Research Institute IITA - International Institute of Tropical Agriculture IRA - Institut de Recherches Agronomiques IRAT - Institut de Recherches Agronomiques Tropicales et des Cultures Vivrieres IRFA - Institut de Recherches des Fruits et Agrumes IRRI - International Rice Research Institute ITA - Ingenieur de Travaux Agricoles IVRAZ - Institut Voltaique de Recherche Agronomique et Zootechnique MRD - Ministry of Rural Development MSU - Michigan State University OFNACER - Office National des Cereales ONBI - Office National des Barrages et de l'Irrigation ONERA - Office National de l'Exploitation des Resources Animales ORD - Organisme Regional de Developpement PAPEM - Point d'Appui de Prevulgarisation et d'Experimentation Multi-locales RHV - Republique de Haute-Volta RMWA - Resident Mission, West Africa (World Bank) SAFGRAD - Semi-Arid Food Grain Research and Development SNS - Service National des Semences SOFITEX - Societe Voltaique des Fibres Textiles SOSUHV - Societe Sucriere de Haute Volta SOVOLCOM - Societe Voltaique de Commercialisation T and V - Training and Visit System UVOCAM - Union Voltaique des Cooperatives Maraicheres  - vii - UPPER VOLTA: AGRICULTURAL ISSUES STUDY EXECUTIVE SUMMARY (i) The following report addresses selected issues in the agricultural sector concerning a) the alternatives for promoting agricultural production, b) the strengths and weaknesses of sectoral institutions, and c) public financial implications of developments in the sector. (ii) Agriculture is the most important sector of the Voltaic economy, yet poor agricultural resources - in particular uncertain rainfall over most of the country and poor, easily eroded soils - lead to low and variable output. In theory, one approach to expanding national income from agriculture could be to mobilize more resources (labor, land, water, capital). Resettlement to more fertile, less-populated areas and measures to recover eroded lands have some potential to expand production under this approach. (iii) Second, new technology (e.g., improved varieties, fertilizers, animal traction) could be introduced to raise the value of output from exist- ing domestic resources. Such technology has the potential both to make the structure of the sector more efficient as well as to expand total production with the country's given resources of land and labor. The objective of the analysis here -- limited mostly to coarse cereals and cotton in the center and southwest -- is primarily to examine the technological potential to make the structure of production more efficient, although consideration is also given to the scope for expanding output by using the new technology. The empirical results in financial prices suggest that the available improved technology is likely to lower per unit costs of production compared to tradi- tional methods only for maize, cotton and perhaps sorghum -- all in the south- west. However, under optimistic assumptions about responses to fertilizers, net financial returns per manday and per ha usually increase -- except for millet in the center. The addition of animal traction to manual cultivation using modern inputs appears to improve financial returns only in the southwest. In long-run economic prices, the use of fertilizers and other modern inputs causes the unit costs of production to fall only for maize in the southwest. The additional use of animal traction causes net economic returns per manday and per ha to rise for both maize and cotton in the southwest but not for coarse cereals in any region. Compared to traditional methods, the improved technology combining new seeds, fertilizers, and animal traction tends to improve the country's comparative advantage only for maize and cotton -- a pattern that holds regardless of changes in major assumptions. However, in all cases-except perhaps for millet, the world prices for commodities are sufficiently high so that even the cost-increasing techniques remain profit- able, providing a margin to promote new technologies and thereby raise the total volume of output. The magnitude of the expansion that would be possible though, has not been assessed. In carrying out the analysis, the dearth of data has made it necessary to make various assumptions about prices, wages, and technical coefficients like response of yields to fertilizers. For the ranking of various crops with the different techniques and in different  - viii - regions, the empirical results are fairly insensitive to significant changes in major assumptions. But the magnitude of costs and gains -- and hence the scope for profitable promotion of new techniques -- does vary considerably, depending on values chosen for various parameters. (iv) A third approach to expand income in the sector is the introduction of higher value crops, mainly for export since the scope for increased import substitution is limited. Changing the crop mix does not appear to be a major option in the near future, according to available evidence, because most of the new crops already tried cannot be widely grown by small farmers under rainfed conditions, with the possible exception of some fruits, vegetables, and root crops. More research is warranted in this area. (v) The following major points which grow out of the analysis suggest possible orientations of a sectoral development strategy: a) Agricultural growth in Upper Volta depends less on changing domestic output and input prices than on expanding productive potential, but some reform of price policy is warranted to improve efficiency-- in particular by phasing out subsidies on chemical fertilizers and by avoiding depressing farm prices through sales of food aid. b) To expand the productive potential of the agricultural sector will require long-term changes consisting of incremental improvements in the farming system and in the agricultural resource base. c) Priority in the near term must be accorded to increasing the economic efficiency of food production. (vi) An agricultural production program should therefore be based on the following components: a) Improvements in agricultural research, in terms of strategy, to focus more on farming systems and adaptive trials; organization, to strengthen the coordination of national research efforts; and resources, in particular, manpower, facilities, and financial support. b) A definition of regional investment priorities, which would not imply a strict regional specialization, but would focus on the major constraints and areas of potential: - in the Southwest, in the near term by promoting maize in appropriate areas in place of sorghum and millet and encouraging the use of animal traction to raise the efficiency of food production and free resources for cultivation of export crops; - in the Center, by introducing measures to improve soil re- sources over the long-term, such as by erosion control, better husbandry, and animal traction, and undertaking research to improve drought-resistant varieties, in order to increase the region's eventual self-sufficiency in food production;  - ix - in the East, by improving commercial infrastructure to expand the utilization of existing resources. (vii) These priorities imply that donors' investment strategy needs to focus on improving the effectiveness of agricultural research and extension, in particular with increased consultation with farmers; improving cultivation practices and soil and water management in the central plateau (which may require some selected input subsidies as well as investments in physical works); strengthening marketing outlets; building up the technical and co- ordinating capacities of the Ministry of Rural Development; and undertaking a long-term commitment to finance operational expenditures on administration, extension, and research, which are the "development costs" of the sectoral strategy. This implies that donors and the Bank may each need to review their current policies regarding the financing of recurrent expenditures, which has to be accompanied by improved financial controls.   UPPER VOLTA AGRICULTURAL ISSUES STUDY SUMMARY AND EVALUATION A. Scope of the Agricultural Issues Study 0.1 The attached report is the outcome of two missions to Upper Volta in March and May, 1980, which were undertaken to analyze selected agricultural issues. 1/ The study was designed with three long range objectives: 2/ (a) improving our knowledge of the sector and of the options for its development; (b) contributing to a definition of a new strategy for Bank investment in the sector; (c) providing a basis for dialogue with the Government concerning its agricultural policies. 0.2 The specific topics on which the study focuses are: (a) the alternatives for promoting agricultural production; (b) the strengths and weaknesses of agricultural institutions (extension, marketing, input delivery and credit) in supporting these alterna- tives; and (c) the public financial implications of the policies concerning input and output prices, expenditures on public services and cost recovery capability in the agricultural sector. 1/ This report has been written largely by Christine Fallert Kessides and Charles Humphreys (WACPI) who participated in both missions. Youssouf Sylla (YP) and Belai Abbai (CPS) joined the second mission and prepared the farm budgets and section on extension, respectively. Florent Agueh, Philip Berlin (WACPI) and John Russell (CPS) provided valuable commentary both in the field and during the preparation of the report. A draft of the report was sent to Government in December, 1981. Government subse- quently appointed on ad hoc commission which reviewed the draft and submitted written comments to the Bank. Representatives of the Bank and the Government in Ouagadougou in May, 1982, to discuss these comments and the main report. The main points of this discussion have been incorporated into the present version of the report. 2/ The last full sector study by the World Bank was Report No. AW-19a, The Economic Development of Upper Volta: Agriculture (Vol. II), November 1970. A document entitled "Agricultural Annexes" (Report No. UV-564) was issued in September, 1974 in connection with publication of Current Economic Position and Development Prospects of Upper Volta (Report No. 564a-UV) in July 1975. An agricultural sector paper (Report No. 2095) was also written in June 1978 by Adrien Otten (WAP).  -2- 0.3 Each of these three major topics is addressed in a separate chapter of this report. The remainder of this note provides an overview of the major arguments and conclusions of the study and a coherent view of recommended reforms. It should be kept in mind that data on the Voltaic agricultural sector are both limited and of poor quality; the following empirial analyses should be viewed as estimates, subject to some considerable uncertainty. B. Background to the Sector 0.4 Econosmic growth in Upper Volta is necessarily closed linked to the progress of the agricuiltural sector. Agriculture is the most important sector, employing 80-90% of the population and comprising about one-third of GDP and almost all exports. Yet the country is constrained by poor agricultural resources. Rainfall tends to be low and uncertain over much of the country where most people live; soils are generally shallow, poorly structured, acidic, deficient in phosphorous, and often eroded. The potential to augment resources by irrigation is economically limited, and what potential does exist will require costly investment to develop. As a result, output is low and variable. 0.5 In terms of agricultural potential, Upper Volta can be divided into four regions: (a) the Southwest, with a Sudano-Guinean climate, rainfall averaging above 900 mm annually, good water resources, relatively fertile soils, moderate population density and good access to foreign markets; (b) the Central (or Mossi) Plateau, with 600-900 mm rainfall, poor eroded soils, and population density of over 30 persons/km2 as compared to an average of 12 in the rest of the country; (c) the southeastern savannah zone, with rainfall and soils similar to those of the southwest but with an extremely limited road network, sparse population and poorer ground and surface water resources; and (d) the Sahel to the north, the driest and least settled zone, where herding is the major economic activity. 0.6 Almost 90% of cultivated land throughout the country is devoted to cereals. Although cotton, grown mostly in the Southwest, is the major export crop, the value-added from it is worth perhaps no more than one-fourth of that earned from the marketed share of millet and sorghum. Thus, cereals are important cash crops. 0.7 Over the last decade, domestic policies have significantly favored agriculture. The barter terms of trade have consistently made agricultural production more attractive relative to non-agricultural activities, as in- dicated by the fact that increases in agricultural output prices, both offi- cial and market, for food staples (millet, sorghum, and maize) have increased faster than the index of general inflation or the prices of purchased agricul- tural inputs (fertilizer, improved varieties of seeds, and insecticides). Growing input subsidies and increasingly easier credit terms have made tech- nical adjustments attractive, and the apparent resulting increase in produc- tivity has reinforced the favorable movement in the terms of trade. The agricultural sector has also been the target of a high level of foreign- financed investment (growing from about one-fourth to one-third of total capital expenditures), particularly since the drought of 1973-74.  0.8 The trends in agricultural production over 1961-79 appear dis- couraging--as in much of sub-Saharan Africa, although there are some bright spots in the picture and the sector has perhaps performed as well as could have been expected given the severe constraints to its development. Cotton acreage expanded rapidly until 1968 and has since then changed very little, although cultivated areas within project zones have grown while they have declined elsewhere. Yields of cotton over the period have risen markedly, owing to the shift to more fertile areas and to increased use of fertilizers and insecticides, coupled with extension programs. Food crop areas, except for sesame, have increased less than the 1.3 percent net annual growth in rural population. Sorghum yields have, however, improved by 1% per year, reflecting in part the residual effects of cotton fertilizer in crop rotation, as well as direct fertilization of the crop. Consequently, sorghum produc- tion has grown more rapidly than population, in contrast to the declining or stagnant output of maize, millet, paddy and groundnuts. Because readily available agricultural production capacity appears to be largely utilized, because there is a significant emigration of the most productive members of the agricultural labor force, and because profitable technological shifts are limited, supply elasticities are low and a large increase in one crop appears often to come at the expense of others. 0.9 On the Central Plateau, yields of coarse grains have stagnated as soils have become increasingly degraded. For the country as a whole, net per capita cereal output (excluding 12% for seeds and losses) has fallen from 215 kg in 1962-69 to 204 kg in 1975-79, making it about equal to the FAO minimum requirement. The country still satisfies all but a small share of its consumption of cereals and other agricultural goods from local production in years of normal rainfall, but this has only been achieved through increasing dependence on the Southwest as a source of food surplus, which tends to limit the resources available in that region for export crop production. C. Evaluation of Options for Increasing Agricultural Growth 0.10 In theory, national income from agriculture could be expanded through three approaches: (a) mobilization of more resources (labor, land, water, and capital); (b) introduction of new, complementary inputs--including better crop husbandry--to raise the value of output obtained from given resources; or (c) a change in the crop mix to raise the value of output obtained from existing resources. In practice, Voltaic agriculture is highly constrained on all three fronts. Mobilization of More Resources 0.11 Physical factors that limit the first option, as mentioned above, include inadequate rainfall with relatively few opportunities for cost- effective irrigation, poor and easily eroded soils, and high population density relative to arable land. At the same time, emigration of the most able members of the work force, and a general low level of education limit the quality of available agricultural labor. There is some scope for re- distribution of population to more fertile, less-settled regions in the south, especially as riverblindness in these areas is brought under control. Beyond  - 4 - noting that the option exists, the possibilities and constraints concerning resettlement are not evaluated in the present report. Past study suggests that while resettlement cannot be the major solution to low agricultural growth in the country, it is important in relieving population pressures in the central area and should be facilitated. More land resources could also be mobilized, at considerable cost, through erosion control and heavy applica- tions of rock phosphates to reclaim overworked lands. There does not seem to be a severe constraint of financial capital as such in the agricultural sector, given the ample flows of external aid that are already forthcoming and the presence of other bottlenecks to efficient utilization of capital. Adoption of New Technology 0.12 The primary objective of the analysis of this second approach is to compare new technologies with existing traditional, manual techniques, although consideration is also given to the scope for profitably expanding production using the more modern methods. The economic analysis of new technology is hampered by poor data on both prices and technical co-efficients. Although conclusions are based on reasonable assumptions about critical parameters, they seem to accord well with general information about farming conditions in the country and with specific research findings. But those conclusions should be considered only indicative, because interpretations of the same data may differ; future prices may be more favorable than expected; the poor performance observed for these new techniques may be caused by insufficient implementation programs, not lack of inherent potential; and results achieved by good farmers are likely to be better than those of average farmers. However, the broad pattern of these results varies very l-ttle in the face of large changes in some of the major assumptions--rankings among different crops, techniques and regions stay fairly constant and the scope for expansion using new technologies is generally positive. 0.13 There are three major rainfall zones: 400-700 mm, 700-900 mm and over 900 mm, within which can be found different soil types and degrees of soil degradation. The technical packages for these three zones have to be carefully selected. Millet, cowpeas, sorghum and groundnuts are found in the first zone, the last two crops only where rainfall is over 500 mm. There are few new crop varieties that give much improved yield below 600 mm. The climate and 60-100 day growing season in the 400 to 700 mm rainfall zone is very limiting to plant growth and quantum increases in yield above the present average of 300 to 400 kg per hectare of cereals cannot be expected. However, good husbandry, principally planting and weeding on time along with soil conservation and application of manure, has beneficial effects even in the lowest rainfall areas. Some improvement in yields can be gained by using manufactured fertilizers on sorghum and groundnuts in this first zone, but only on selected soils and under good management conditions. Maize and cotton can be produced in the second zone, with 700-900 mm rainfall. On the right soils, good responses can be obtained in applying manufactured fertilizers to these two crops as well as sorghum. Selectivity in the use of fertilizers, however, is important. Over 900 mm with a 120-day growing season, the poten- tia'l for use of improved technology is much greater.  - 5 - 0.14 What the results of the financial evaluation suggest is that the improved technology (seeds, fertilizers, insecticides) is likely to lower costs of production (per unit of output) compared to traditional methods only for maize and cotton in the southwest. For sorghum and millet, the improved techniques generally raise financial costs per unit of output unless responses to fertilizer are quite high. At financial prices, the use of animal traction lowers unit costs under improved systems in the southwest for all crops--but especially for maize and cotton; it tends to leave unchanged or to raise costs for sorghum and millet in the center and east. However, given the right growing conditions in the right areas, it may be more financially attractive to use fertilizers and animal traction--providing it is accompanied by good husbandry--than to continue traditional methods. Improved production tech- niques in general remain profitable to farmers even at higher wage levels-- with the notable exception of cotton for which non-pecuniary incentives for producing the crop seem to play an important role. Thus, at current financial prices there is scope for expanding cereal production through the adoption of these techniques. 0.15 At economic prices, the use of seeds and fertilizers increases the unit production costs of all crops except maize where it can be grown; when compared to manual, improved methods the use of animal traction lowers costs for cotton generally and for maize in the southwest. Thus, improved maize production should be promoted in suitable areas; and for the other cereals, world prices are high enough to permit import substitution through the improved manual production. To the extent that this new technology is essential to raise the total volume of output, there is still some margin in which it can be profitably employed. At longrun economic prices, cotton exports are extremely atractive, allowing even greater use of improved inputs. 0.16 Water Control. Measures to improve water control include irriga- tion, anti-erosion and water conservation works, and development of drought resistant plants and practices. Government sectoral strategy acknowledges that agricultural development must be based on rainfed techniques. There is clearly much economic potential for development of small-scale irrigation such as through improved bas-fonds for rice cultivation and small pump irrigation for crops such as fruits and vegetables. A point which remains under discus- sion between the Government and the Bank concerns the degree of emphasis and the priority to be given to large-scale irrigation with full water control. The Government places considerable importance on large developments to obtain greater security of production and possibility for important substitution especially for rice, wheat and sugar. Further study of proposed large-scale perimeters should fully examine the problems which have been encountered in similar existing schemes, such as high investment and maintenance costs in relation to actual yields, the need for good farmer organization for mainte- nance, technical difficulties, and the availability of adequate markets. Antierosion works and water conservation, which can be facilitated by contour bunding, offer the advantage of improved water control plus consistency with existing rainfed cultivation practices. The experience with these measures has been mixed, in part because the investments have been poorly executed and maintained, despite their potential. The success of efforts to promote soil and water conservation will require collaboration among several ministries and  - 6 - services and will depend as well on the adoption of a land tenure system which provides farmers with an incentive for land improvements. More research is warranted to determine traditional practices which can be more widely promoted to protect soils. 0.17 Seeds. There are very many improved varieties of seeds that re- search authorities consider suitable for dissemination, and these have the potential to raise national production by an enormous amount when coupled with required inputs of fertilizer and improved management. But relatively few of these varieties are actually multiplied and used--except for rice and groundnuts. The major constraints on wider use of new varieties include: (a) an inadequate system of seed production and distribution; (b) the dif- ficulty that research has had to develop seeds that are better adapted than local varieties to farmers' growing conditions, general husbandry practices, and multiple uses of the crop; (c) the fact that additional complementary inputs (including labor) are needed to realize potential yields, and these may be unavailable or too costly for the gains achieved; and (d) unattractive prices to contract seed farmers. 0.18 Fertilizers. Of the several types of crop fertilizer, the most important is manufactured coumpound fertilizer, use of which has grown extremely rapidly -- especially after the drought. The financial price of fertilizer has declined relative to other inputs and to output prices, and its use appears to be financially attractive (showing positive net returns)-- despite higher costs with fertilizer--for cereals in virtually all instances and for cotton when high response rates are achieved. However, the use of fertilizer appears to lower production costs (per unit of output) compared to traditional methods in a significant sense only for maize, although it can also reduce costs for cotton and sorghum in the southwest under certain assumptions. For millet and sorghum in the center, the new technology tends to raise unit production costs regardless of assumptions. The negative financial returns calculated for use of fertilizer on cotton are apparently offset by other factors like residual benefits from the fertilizer, secure and rapid marketing, and more stable yields. However, longrun prices for cotton are expected to rise sufficiently to allow price increases that would assure profitable use of new technology. In long run economic, or world prices, the use of manufactured fertilizers significantly raises the cost of production per unit of output for cotton and the major cereals except maize. This pattern holds even with significant changes in assumptions (higher fertilizer response rates and lower wages). 0.19 Although manufactured fertilizers raise the physical productivity of traditional factors, the increase does not always cover the higher costs for both the fertilizer and other complementary inputs. A certain level of return is essential, which means that areas and growing conditions must be carefully assessed before using fertilizer. In general it is viable for maize even under conservative response rates, but higher response rates are necessary for fertilizers on cotton and sorghum to be attractive. In the case of sorghum in particular, the response of the output to NP (nitrogen/phosphate) must be greater than 7 to 1, which is possible through improved husbandry and careful selection of areas. Results from millet are generally discouraging  - 7 - even under the best circumstances. These factors are discussed at some length in Section 5, Seeds and Fertilizers. Long-term reliance on manufactured fertilizers might also exacerbate existing soil problems, including acidity and poor structure. 0.20 Because such fertilizers appear to improve efficient use of economic resources only when employed by above-average farmers and in areas of better rainfall, a selective approach to promoting their use is recommended. Although by raising unit production costs in most cases the modern inputs tend to lower economic efficiency (strictly defined), the country still enjoys a comparative advantage in using fertilizers to produce cereals for import substitution and to grow cotton for export because longrun economic prices are sufficiently high--even with fairly conservative assumptions. Thus from the national view- point, there is scope to expand fertilizer use on two accounts: to exploit to the fullest the margin where real gains can be had; and to expand overall production up to the point where marginal costs equal relevant world prices. Both would increase national income. 0.21 The other types of fertilizer can help both improve deficient soils and possibly overcome potentially harmful effects of chemical compound ferti- lizers. There are substantial deposits of low-grade rock phosphates, and a mixture of them with imported soluble phosphates to reduce the import require- ments appears economically justifiable for maize, cotton, and probably ground- nuts, but not necessarily the other major crops. Research results for both manure and crop residues--which also improve soil structure--are encouraging; but expansion of their use depends closely on the spread of animal traction. More research is needed on intercropping. Greater use of legume crops, particularly groundnuts and cowpeas, could improve soils and reduce amounts of fertilizers needed. The use of manure could play a much more important role than it does in improving soil quality and reinforcing the value of fertilizer. A higher fertilizer price might prompt greater use of manure. The quality of manure could be increased by keeping cattle in corrals at night while feeding them on stovers. The value of manure as a fertilizer could be enhanced by more careful placement next to plants. 0.22 Animal Traction. The use of ox cultivation appears to have grown rapidly over the last 15 years, but it is concentrated where cotton is grown. It is estimated that 25-30,000 ox teams are currently in harness, as well as a large number of donkeys. There are several plausible reasons to expect higher yields under ox cultivation, including better crop husbandry, greater water infiltration, and more available nutrients. Ox cultivation should also reduce labor needed for land preparation and weeding. As far as cultivation is concerned, the major benefit appears to be an expansion of the area culti- vated (per worker). Evidence of increases in yields is less conclusive, although the potential exists. There are also other indirect benefits from the adoption of animal traction, including manure for fertilizer and easier transport of inputs and crops. The financial evaluation shows that farmers already using other modern inputs have strong incentives to adopt the tech- nique, mostly in the southwest, where returns per unit of output, per ha and per manday tend to rise--especially for maize and cotton. When the evaluation  - 8 - is made in economic prices, results are also positive (lower per unit produc- tion costs) for cotton and perhaps for maize in the southwest, where the longer growing season allows more labor to be saved, yield effects may be larger, and the equipment can be more fully utilized. Animal traction also significantly raises net returns per ha and per manday for both cotton and maize in this region. Elsewhere, and for other crops, expanded output (through higher yields and land-labor ratios) that can be achieved with animal traction under usual farm conditions appear too low to pay the extra cost (in economic prices). But when viewed as part of an integrated production package, animal traction offers significant potential advantages; to overcome constraints and to realize them will require additional promotion and adaptation of all the inptuts as well as time. Even though the use of animal traction does not always lower economic costs of production, the country can still retain its comparative advantage by using the technique to expand total output for all of these crops except perhaps millet in drier areas. 0.23 To summarize the assessment of technological changes, there are two different problems to address. First, compared to traditional cultivation methods, new technology itself appears to be generally cost-increasing at current world prices (except for maize, cotton and perhaps sorghum in the southwest) even if reasonably well adapted to actual farming conditions and used with requisite complementary inputs. Of course, for proficient farmers who use inputs more efficiently than assumed for this analysis, the technology may lower costs. More applied agricultural research is needed which is oriented to the development of robust varieties that are highly responsive to fertilizer or to finding new crops. Maize appears to be an example of one crop for which such research has borne fruit. However, as long as world commodity prices are high enough to cover the extra costs, this technology, even if it is cost-increasing, can still play a role in profitably expanding national production. This is the case for maize, sorghum and cotton. Second, the technology may have sufficient potential, but its full realization is dependent on the simultaneous use of new inputs and possible other investments or changes in the farming system. Moreover, the heterogeneity in rainfall and soils means that even this productive potential is only likely to be realized if the new technology is selectively used, although its use in the southwest could be more generalized. In order to raise total economic productivity, partial changes based on one or two inputs are probably insufficient; rather, a larger change in the farming system is needed, involving other inputs, manure, legumes, more equipment, better husbandry, and improved soil and water conservation. These may require more intensive use of labor, and labor bottlenecks may occur at critical times, making the package impractical. Because of these complementarities, and the fact that farmers are often con- strained by factors beyond their control (e.g., short growing seasons and uncertain rainfall), widespread dissemination of only a few of these new, higher technology inputs is unlikely to raise the economic productivity of farming, except perhaps in areas favored by good soils and climate and when used by farmers already reasonably proficient. Rural development projects are already attempting to change many elements of the farm system concurrently, but the process will require time and only the initial steps have been taken. The development and dissemination of such complementary packages calls for adaptive research and closer coordination between research and extension.  -9- Introduction of New Crops 0.24 - The present patterns of agricultural production and domestic demand in the country indicate that further long-term growth of the sector must be based mostly on exports, because the potential for import substitution is limited both physically and economically. The analysis of domestic resource costs at present world prices indicates that there is some scope for efficient expansion of import substitution in the near term. However, the country is still largely self-sufficient in oils and starchy staples--although imports have begun to increase recently; and much of the problem of food shortages appears to arise not from an inability to produce enough but from highly unequal geographic distribution of production and from low effective demand in certain deficit regions. Domestic consumption of starches and oils will grow as population increases, and the market for wheat, fruits and vegetables will expand with incomes, particularly in urban areas. 0.25 Although many farmers in the Southwest are growing more cotton, increasing the share of new crops does not appear to be a major option in the near future for the country at large because most of the new crops which have been tried to date (soybeans, wheat, sugar, tobacco, sunflowers, fruits, vegetables and root crops) cannot be widely grown by small farmers under rainfed conditions. However, because of the lack of data, it has been dif- ficult to assess completely the technical and economic potential of all these crops and to estimate their comparative advantage. The few empirical indica- tions are that high-value fruits and vegetables that can pay for irrigation and perhaps root crops could play a larger role in the future. It is also important to note that many of these crops are important adjuncts to the farming system; although their total production may be small and limited, at the margin they can be very important. Finally, more research is needed to refine these results and to explore other alternative crops. 0.26 According to the Bank's commodity projections, movements in world prices over the next decade should not discourage continued technical trans- formations in the production of the major crops or adoption of new crops. Fertilizer prices are likely to rise in real terms faster than most existing or potential Voltaic commodities, in particular, oilseeds, wheat, and citrus. On the other hand, prices of cereals, sugar, and cotton are expected to rise, favoring the existing although limited import substitution for the first two and larger exports of the third. Efficient agricultural growth through exports as well as further import substitution under improved techniques is also constrained by economic factors besides world price trends - in particular, the cost of labor, which is influenced by opportunities for migration to the Ivory Coast. The long distance from coastal markets also raises the cost of inputs and lowers the value of exported outputs. D. Orientations of a Sector Strategy 0.27 The analysis of present constraints on the sector and options for promoting economic growth suggests the following broad elements of a develop- ment strategy for the agricultural sector.  - 10 - Agricultural growth in Upper Volta depends less on changing domestic output and input prices than on expanding productive potential, but some reform of price policy is warranted. 0.28 Output prices. Although Voltaic farmers have responded to favorable trends in private prices, notably by adopting modern inputs at a rapid rate as their price relative to cotton and cereals has declined, there does not seem to be much scope to achieve a major stimulus to agricultural production by raising output prices. Past trends indicate that increasing the price of an agricultural commodity, relative to other consumer goods, is unlikely to stimulate production by very much unless new technology is made available at the same time to raise productivity or unless output of other crops falls, releasing productive resources. However, a change in relative prices could favor a switch to maize, which is more efficient; and higher prices could provide an umbrella under which the use of cost-increasing technology could be profitably expanded. Introducing new, higher value crops, most of which require irrigation and careful husbandry, also cannot be widely pursued as a viable alternative to improving technology or reducing resource constraints. Even if increasing output prices could be expected to have a significant impact on production, the Government would have difficulty implementing the policy except in the case of cotton, or by restricting sales of food aid and taxing bread, since most output prices are already determined largely by the market. Although the tendency of food aid is to depress market prices, food aid sales, if undertaken selectively, can play a welfare role that may be warranted by the severe regional imbalances in food supply and income. 0.29 Lnpu_ subsidies. Input subsidies can be justified if they help overcome some specific constraint to transforming the technological base of agriculture--leading to higher economic productivity; if they offset other distortions in prices; or if they compensate for socially valuable externali- ties. Phasing out the subsidies on manufactured fertilizers (and probably insecticides) is warranted primarily because significant economic gains from using these inputs are realized only in favorable regions, on responsive crops (e.g. maize), and by better farmers who employ other complementary tech- nologies - in which case these producers probably do not even need the subsidy as an incentive to adopt the inputs. It is also difficult to justify continued subsidies on chemical inputs given the alternative of raising output prices (especially of cotton), farmers' current knowledge of them, and possible negative externalities of fertilizer's overuse. Finally, the most compelling argument is that the Government will becoming increasingly unable to pay the subsidies without external assistance, especially if the widespread use of these inputs is to form the basis of a technical transformation of agriculture over the long term. Difficulties in financing the subsidy have already led to certain ruptures of supply, which is clearly counterproductive to the objective of promoting fertilizer use. The Government has accepted to reduce the subsidy gradually over time, and to base the adjustments on an annual review of thie markets' response to higher input prices. 0.30 The loss in physical output from reduced use of fertilizers, if subsidies are removed, is hard to predict, but it may affect initially the less efficient farmers who produce some of the marketable surplus of food- grains - implying that domestic cereal prices may tend to rise to compensate  - 11 - for the increased price of these inputs. Some improvement in the average prices of cereals may be desirable to help maintain incentives for efficient improved production; this might require some reorientation of the Government's marketing interventions (see below). To help soften the impact on private incentives for cotton production if input subsidies are removed or if cereal prices rise, some increase in the cotton price will be necessary. 0.31 Subsidies on other inputs - notably rock phosphates, and soil and water conservation measures, may be justified in theory to account for the complementarities among the use of these varied inputs along with fertilizer, positive externalities (such as arresting the long-term decline in the produc- tive potential of land), and the long lag in the realization of private benefits. But it is important that these inputs be technically sound before a large commitment is made to subsidize them. A priority should be placed on research into alternative fertilizer compositions, and particularly on the use of local phosphates, to arrive at a nutrient package which yields the benefits of improved productivity at a lower expenditure. To expand the productive potential of the agricultural sector will require long term changes consisting of incremental improvements in the farming system and in the agricultural resource base. 0.32 The aim of such changes, which must occur on several fronts at the same time, will be to expand the productive capacity and potential of existing resources. Primary emphasis must be given to rainfed cultivation, and its development demands large scale investment in water and land conservation which will enable farmers to realize the latent potential of improved seeds and fertilizers. Animal traction should preferably be associated with the use of improved seeds and fertilizers in order to make them sufficiently produc- tive as to be an attractive alternative to traditional methods. Promotion of these complementary techniques requires a major investigation to address the complex constraints which the farmer faces concerning soil, water, avail- ability of labor and other factors that hinder him from using the modern inputs efficiently. A development strategy for the agricultural sector must accord priority in the near term to increasing the economic efficiency of food production. 0.33 Although the country presently meets most of its food requirements in normal years, additional efforts will be needed to maintain self-sufficiency as population increases and to revive yields in the center region, where most of the population lives. While continued emigration abroad may be expected to limit the growth of domestic demand (as well as provide remittances which can be used by remaining residents to import food), and food aid appears readily available to the country, a sustained level of local production which permits self-sufficiency in normal years is a necessity to provide a minimum of food security and adequate internal distribution. Increasing the returns to labor and land in cereal production will have a major impact on improving rural incomes and freeing resources (especially in the Southwest) for production of  - 12 - higher value export crops. Implementation of this strategy will require research to develop economically attractive technical packages that can intensify cereal production in parts of the country with an unfavorable endowment of agricultural resources relative to population. E. Specific Recommendations Concerning Agricultural Production 0.34 The above broad outline of an agricultural production strategy suggests that a development program for the sector should incorporate the following measures. Research 0.35 The analysis indicates that the new inputs and techniques that research has developed have not always been sufficiently adapted to the con- ditions under which farmers actually work. To help alleviate the constraints to achieving higher productivity under farm conditions, improvements are needed in agricultural research in the areas of: (a) Strategy: to put the focus on farming systems research, carried out in conjunction with farmers and linked to the extension service; and to assure that agricultural research and recommendations are formulated in light of feedback from farmers; (b) Organization: to define a national research work program, which must involve moving research from its present single-crop orienta- tion to permit a farm systems orientation; to help straighten out organizational ambiguities and conflicts; and to provide better coordination with international crops research programs; (c) Resources: to assure that adequate funding, manpower facilities, and logistical support will be provided to carry out needed research. The Government has taken important initial steps towards facilitating appro- priate changes in strategy and organization by creating the Institute Voltaique de Recherche Agronomique et Zootechnique (IVRAZ), charged with planning, programming and orienting all agricultural research activities. Particular attention will have to be given to providing adequate coordination between the Ministry of Higher Education and Scientific Research, which oversees IVRAZ, and the Ministry of Rural Development, which manages the agricultural extension service and the adaptive research station run by it. Regional Investment Priorities 0.36 The Southwest appears to enjoy an absolute advantage in the produc- tion of most major agricultural commodities, but its comparative advantage-- relative to the center--should be in the production of exports. Its greater proximity to international markets and its relatively favorable endowment of water and soils make it more capable than other parts of the country to compete in world markets. At present, however, growth of exports is constrained on  - 13 - two fronts: by the scarcity of profitable export activities in the Southwest in addition to cotton, and the inability of the Center to expand cereal pro- duction to free resources in the south. Regional investment strategy should therefore focus on major constraints and potentialities in each area to achieve the greatest efficiency in resource allocation without at the same time leading to strict regional specialization. 0.37 In the Southwest: In the near term, it should be possible to use the favorable endowment of economic and natural resources to promote better use of existing technology (e.g., development of maize where feasible in place of sorghum and millet, and animal traction instead of manual cultivation) to increase the efficiency of food production. 1/ The problems to be faced in the medium term in this region are those of refining technical packages and finding additional competitive export crops. 0.38 In the Center: The long run goal of this region, where most of the population will continue to reside, should be to become more self-sufficient in food production. For this to occur, its productive capacity must be augmented by measures to conserve soil and increase its fertility. These measures could include both investments (e.g., bunding and large applications of rock phosphates if that proves economically feasible) and better cultiva- tion methods, such as planting of grasses to prevent run off (perhaps made possible by animal traction), based on traditional practices where feasible. But increasing productive capacity also depends on better technical packages, including seed varieties. The choice to subsidize certain inputs in the central region may be justified if these measures reduce soil degradation, yet private (as well as economic) returns do not make them appear very attractive in the short run. Selective subsidies can also be viewed as a redistributive policy to help redress the natural and climatic disadvantages of the plateau. 0.39 In the East: It may be possible to increase the employment of resources by improving the commercial infrastructure (particularly roads), which would reduce import costs, raise farm prices, and encourage settlement to unused land, and by establishing new export routes through Lome. F. The Role of Agricultural Services in a Sectoral Development Strategy 0.40 A strong supporting network of agricultural services--including extension, marketing, input and credit delivery--is essential to permit the physical production possibilities to be realized. The development of these services in Upper Volta is constrained by available administrative capacity; by inadequate infrastructure (poor roads and channels of communication); and by limited financial resources. l/ It will be important to ensure, however, that the value of sorghum and maize to national food security, which derives from their drought- resistance, is not unduly sacrificed by shifts into maize. In the near term the potential for maize production is somewhat limited by consumer tastes, but maize consumption is growing and can be expected to increase further as nutritional practices and incomes change.  - 14 - 0.41 The major issue for the development of agricultural services in Upper Volta concerns the appropriate mix between private and public sector channels of delivery. To the extent that the country relies on the public sector for these services--specifically, through publicly-financed extension workers, a parastatal organization of marketing, credit delivery, and input supply--the development of these services may be constrained by limitations of trained manpower, managerial ability, and by political or bureaucratic pressures which can impede an efficient and streamlined operation (by making it difficult for the public institutions to keep overhead costs, for example, of personnel, under control). Of course, in a country which suffers an absolute shortage of trained and experienced human resources, the private sector is likely to be ineffective and undeveloped in many areas of activity as well. Regardless of what combination of public and private sector involve- ment in the delivery of services is preferred, major efforts will be needed to strengthen the resources of manpower, infrastructure, and finance on which these services depend. The question remains whether, in the near and medium term, the agricultural community can be better served (or serve itself) by relying on private channels, however imperfect, or on public institutions which may only be able to acquire the resources to meet their managerial and financial requirements over the very long run. The issue remains particularly pertinent for Upper Volta, since it has permitted both public and private channels for the delivery of agricultural services to appear, and both are at early stages of their development. 0.42 The comments and recommendations below address the conditions needed to promote more effective extension, marketing, and input/credit supply in the context of sectoral objectives and constraints, and of existing Voltaic insti- tutions. The institutions involved in the delivery of agricultural services include the ORDs (Regional Development Organizations) and the Ministry of Rural Development, the counterpart unit of central government; OFNACER and UVOCAM, charged with marketing cereals, and fruits and vegetables, respec- tively; and the ORDs, CNCA, and SOFITEX, which currently share responsibili- ties in the area of input and credit delivery. Extension 0.43 General Considerations: Because there are a limited number of technical innovations which are applicable to most regions of the country, the results of the extension effort outside of the cotton zones have not been very impressive, particularly in light of the significant commitment of manpower and expenditure which it entails. The essential role of extension is three- fold: (a) to assist farmers to adopt improved production practices, (b) to provide constant feedback and interaction between the farmer and the research and planning authorities, and (c) to promote the organization of farmers in order to facilitate the delivery of information and services to them and increase their ability to pursue their own communal interests. To better meet these objectives, a first prerequisite is an improvement of the technical message through development of an adaptive research program involving trials and demonstrations on farmers' fields. Second, the channels of communication with farmers have to be strengthened. This second condition calls for measures to enhance the effectiveness and efficiency of the existing extension system  - 15 - which, in the near and medium term, is likely to provide the major link between farmers and other agricultural services (research, sources of credit, etc.). However, given the constraints of manpower and financial resources it is important that reforms maintain flexibility and a range of options in the extension system. For example, a concerted use of rural radio can be a cost- effective means of complementing the extension service in the communication of simple messages to farmers. The development of farmers' groups will enable them to undertake much of the information reporting themselves and seek out advice from the research network. Promotion of these groups can be carried out either by the regular extension agents or, where staff resources permit, by specialized animateurs. The choice of a suitable farmer/extension worker ratio may vary depending on the extent to which a replicable technical package exists for each particular region of the country, which would justify denser farmer coverage by the extension staff in some areas than in others. Thus, the objectives of extension can be served by a judicious use of scarce resources while the extension message becomes more developed and the farmers themselves become more receptive to technical advice. 0.44 Specific Recommendations: The ORDs as an institutional framework for extension 1/ have proven an appropriately decentralized unit of agricul- tural development and channel for external project assistance. Their effec- tiveness is likely to be enhanced through the Government's proposal to focus the ORDs' activities on agricultural production rather than broader rural development. The major measures required to further improve the functioning of the extension service include: (a) a much stronger technical guidance of the extension system by the Ministry of Rural Development, which will require strengthening the central services and establishing a program of monitoring and evaluation. The creation of a Department of Extension in the Ministry is a move in this direction; (b) the development of a program of adaptive research trials and demonstrations involving formal collaboration between research and extension personnel; this would involve (i) adaptive experiments to be carried out at substations under the responsibility of research institutes, but with participation by ORD service chiefs, and (ii) trials and demonstrations by the extension service to apply the findings of these experiments on farmers' fields and communicate the results of the field demonstrations to researchers; (c) an increase in the numbers and quality of middle-level supervisory personnel through the rehabilitation of the Matourkou school, and introduction of periodic in-service training for extension staff at all levels; (d) establishment of a structured work program, such as the Training and Visit System, in all ORDs; 1/ The extension activities of the AVV and of the Rural Development Fund have not been evaluated in the present report.  - 16 - (e) improvements in staff incentives, largely by eliminating dis- crepancies in compensation and providing better opportunities for promotion; and (f) development and training of farmer groups, in order to disseminate the extension messages more effectively, provide feedback to research and extension personnel, and enable farmers to take over much of the final distribution of input supplies and credit, thereby lessening demands on ORD staff. Cereals Marketing 0.45 The public cereals marketing agency, OFNACER, although not estab- lished as a monopoly, has the very ambitious objectives of assuring producer incentives, protecting consumer income, and promoting regional equity. The agency's present operations are handicapped by a rigid policy of uniform pricing and of annual buying and selling quotas; as well as by insufficient financial resources, which make it unable to carry out its floor pricing policy and have led to its almost complete reliance on food aid. OFNACER's effect on the market to date has probably been minor, but more to dampen consumer prices in urban areas, through food aid sales, than to support producer prices. 0.46 If OFNACER is to carry out its present mandate effectively, the financial and administrative requirements will be stringent. In view of these costs, a more restrained role for the agency should be considered, consisting of managing emergency stocks, selling food aid only to drought-stricken areas, and improving market information. Assuming, however, that Government wishes OFNACER to continue to play a more interventionist role, and that the agency is endowed with the necessary resources, its program should be defined as that of maintaining producer "floor" and consumer "ceiling" prices on the following terms. 0.47 The agency would guarantee to purchase grain based upon a reference producer price, which would be calculated by the return which the better farmers in the more productive zones (i.e., the Southwest) need to cover the costs of an appropriate use of inputs. The price would serve as a kind of market "insurance" for these farmers. The purchasing policy would have the effect of providing most incentive to regions which have at least a potential comparative advantage in the production of surplus grain through efficient use of new technology. OFNACER's policy on grain sales would aim at permitting consumer prices overall to rise in line with producer prices. This objective would be tempered when and where necessary by official sales to maintain the estimated maximum prices which low income consumers in the major market can afford. 0.48 Successful implementation of this program would require that the reference "break-even" producer price be based on the production costs of the most efficient farmers. OFNACER would also require substantially improved capabilities of administration and analysis of data on prices, production costs, and consumer incomes. A regular source of financial support would be needed which is independent of the agency's own operations and of the revenues from food aid, since OFNACER could not function effectively both to maintain a floor and ceiling price policy as well as achieve commercial profitability.  - 17 - 0.49 The substantial costs and risks of attempting to carry out such an active role in the marketplace make a strong case for the Government to pursue only limited objectives as listed in paragraph 0.46. Regardless of the nature of OFNACER's interventions, however, measures should be taken to improve and facilitate the functioning of the private sector, such as through an improve- ment in rural roads, better availability of seasonal credit for crop purchase and storage, and timely radio broadcasts of market information. The experience of some farmers' groups with the management of village grain banks should be evaluated, as more promotion of these banks may be justified to increase producers' role in the marketing of their own grain. The Government is increasingly encouraging the village groups to take an active role in marketing their produce in collaboration with OFNACER. Fruit and Vegetable Marketing 0.50 The fruit and vegetable subsector is unique in Upper Volta in that it has fostered a relatively large number of officially-constituted producers' cooperatives who have formed their own marketing union, UVOCAM. UVOCAM has made notable strides in the export of fruits and vegetables to Europe, although some reorientation of the agency may be needed to promote production of fruits and vegetables for the domestic and coastal markets. Efforts to negotiate reductions in air freight rates and technical assistance to improve UVOCAM's operating efficiency appear to be warranted. Pending the results of further study of the potential for higher value crops in this subsector, a larger role for UVOCAM may be called for, including possibly more vertical integration of its operations to coordinate research and extension as well as marketing, in cooperation with the ORDs and research institutions (comparable to the SOFITEX approach). Input and Credit Delivery 0.51 The arrangements for the provision of inputs and credit to farmers should realize the objectives of cost recovery and cost effectiveness, timeli- ness of delivery, quality control, and economies of scale. The importation of chemical inputs should be undertaken either by SOFITEX, which already handles all inputs intended for cotton, or by a licensed private enterprise. Produc- tion of certified seeds either by contract farmers or on ORD farms should be limited to a few sites where linkages with research and strict control of quality can be enforced. At the same time, a seed pricing policy should be adopted to set the price to seed farmers at a level at least twice the market producer price, and a sufficient margin should be added by the seed multipli- cation centers to cover the costs of collection, treatment and grading. Artisanal repair of animal-drawn equipment and development of a manual or ox-drawn seeder should be encouraged. 0.52 In many areas, delivery of inputs at the local level may better be carried out by licensed commercial traders functioning in cooperation with the ORDs, rather than by ORD personnel themselves. Using private traders would have the advantage of keeping an essentially commercial function out- side of government channels, where the costs of administration may become unnecessarily high. In ORDs where a separate input and credit supply service  - 18 - has been established, the objective should be kept in view of facilitating the transfer of input and credit distribution to farmers groups, or to agents whom they would employ, in the future. One way of easing this transfer may be to avoid staffing these services with permanent staff (i.e., civil servants). 0.53 A number of organizational measures are needed to enable the ORDs to more effectively administer the agricultural credit program at field-level and to permit the CNCA to exert guidance and control. Among such measures are a determination of uniform guidelines for credit administration in all ORDs and an upgrading of the legal status of farmers' groups. To enable the credit program to remain on a financially sound footing and to avoid unnecessary subsidies, interest rates should reflect as near as possible the real cost of capital within the limits permitted by central bank, and appropriate revenue- sharing arrangements need to be worked out between the CNCA and ORDs to cover the administrative costs of credit delivery. G. Public Finance Aspects of a Sectoral Strategy 0.54 The primary financial issue in the agricultural sector is not whether public revenues from agricultural income can be increased or public expenditures can be reduced - which to some degree is possible - but whether these expenditures are efficient and productive in generating benefits or maintaining income. As noted earlier, various constraints on the farm system limit the returns which are actually obtained from existing public expendi- tures on input subsidies, extension, improved seed production, and land improvements. Unless the productive potential of technological approaches can be more fully realized by farmers - which requires adaptive research and perhaps additional, complementary farm inputs - it is not realistic to expect full cost recovery from the agricultural sector for many of these expenditures. In the meantime, however, it may be premature to encourage the widespread use of some inputs through subsidies if they can only become economically produc- tive in selected areas. 0.55 The financial data indicate that the agricultural sector at the present time receives a net transfer of public revenues, which is largely financed by external aid. Although the scope is very limited in the foresee- able future to achieve greater cost recovery from the rural sector for produc- tive inputs and investments and to make agricultural production a net provider of revenues to Government, several adjustments may be feasible to improve the public financial situation. (a) Subsidies on manufactured fertilizers should be progressively phased out. The timing of a reduction of subsidies is the subject of ongoing sectoral discussions between the Government and the World Bank. Clearly, a schedule of reductions will have to be reviewed at regular intervals in light of new information concerning world prices and the actual impact of each price change on farmers' incentives. However, a reduction of subsidies need not lead to a sharp and long-term decline in output, and will instead bring about a more efficient use of productive factors and a better allocation of scarce budgetary resources.  - 19 - (b) The official price schedule for sheanuts should be reviewed so as to avoid subsidizing exports of this uncultivated tree crop. (c) Study should be made of the potential costs and benefits of improving the collection of fiscal revenues from the rural sector (particularly the livestock subsector) and of instituting additional taxes. (d) The Ministry of Rural Development should become actively involved in the formulation of expenditure guidelines for the ORDs and should regularly monitor accounts of the ORDs and of sector projects. (e) The financial accounts of the ORDs should be included as an annex to the national budget, in concert with a general reform of budgeting and investment programming at the national level. 0.56 If these adjustments are undertaken and if the necessary measures (primarily adaptive research linked to extension) are instituted to strengthen the productivity of technological components which are publicly financed in the sector, the Government will be making as strong an effort to put the agricultural sector on a financially viable footing as can reasonably be expected at the present time. In the meantime, a continued high level of foreign funding will be needed to finance the development costs of services and infrastructure in the agricultural sector, since the benefits and the possibilities for cost recovery from these investments will only be realized with a considerable lag. HI. Implications for Donors' Lending Strategy in the Sector Broad Orientations 0.57 The preceding summary of recommended reforms and directions for investment in the agricultural sector point to some important modifications of the donors' lending strategy. To bring about agricultural growth, the sector clearly needs to enhance productivity in ways which can occur only over the long run, through a series of incremental improvements in the farming system and in agricultural resources. There is, therefore, no quick solution to the problem of expanding agricultural potential. What is needed is a long-term commitment to help finance the technical changes and investments that can raise the productivity of resources. 0.58 The following elements should be the keystones of donors' long-term investment strategy in the sector: (a) improving agricultural research, by helping to reorient research strategy to focus on farming systems and develop collaboration with farmers and extension personnel; to refine the national organization of research; and to provide resources such as adequate funding, manpower, facilities, and logistical support;  - 20 - (b) enhancing the effectiveness of extension, first, by refining the technical packages and their applicability to farmers; and second, by a better organization of extension (such as by adoption of the Training and Visit System), supervision, and in-service training of personnel; (c) improving cultivation practices and soil and water conserva- tion on the Central Plateau to restore the region's productive potential and increase its chances to achieve food self-sufficiency; more agricultural research is also needed here to develop crop varieties suited to the climate; (d) strengthening private marketing outlets, by improvements in physical infrastructure (roads) and the availability of reliable market information; (e) building-up the capacity of the Ministry of Rural Development to provide effective technical support, financial control, and coordination of regional activities in the areas of extension, research, and programming of development expenditure; and (f) undertaking a long term commitment to finance operational expendi- tures on administration, extension and research, which if properly oriented are "development costs" in the truest sense. External financing of some recurrent subsidies may be justified to bring about complementarities among input use, to overcome learning problems and to account for beneficial externalities. External budgetary support to the Government for expenditures of a recurring nature is only justified, however, if these expenditures actually lead to viable structural changes that enhance agricultural pro- ductivity; if Government increases its efforts to generate fiscal revenues from the rural population as they realize greater benefits; and if publicly-financed services (such as input delivery) are shifted, where possible, to the private sector. Stricter accounting controls of these expenditures is also a prerequisite to broader external financing. Specific Recommendations for Donors' Lending 0.59 The donors' future interventions should comprise both conventional project loans and a more programmatic approach to lending. The recommenda- tions for a medium term production strategy in the Southwest, which would focus on animal traction, maize and cotton cultivation, as well as measures to improve the efficiency of the extension service, input delivery, and seed production can be promoted in specific areas through marginal changes in regional (ORD-based) development projects. The proposed strategy for the central region, which emphasizes measures to protect soil resources and better husbandry practices associated with the use of animal traction, can be pursued through an institution such as the Rural Development Fund (provided there is effective follow-up by ORDS) as well as by area development projects. Certain changes in research activities and training programs could also be initiated through the vehicle of project credits.  - 21 - 0.60 The most fundamental reforms which are recommended in the sector, however, involve strengthening institutions and planning capabilities at the cent-er of government where technical and managerial skills are insufficient to provide the needed direction to the regional organizations. Therefore, a strong case can be made for donors to adopt a more programmatic approach to lending as well, which would provide a coherent framework for reforms with national, not just regional, applicability in the areas of price policy, reorientation of research and extension, marketing, and financial management. By strengthening the Ministry of Rural Development's capabilities of coordina- tion and technical oversight, such lending would provide both the leverage and the administrative means necessary to link research and extension and to effect sector-wide policy changes which cannot be implemented through project loans alone.  - 22 - CHAPTER I: ANALYSIS OF AGRICULTURAL PRODUCTION 1. INTRODUCTION 1.1.01 Agriculture is the major productive component of the country's economy; thus, continued and improved economic growth depends importantly on expanding the quantity and value of agricultural production. More specifi- cally, continued growth of exports will depend heavily on agriculture, and there may be some room for replacing imports of agricultural commodities. 1.1.02 In the following analysis, attention is mostly focused on resources and their productivity--both physical and economic. Three major orientations offer themselves for examination: mobilization of more resources to expand production; introduction of new, complementary resources to raise the produc- tivity of resources already devoted to agriculture; and changes in the mix of crops to raise the value of output obtained from given resources. Development strategy will doubtlessly include a mix of these, although in the long run the second and third orientations must be the major ones. 1.1.03 While more traditional resources (unskilled farm labor and dry-lands) can be brought into production--especially as population grows and land in areas freed of onchocerciasis becomes available--past experience suggests that this will not be a major source of growth. Rural population growth has been low (perhaps only 1.4% per year) because of migration, but expansion of areas cultivated in sorghum and millet--the major cereals--appears to have been even lower (0.4% per year). With no change in either production methods or the mix of crops, expansion of land area can probably proceed no faster than the rate of population growth. Such expansion would at best maintain but not increase rural per capita incomes. It will also eventually be constrained by lack of available arable land, given the relatively high population density of the country and the increasingly precarious condition of soils on the central plateau. 1.1.04 Major new agricultural inputs include irrigation, fertilizer (usually with improved seeds), animal traction, and improved farm practices. All of these complementary inputs raise the physical productivity of labor and land, and as long as world reference prices remain favorable, many of them can be profitably employed to expand output. However, at the margin and in economic prices, few of these inputs appear more attractive than traditional activities, for the average farmer under rainfed conditions. These modern inputs tend to raise, not lower production costs per unit of output, although the estimates are subject to a wide range of error. At higher longrun prices and at higher response rates likely to be achieved by good farmers under good conditions, the margin to employ these new inputs profitably will become even larger. But it is important to bear in mind that the value of these inputs appears to lie more in their contribution to enhanced physical productivity of scarce factors than in their ability to raise overall economic efficiency. Although in economic terms the production costs may increase relative to tra- ditional production, there remains scope for profitably increasing production using modern inputs.  - 23 - 1.1.05 The advantage of changing the output mix is that existing resources, along with new technologies, can be applied to more valuable crops. Since the Voltaic economy is fairly open (exports plus remittances are over 20% of GDP), world prices provide some guidance in the choice of crops. However, output prices alone are insufficient to select crops, since costs of production vary, and the real choice depends on current and expected net returns. There do not appear to be many new high-value crops that can be widely grown by small farmers under rainfed conditions; vegetable production seems to offer a feasible irrigated alternative for such farmers during the dry season. 2. BACKGROUND A. Physical Features 1.2.01 Upper Volta is landlocked in the center of West Africa, with borders that are more than 600 km from parts on the Gulf of Guinea. (Maps of the country giving population density and agricultural infrastructure (15152) and agricultural resources and physical features (15166) are located in the Annex.) It is connected by rail with Abidjan and by all-weather, mostly paved roads with Accra and Lome. The surface is a plain, lying between 250 and 350 m above sea level and inclined slightly toward the south. The country covers some 274,000 km2, of which about 89,000--or 33%--is considered arable by the Government. 1/ In any given year, somewhat less than 30% of this appears to be actually cultivated, in part because much land is left in fallow or located in unhealthy areas affected by onchocersiasis. The ratio of fallow to cultivated land varies by region--from zero in some parts of the central plateau (e.g., Yatenga) to more than double in eastern and southern communi- ties. In general, cultivation cycles are long, and intervening fallow periods are short. Nationally, the ratio appears to be about 1 ha of land in short fallow (less than 5 years) per ha cultivated. As much as 22,000 km2 of arable--but presumably unused--land is in the area covered by the Onchocercia- sis Control Program. Thus, although the population density is high in any case, the presence of this disease makes it more severe. Soil quality varies mainly by topography. Swampy or wet bottomlands (better for rice) are replaced by sandy loams (better for sorghums) farther up the slopes. The thin, sandy, and shallow soils along the ridges are the poorest and have the least ability to retain water. Richer vertisols and hydromorphic soils are 1/ This is land defined as "superficie agricole utile." Together with land for livestock, over 90% of the national area has some productive use. See RHV, Ministere du Plan et de la Cooperation, Institut National de la Statistique et de la Demographie (INSD), Les Estimations des Aggregats de Comptes Nationaux et Indicateurs Economigues de la Haute Volta de 1970 a 1978, Ouagadougou, April 1979, p. 22. The FAO gives arable land as 56,000 kmL (See Production Yearbook 1978, Rome, 1979). This definition includes only land that is currently cultivated or has been within the last five years. The addition of pastures and woodlands brings the total agricultural land to 229,000 km2, or 84%. The Ministere de Developpement Rural, Direction des Services Agricoles, reports that 50% of total area is arable (137,000 km2); see Rapport Annuel 1975-76, Ouagadougou, October 1976.  - 24 - limited largely to the valleys of the main rivers, mostly in the southwestern portion of the country. There are fewer bottomlands in the North. Most of the arable land consists of shallow, poorly-structured alfisols that are generally acidic and deficient in phosphorous, nitrogen, and organic matter. 1/ 1.2.02 There are three major drainage systems in the country: the Volta basin, the Comoe basin, and the Niger basin. The major rivers--the Volta Noire and the Comoe--rise together in the high rainfall area near Banfora but flow in opposite directions. The Volta Noire reaches north only as far as Dedougou before descending toward Ghana. The other rivers rise in lower rain- fall areas and usually have only small, even intermittent flows. The effect of this drainage system is to keep water resources in areas of higher rainfall, rather than to distribute them toward drier regions, as in Mali and Senegal. There are few known mineral deposits of any significance, except for some unexploited manganese, iron and calcium deposits in the isolated northeast corner and significant but low-grade rock phosphate deposits in the isolated southeast. Other than the Volta Noire, the more important, permanent rivers are near the fringes of the country, and these can be tapped for hydroelectric power and irrigation generally only at relatively high cost. B. Climate 1.2.03 The climate of Upper Volta is primarily sudanian. The country also falls into the zone known as the semi-arid tropics, characterized by a net moisture deficit for more than half the year and by great spatial and temporal variability in rainfall patterns. The dry season can be divided into two periods--a relatively cool period for 3 months following the end of the rains (December to February) and a much hotter period prior to the beginning of the rains. These temperature changes affect the potential for dry-season agriculture (e.g., wheat). The average level of annual rainfall, which is highly variable from year to year, ranges from 500 mm in the Sahelian zone to 1,200 mm in the extreme southwest near the Ivory Coast. Isohyets tend to be horizontal except in the southwest, where the plateau near Banfora and Bobo-Dioulasso and the forests along the Volta Noire tend to raise rainfall above the levels farther east. The southwest tends to be doubly favored by higher rainfall over a longer season. 1/ The FAO/UNDP, Creation d'un Service des Sols - Haute Volta - Etat des Connaissances des Sols, (AG:DP/UPV/74/007, Rapport Technique 1), Rome, 1980, pp. 17-19, reports the following distribution of soil quality (in %): Very poor Poor Medium rich to rich Organic matter 55 29 16 Nitrogen 61 26 13 Phosphorous 85 12 3 Potassium 28 32 25 Hydromorphic and vertisols usually score higher on these measures than do the sandy brown soils on the ridges.  - 25 - C. Demography 1/ 1.2.04 The resident population of Upper Volta is not accurately known, but the Bank estimates it at about 5.6 million for 1979. If only a third of Voltaic area is arable, then it is one of the most densely settled regions in the Sahel with only one and a half arable ha per inhabitant -- a population density greater than that of Niger and Mali. Although much less densely populated than humid areas in Asia, the country has, by West African standards, a relative surplus of people. 1.2.05 As many as 0.7 million people born in Upper Volta--generally young single men better educated than their peers--live and work in other countries, mainly Ivory Coast and Ghana, giving the nation the highest rate of emigration in West Africa. 2/ The low annual growth rate of the resident population-- estimated by the Bank at 1.6% during 1960-78--reflects this high rate of emigration. Some 90% of the population live in rural areas, 3/ but its geo- graphic distribution is uneven and poorly correlated with natural resources. Almost three-fifths of the people inhabit at the central plateau--an area of relatively poor, eroded soils and only moderate rainfall--giving a density of over 30 persons/km2, compared to only 12 for the rest of the country. Because of the unfavorable balance of population and resources on the plateau, most of the migrants come from this area and settle in the relatively under- populated south and southwest, in foreign countries, or in the main urban centers of Ouagadougou and Bobo-Dioulasso. The increase in the urban popula- tion, which has averaged about 4.0% per year during 1960-75, is sufficient to reduce rural population growth to only about 1.4% per year if the overall growth rate is accurate. Although there are some 60 ethnic groups in the country, the Mossi alone comprise almost half the population. The Peuhl-- representing most of the herding population--are the second largest group, with only 10%. D. Macro-economics _/ 1.2.06 Although economic data for the country are poor--national accounts are not established in all years and much foreign trade goes unrecorded-- certain observations are possible. During 1977-79, the growth rate of GNP as 1/ Recent Bank economic work has led to some revisions in the population estimates and estimates of agricultural and total GDP during the 1970s quoted in this report. Details on these revisions will be provided in the forthcoming Country Economic Memorandum on Upper Volta. 2/ Perhaps 25% of the work force is abroad (based on 0.7 million Voltaics abroad compared to less than 3 million economically active persons in the country). 3/ The exact proportion of rural population is not accurately known. The social indicators data sheet published by the Bank suggests that 83% of the labor force is engaged in agriculture although 92% of the population is rural. Voltaic publications indicate that 91% of the population is rural (See Les Estimations des Aggregats de Comptes Nationaux et Indicateurs Economigues de la Haute Volta de 1970 a 1978, Ouagadougou, April 1979). A figure of 92% is used in the calculations in this study.  - 26 - estimated by the Bank was 4.7% in real terms, despite fairly high rates of inflation and a decline in the terms of trade. Longer term trends, though, are less favorable--during 1960-79, real GNP per capita grew at only 0.4% per year (see Table 1-1). By 1979 GDP at market prices was estimated at about CFAF 210 billion, and GNP per capita is estimated at about US$180. Trade re- presents a sizeable share of the country's economy; in recent years (1976-78), imports--mostly equipment and consumer goods--have amounted to almost one-third of GDP. Exports--almost entirely agricultural commodities--are inadequate to pay the import bill; the trade deficit in recent years has approached one fifth of GDP and has grown by more than 50% since the mid-1970s. This deficit is largely but not completely covered by earnings remitted by the substantial number of Voltaic emigrants and by inflows of foreign aid, furnished primarily by bilateral agencies on concessional terms. 1.2.07 Upper Volta is primarily an agricultural country, with 80-90% of the population directly dependent on the sector. The importance of the agricultural sector--including livestock, forestry, and fishing--in the economy has been declining gradually, and the sector now accounts for about 40% of national production (see Table 1-1). Crop cultivation is still the dominant subsector in agriculture, contributing about a fourth of GDP during the 1970s. 1.2.08 Since the mid-1970s, agriculture has accounted for well over half of total exports, with cotton products comprising the bulk, followed by oils and oilseeds. Agricultural exports have grown steadily, if somewhat erratically, since independence, primarily because of expanded cotton production (see Table 1-6). 1.2.09 Agricultural imports constitute a relatively small share of total imports--about 10%, a share that has remained more or less constant since independence (see Table 1-7). Until the mid-1970s, these imports were roughly half cereals and half sugar. Since the opening of the sugar mill at Banfora (Societe Sucriere de Haute Volta), imports of agricultural products are almost entirely cereals and flour. Cereal imports--including food aid--have grown precipitously since the drought, increasing to an average of CFAF 3 billion from the annual value of CFAF 600-800 million before 1973. Because of an apparently growing shortage of edible oils, imports of these have also begun to increase and comprised about a tenth of agricultural imports by 1978; the bulk of these are food aid. In spite of this growth, the country itself still meets over 95% of its food needs and most of its oil needs. 1.2.10 Although it forms the backbone of the economy, agriculture contri- butes relatively little to the industrial sector. Most commodities are consumed or exported with only minor processing, such as milling in the case of cereals and ginning for cotton. Industries that do transform agricultural products often rely on imported commodities--like wheat for flour and bread, cereals and malt for beer and palm oil for soap. On the input side, all modern inputs except equipment for animal traction are imported in forms ready to use. Thus, the industries which depend largley on Voltaic agriculture are: SOSUHV (sugar), CITEC (groundnut oil, groundnut cake, cottonseed oil, cotton- seed cake and shea butter), SOFITEX (cotton lint), VOLTEX (thread and cloth), and ARCOMA (plows, weeders and carts).  - 27 - E. Prices 1.2.11 In the 19 years since independence, price increases have ranged from over 250% for general consumer prices to over 350% for food in Ouagadougou (see Table 1-8). Increases have been steepest for the urban retail prices of major starchy staples--millet, sorghum, and maize, as shown below: Annual % price rise Commodity or series between 1968-79 GDP 8.5 Consumer goods 1/ 7.3 Urban food (Ouagadougou) 1/ 11.6 of which: Millet and sorghum 19.0 Maize 20.5 Rice 9.5 Bread 2/ 7.2 1/ Based on 9 months in 1979. 2/ 1972-79. 1.2.12 In all cases, the market prices of coarse grains exceeded official prices, both nominally and in terms of their rate of increase (see Tables 1-8 and 1-9). Thus, the government has been ineffective in holding prices to official levels, despite large imports of food aid that are sold at or below the official prices. 1.2.13 In general, agricultural output prices--both official and market-- have risen faster than either input prices or the rate of general inflation, as shown in Tables 1-8, 1-9 and 1-10. However, there are three significant exceptions to this pattern. First, the cost of draft oxen may have risen at twice the general rate of inflation, reflecting the government's lack of control over this input, reduction in herd size caused by the drought of 1973-74, growing Voltaic demand for draft animals, and strong demand and high prices in the Ivory Coast. Second, the official price for cotton, the only commodity whose price the government effectively controls, has risen at half the general rate of inflation from 1968-79, although faster than the prices of modern inputs. Gross margins of all other agricultural commodities have thus increased relative to cotton, and the increase over the period for coarse cereals appears to have been 8-9 times greater. Third, the official price for groundnuts has not kept pace with Voltaic inflation; as a result, government purchases have virtually disappeared. In general, the change in the terms of trade for agriculture appears to have been positive during the past 11 years. 1.2.14 The movement of world prices has generally been against improvements in Voltaic agriculture. During the period 1967/69 through 1979 (the same period examined for Voltaic price movements in Table 1-11), world fertilizer  - 28 - prices tended to rise faster than the world prices of the main Voltaic agri- cultural products. In addition, these output prices tended to rise less than the rate of world inflation. These figures are tabulated below as index numbers: 1/ CURRENT WORLD PRICE TRENDS Actual Projected (1967/69 = 100) (1979 = 100) Commodity 1979 1990 International inflation 325 221 Urea 258 323 Di-ammonium phosphate 302 341 Potash 320 292 Cotton (lint and seeds) 239 298 Groundnuts 305 239 Soybeans 279 292 Sugar 410 380 Citrus (oranges and tangerines) 240 161 Sorghum 221 328 Maize 226 349 Rice 167 344 Wheat 258 284 Palm oil 342 188 Thus, the pattern in Upper Volta, where the agricultural terms of trade turned largely in favor of agriculture, was opposite from world trends. While the Voltaic price of fertilizer was held constant, the world price rose by some 150-200%. Official prices for some major exports rose much less than world prices (cotton and groundnuts), and those for other oilseeds appear to have risen less than their world equivalents (sesame and sheanuts, as compared to soybeans but not when compared to palm oil). On the other hand, official prices for all cereals rose faster than international prices; and in all cases 1/ Figures for 1967/79 and 1979 are based on actual market data; those for 1990 are projected. Historical figures (and projections for citrus) taken from World Bank, Price Prospects for Major Primary Commodities, Report No. 814/80, Washington, January 1980; projections from World Bank, "Office Memorandum: Commodity Price Forecasts - Updating," 12 November 1980, from EPDCE. Revised projections are roughly 8% higher than earlier (January 1980) ones.  - 29 - except rice the local market prices rose even faster. These Voltaic changes have tended to favor import substitution, although world price movements have tended to favor Voltaic exports. 1/ 1.2.15 Expected future trends in world prices are favorable for increased local food production, but less so for agricultural transformation (e.g., use of more fertilizers), for export expansion--except for cotton--or for new agricultural import substitution. First, fertilizer prices are expected to rise faster than world inflation and about as fast as most Voltaic agricul- tural commodities. Di-ammonium phosphate may increase in price the most, which would help to make local rock phosphates more attractive. Second, the prices of existing or potential exports will remain constant (oilseeds) or decline (citrus fruits). Cotton prices will tend to rise relative to pro- jected inflation but less than fertilizer prices. Third, prices of existing import substitution goods for agriculture (cereals and sugar) will also increase, making it easier to maintain attractive prices without imposing trade protection. These high prices will also make exports of surplus produc- tion more feasible, provided that local prices are not allowed to rise too much. Fourth, prospects to substitute for imports of new crops (wheat and edible oil) are not good because world prices of these are expected to rise less than those of other commodities. However, what actually happens in Upper Volta depends importantly on policies followed by the government that will cause local prices to diverge from world prices, as they have in the past. F. Government Strategy 1.2.16 The 1977-81 Plan sets forth three national objectives: improved living conditions for all the population, self-sufficiency in food, and a reduction in underemployment. The two major objectives set for the agricul- tural sector are to replace food imports with increased cereal production and to diversify into export ("cash") crops. 1.2.17 To achieve these agricultural goals, the Plan proposes several stra- tegies, including attractive producer prices, improved farming practices, migration to new land, diversification into new cereal and export crops, construction of rural roads, and promotion of integrated rural development projects. The plan does not emphasize irrigation, but policy seems to be limited to gradual expansion--especially for cereals like rice--with priority being given to rainfed agriculture (see Section 4 on water control). These strategies thus broadly attack the problem of increasing production by a combination of measures, including raising productivity, bringing more 1/ To some extent, the movement of Voltaic prices relative to world prices reflects the gradual appreciation of the CFA franc vis-a-vis the US$, in which all the world prices are denominated. Over the period 1967/69 to 1979, the franc appreciated by about 15%, from CFAF 251/US$ to CFAF 213/US$. For example, both fertilizer imports and cotton exports become cheaper in local currency, making it possible for their prices to rise less than world prices. However, for cereals, the appreciation of the CFAF makes the local price rises even more precipitous when compared to world prices.  - 30 - resources into production, and shifting crop mixes to augment the value of output. While basically sound in much of its orientation, the Plan does not detail a program for implementation. 1.2.18 Self-sufficiency has been, since the drought, a common objective of most Sahelian countries. It is also an objective that Upper Volta can achieve, at least in average years. For example, the short fall in the domestic supply of coarse grains during 1978 was perhaps no more than 50,000 mt (5% of demand) even though the harvest at the end of 1977 was the lowest since 1973. 1/ However, because of large interannual variations in output, avoiding food imports altogether in all years poses difficult technical problems--either of capacity and incentives to store surpluses from good years or of disposing of surpluses if output is raised to satisfy demand even in poor years. Govern- ment policy appears to recognize this inherent difficulty and limits its scope to assuring adequate supplies until the arrival of food imports or aid. 1.2.19 A major problem which remains is that of distributing food within the country, which will exist whether food is produced locally or imported. Given the large regional inequalities in food production, poor distribution may be a more serious problem than the low level of national production. However, unless efforts are taken to increase output, past trends suggest that population will grow more rapidly than food production, causing a steady, long-term growth of food imports. 1.2.20 Although the evidence is limited, various indicators point to the likelihood of undernutrition in the country. These include the very low level of per capita production that appears to be declining over time, severe regional imbalances in output per capita,--exacerbated by low effective demand in deficit regions and high interannual variability. Recent, but unpublished, evaluations of school feeding and maternal and child health care programs, as well as studies by ORANA, indicate nutritional deficiencies in younger persons. There is, however, less evidence of significant regional and seasonal varia- tions leading to malnutrition. There are many measures needed to reduce malnutrition--including better education; but it would seem desirable in any case to concentrate more on domestic food production especially in areas now deficit--an alternate that is entirely consistent with the country's overall comparative advantage in producing food to substitute for imports and in the southwest's comparative economic advantage in producing export crops. 1/ This figure is based on information in Table 1-2 and the following coefficients: (a) resident population in 1978 of 5.6 million; (b) annual per capita cereal consumption of 180 kg; (c) conversion of paddy to rice at 65%; and (d) seeds and losses equal to 13.5% of production. Total demand is estimated at 1.008 million mt, while national production of millet, sorghum, maize and rice is estimated at 0.947 million mt, net of seeds and losses.  - 31 - 3. DESCRIPTION OF AGRICULTURAL PRODUCTION 1.3.01 This section is divided into five parts: agricultural regions, crops produced (including levels and trends), cultivation techniques, con- straints, and government policies affecting the sector. A. Regions 1.3.02 For the purposes of this study, Upper Volta is divided into four regions: southwest, central plateau, eastern savannah, and Sahel (see Map 15166, "Agricultural Resources and Physical Features"). The limits of these zones are approximate, being based primarily on the convergence of four factors: rainfall, vegetation, population density, and access. As a result of these conditions, the economic profitability of agricultural activities will vary among the zones. The zones are not, of course, homogeneous; there- fore the analysis based on them can only be an approximate indication of the geographical distribution of agricultural potential. 1.3.03 The southwestern zone lies south of a diagonal line drawn roughly from Dedougou to Po, and covers entirely the ORDs of Banfora, Bobo-Dioulasso, and Bougouriba and the southern portions of Dedougou, Koudougou, and Ouagadou- gou. This Sudano-Guinean Zone has by far the most potential of the four, with an annual rainfall generally above 900 mm distributed over a longer season (about five months), a relatively higher proportion of richer vertisols, several permanent water courses, and only moderate population density. It also benefits from being the most accessible to foreign markets, giving it an advantage in terms of lower prices for imported inputs and higher export prices; however there is less natural trade protection for import substitution. As a result of these various factors, most of the major crops of Upper Volta grow most easily in this zone and yields are higher. Potential for expansion as well as for intensification is high, given unused land, attractive possibili- ties for irrigation, and generally higher returns to modern inputs. As a result of its good technical and economic potential, there have been numerous investments and projects in this region, including seven production projects funded by the Bank (Cotton Project - Cr. 225; Bougouriba Agricultural Develop- ment I and II - Cr. 496 and 1097; Livestock - Cr. 557; West Volta Agricultural Development - Cr. 706; Forestry - Cr. 982; and Niena Dionkele Rice Development - Cr. 1013). There is thus a sound basis on which to promote agricultural development. 1.3.04 The central area--which includes the region known as the central or Mossi plateau--occupies all of the band between the 600 and 900 mm isohyets except for the region east of Koupela. It covers the northern portions of the ORDs of Dedougou, Koudougou and Ouagadougou, and all of Ouahigouya. This Sudanian zone has historically been densely settled and consequently has poor, eroded farmlands composed largely of sandy, shallow and generally acidic soils. The rainy season lasts only 4 months or less, and there are few permanent water courses or bottomlands, which makes irrigation much less viable as an option. In terms of advantages, the zone is criss-crossed by a relatively dense network of secondary roads and contains the country's major  - 32 - consuming center--Ouagadougou. Its dense human--as well as livestock--popula- tion also increases the attractiveness of intensification, particularly if emigration becomes more constrained in the future. The zone is not homogeneous, the area nearer to Ouahigouya being drier and more isolated. The analysis assumes, however, that agricultural potential is similar for areas within an arc stretching about 100 km around Ouagadougou. 1.3.05 The eastern savannah zone lies to the east of the central plateau, occupying the southeastern corner of the country. It includes most of the ORDs of Koupela and Fada. Except for the fringe along the boundary with the central plateau, it is one of the least densely populated areas of the country. That, together with sliglhtly higher rainfall and better surface water, including swampy bottomlands, gives the region a relatively large but unexploited poten- tial--second only to that in the southwest. Within the zone, the road and communication networks are poorly developed, and trade is as likely to take place with neighboring countries as with the rest of Upper Volta. 1.3.06 The fourth zone is the Sahel, lying north of the average 600 mm isohyet, largely coincident with the ORD of Dori. It is the driest zone and the least densely populated, where livestock production plays a dominant economic role. Agricultural activities are limited largely to millet and some sorglhum, along with some groundnuts and sesame. The zone is also the least accessible. Because its potential for agricultural development is so limited, it is excluded from analysis here. 1.3.07 These geographic variations indicate that different development strategies should be pursued according to the region in order to exploit each region's greatest potential and achieve an efficient overall allocation of resources. This approach does not imply that strict regional specializa- tion (e.g., a system of "crop belts") need to be developed. It is in the southwest that agricultural productivity can be most rapidly, easily and efficiently improved. As proof of this potential, yields of cotton and sorghum, the major crops, have risen impressively during the last decade. Past projects, generally successful, provide an administrative and logistical foundation. Strong research facilities give technical support. A favorable climate (e.g., longer growing season) permits a wider range of more productive crops, like maize, to be grown and allows the profitable introduction of new techniques using fertilizers and animal traction. Its good access makes prices--at least as denominated in world terms--more favorable than elsewhere, except for production aimed at import substitution. Agricultural production in the center is constrained by poorer soils and climate and by a higher dependency ratio caused by the absense of a large proportion of the male labor force. At best, yields do not appear to have declined, perhaps because of several agricultural development projects--although these have not generally been very successful. Increasingly, the center is becoming an importer of agricultural commodities that it could technically grow itself, which draws upon resources in other areas that could be better used for exports. Barring massive out-migration from the region, perhaps the best approach for the center is simply to keep production levels from falling further. The southeast seems to have a lot of potential, which is largely untested and unexploited. There is thus a much smaller base on which to carry out future projects, and infrastructural investments--including administrative capability and research-- will initially have to be important there.  - 33 - B. Crop Production 1.3.08 Agricultural production can be divided into four categories: starchy staples, oil seeds, fibers, and fruits and vegetables. Starchy staples, together with rootcrops and the grain legumes that are intercropped with them, are the most important, reflecting the subsistence nature of the economy. Sorghum and millet are the most widely cultivated crops, owing to their wide adaptability to climatic differences. Production of both rice and maize is limited by low rainfall and lack of irrigation--especially for rice. The production of maize is also somewhat limited by traditional consumer preferences for sorghum and millet. Except in the southwest, maize is grown in house gardens, in part because it responds well to the higher fertility. Fonio is a minor cereal crop, prized because it ripens before other cereals and can be grown on marginal lands. Cowpeas is the main grain legume, grown only in association with cereals because of severe insect attacks in pure stands. Rootcrops are grown in a much smaller quantity than other starchy staples (20-40,000 mt or perhaps 2-3% of total calories) although they hold an important place in the farming systems in certain regions. Manioc is culti- vated in bottomlands--especially in the east--as a security crop during the dry season. Yam cultivation is limited by climate to the southern area. The most important oilseed has traditionally been sheanuts, which is not cultivated but gathered from trees on bush land and fields. Groundnuts are the other major oilseed, although they are often eaten as food. Unlike soybeans--which remain a minor crop--they have the advantage of being able to be grown in all parts of the country except the extreme north. Sesame is a traditional, but minor oilseed crop. All oilseeds are processed by traditional methods for local consumption. The only fiber crop of any significance is cotton, introduced by the colonial government. Production has steadily expanded, although it is limited mainly to the southwestern parts of the country where rainfall, soils, and access to markets are better. Cotton is virtually the only crop for which traditional use is highly limited, thus leaving to govern- ment agencies unquestioned marketing rights. Fruits and vegetables are grown traditionally in house gardens and in bottomlands during the dry season. By comparison with other crops, production is fairly small, but mangoes and green beans appear to have significant potential as export crops. 1.3.09 Owing to the lack of reliable agricultural statistics in the country, aggregate crop production can be assessed only in a general way. Based largely on information compiled by the FAO, figures in Table 1-3 can be taken as indicative of the situation near the end of the 1970s. Including land devoted to fruit trees and vegetables, crop cultivation appears to account for about 2.5 million ha, or 25-30% of Upper Volta's arable land area. Almost 90% of cultivated land is devoted to cereals, which account for about 80% of gross value of agricultural output. These figures demonstrate clearly the dependence of Voltaic agriculture on two crops--sorghum and millet. Even cotton, generally thought to be the main marketed, or cash, crop in the country, is worth only about 2.5 billion in cash value added, compared to perhaps 10 billion CFAF of cash value added by the millet and sorghum thought to be marketed. 1/ 1/ OFNACER estimates that 10-15% of coarse cereals are marketed. See Republique de Haute Volta, "Rapport de la Delegation Voltaique au Colloque sur la Politique Cerealiere, Commercialisation, Politique des Prix et Stockage," Nouachott, July 1978, p. 5.  - 34 - 1.3.10 Trends in Voltaic agricultural production are summarized by the figures in the table below, based on data in Table 1-2. Data are not very reliable, and the results are sensitive to the end points chosen, but the overall pattern is probably valid. On the positive side, cotton and sesame areas have grown more rapidly than rural population, although cotton areas peaked in 1968 and subsequently declined during the drought. Since then, there has been a tendency to shift the geographic distribution of cotton from the center--where it was promoted unsuccessfully during the 1960s--to the southwest--an effort aided by the Bank's West Volta project. As a result of this shift to areas with better land and rainfall, and owing to projects that have improved extension and promoted the use of both fertilizers and insecti- cides--which have a significant positive interactive effect, yields for cotton have grown spectacularly over the period, especially since the drought. 1/ This growth in yields attests to the potential for significant increases in agricultural productivity. The record for sorghum--the major foodcrop--is also encouraging; total production has outpaced growth of rural population. Yield increases, which are probably largely the result of rotation on fer- tilized cotton fields in the more favorable southwest, have provided the majority of this growth. This improvement also attests to the potential for higher agricultural productivity in cereals. Annual % Change in: 2/ Crop Area Harvested Yields Cotton 4.1 17.3 Groundnuts 0.7 -1.4 Sesame 5.5 -4.3 Sorghum 0.8 1.0 Millet 0.0 -0.4 Maize -4.3 0.2 Paddy -0.9 0.0 1/ The data show an increase in yields of 17% per year using a trend-line regression. A growth rate based on changes between end points is lower-- about 13%--from a very low starting point. Although output is known with certainty because of the marketing monopoly, there may be a tendency to understate areas since farmers also plant cotton on fields not measured by the cotton agency, thus causing yields to be overestimated. 2/ Figures cover 1961-78 for all crops except sesame and groundnuts, which are 1962-78. Annual changes are based on total growth over the period as estimated by a simple, trend-line regression.  - 35 - 1.3.11 Despite the favorable trends for sorghum, food crop production overall has lagged slightly behind population because of the low growth of area cultivated, the stagnation of yields, growing urbanization and seasonal emigration. For example, millet--the major cereal in the more arid center-- has shown no growth in area and a decline in yields, reflecting the lack of available land and falling soil fertility in the center, as well as perhaps a switch from millet to sorghum in the southwest. The evolution of per capita cereal output is given in Table 1-4. The data, which are at best indicative, suggest that production during most of the 1960s averaged over 215 kg p.c. (average for 1962-69), whereas in the five years following the drought (1975-79), it averaged only 204, a decline of 5% over a decade. 1.3.12 Although agricultural performance has not been outstanding by most measures, it perhaps should be judged more positively in light of the severe constraints facing the sector. The literacy rate for the country is among the lowest in the world; there is a shortage of land on the central plateau; and there is a high rate of emigration of the most productive members of the agricultural work force. In spite of these difficulties, the country is still largely self-sufficient in food, and cotton production has steadily risen. 1.3.13 The geographic distribution of food production is shown in Table 1-5. Production of millet, sorghum and maize per rural inhabitant ranges from a low of about 100 kg in the Sahelian northeast to over 300 kg in the richer southwest. In terms of the four regions defined above, gross output per capita in 1979 can be estimated at: 1/ kg/person Region kg/person (rural only) (rural and urban) Southwest 319 267 Center 199 173 East 186 184 Sahel 102 102 These large geographic variations--a function of climate, soils, and techno- logy--underscore the critical problem of regional distribution in achieving self-sufficiency in food. 1.3.14 Geographic differences in the trends of yields are likely to increase disparities in output among regions. Although data are incomplete 1/ No account taken for seeds and losses, which may be 10-15%. Based on estimated population for 1980 by assuming 1.25 per annum growth rate for rural population and 5.7% for urban population since 1975. Data based on entire ORDs; thus, they do not correspond exactly to zones as defined.  - 36 - and subject to error, the following figures show how cereal yields (sorghum, millet, and maize) have evolved since the 1960s (in kg/ha): 1/ Year (planting) Central plateau Southwest 1966 483 615 1972 400 590 1973 380 570 1974 540 670 1975 500 710 1976 410 670 1977 440 760 1978 430 800 1979 472 907 Field investigations suggest yields in recent years in the southwest may have been overestimated, with average yields perhaps being on the order of 750 kg/ha. On the central plateau, overall yields have shown little or no long- term growth, although they did rise in mid-1970s. In contrast, cereal yields in the southwest appear to have increased on the order of 25% during the last decade. If this trend continues, the southwest will have to supply an increas- ing quantity of food to the rest of the country, a development which might impinge against efforts to expand cotton. 2/ C. Production Techniques Land Use 1.3.15 Almost all crops with the exception of sugar, vegetables for export, and cotton, are grown under traditional, manual methods on small family farms. For coarse cereals, traditional cultivation is planned to maximize the length of the growing season. Thus there is often little or no soil preparation before planting--especially on the lighter soils in the north. Seeding-- usually in pockets arranged more or less systematically--is done with the first rains; the erratic arrival of consistent rains often makes replanting necessary--sometimes as many as 4 or 5 times. Farmers seem well aware of the value of weeding, and probably all fields are weeded at least once and perhaps half are weeded twice. Higher rainfall and more frequent rains--as occur farther south--tend to increase weeding requirements. Relay cropping and 1/ Data for 1966 from World Bank, The Economic Development of Upper Volta, Vol. 2, "Agriculture", Washington, 1970, Annex 2 (excludes maize); 1972-78 from RHV, Ministere du Plan et de la Cooperation, Situation Economique et Financiere de la Haute Volta, 1979, p. Al; and 1979 from RHV, MDR, "Bilan Provisoire de la Campagne Cerealiere 1979/1980", Ouagadougou, 1979. 2/ The RHV, MDR, ORD des Hauts-Bassins, Bobo-Doulasso, "Rapport Techni- que 1978-1979", Bobo-Dioulasso, n.d., argues in the opposite way, that the expansion of cotton in fact increases cereal output because of residual fertlizer effects and the equipment financed by sales of cotton.  - 37 - intercropping are common--usually legumes with cereals and sometimes cereals with cereals. The practice tends to raise land productivity. Sugar is grown on a large irrigated plantation operated by SOSUHV and is the only industrially produced crop. The majority of cotton fields receive some fertilizer and insect treatment, even though production is still largely manual by small farmers. Vegetables are the major dry-season crop and are often grown using improved seeds, fertilizer, insecticides and irrigation. 1.3.16 Typical farm sizes seem to range from 3 to 7 ha depending somewhat on available land and on family size. The modal size may be about 4-5 ha, smaller in Yatenga, and larger in the southwest. 1/ These farms consist of several small fields arranged around the residence compound. The closest ones tend to be garden plots that are fertilized with manure and household wastes and cultivated continuously. Fields farther away are cleared from savannah bushland, cultivated for several years (up to 8-10 in the East for example) and returned to fallow. Clearing methods usually leave the largest useful trees (e.g., Nere, shea, acacia albida, tamarin) in the fields; and in places the density of these trees seems almost as great as on adjacent bush land. However, fields near towns and roads and in heavily wooded areas are often cleared completely. Fallow may no longer exist in heavily populated parts of the Central Plateau, or may last 10-20 years in the sparsely settled southeast. Few fields are enclosed, except where livestock herding has priority over agriculture. Thus dry-season garden crops everywhere are protected by simple fences of sorghum stalks, and cereal fields in the sahelian region are protected by rows of spiney acacia branches. Land tenure rights are estab- lished by cultivation following allocation by traditional authorities. Grazing confers no permanent rights to control the use of land. There seems to be almost no market in land, except perhaps for irrigated land near towns, although disputes over use are not infrequent and may be becoming more common. 1.3.17 As noted in Section 1.2, Upper Voltan agriculture is land-scarce relative to other West African countries. Even in terms of potentially arable land, the density of population is high, but the effective density is even higher because problems like endemic diseases and lack of drinking water keep large areas from being cultivated. In addition, the quality of the land that s cultivated tends to be poor--soils are low in phosphorous and trace elements, poorly buffered so that chemical fertilizers easily raise acidity, and weakly structured leading to crusting and erosion. Thus it is clear that new inputs and technology to raise yields of land (and, concurrently, the productivity of labor) will be needed eventually. Labor 1.3.18 The major source of power in Voltaic agriculture is human labor. As a rule of thumb it appears that roughly one ha of cereals can be cultivated by an adult using traditional manual techniques, which gives a ratio of about 0.5-0.6 ha per family member (children and adults). 2/ The opportunities to 1/ The RHV, Ministere de Developpement Rural, DSA, Rapport Annuel 1975-76, Ouagadougou, October 1976, gives 5.26 ha as the average farm size for the entire country. 2/ With per capita annual consumption of 180 kg and 10% seeds and losses, cereal yields must average about 400 kg/ha to satisfy family food needs.  - 38 - migrate--both to unused land in the south and to the Ivory Coast--means that the land-labor ratio is largely a function of agricultural technology, as well as the supply of land scarcity. Labor is provided mostly by family mem- bers, although there is a traditional system of labor exchange and a slowly growing tendency to hire labor. Wages paid to this hired labor are obviously affected by opportunities in the Ivory Coast and in urban areas, as well as by farming opportunities in the southern areas. Animal traction is the only form of mechanization except for hullers and mills. Its use in the country remains limited but is growing (see Section 6). 1.3.19 Labor inputs per ha have seldom been measured directly, although estimates range from about 66 to 90 days/ha for most traditional cereal crops. Labor requirements per ha are also higher in the southern areas because of heavier soils, more weeds, and higher yields; but the labor supply is also larger in the south because of a longer growing season. To establish orders of magnitude and a point of reference, labor for traditional cultivation of sorghum, the major crop, may reasonably be assumed to equal about 70 mandays per ha in the center, 85 in the southwest, and 75 in the East. 1/ 1/ Based on conversation with Michigan State University researchers and the Production Agricole in the Direction des Services Agricoles; and on IPD/ ADS, Recherche de Developpement au Yatenga HV, Facs. I. "Evaluation des Projets de Developpement Rural en Cours. bv R. Billaz, Ouagadougou, 1979. These figures are only slightly lower than the labor times compiled for a sample of 20 households near Ouagadougou surveyed by SAFGRAD in 1980. For all crops, cultivation activities (soil preparation, planting, and weeding) averaged 56 man-days/ha, weighted to account for supposedly lower labor productivity of women, children, and the aged. In terms of days/ha, regardless of sex or age, and given that about 80% of total labor time is used for cultivation, total labor times (including harvest) average 90-95 days/ha, averaged over all crops. Given that labor times per ha for millet and sorghum appear to be about half those for other, garden crops, and given that these cereals are grown on about 90% of the land, the labor input for them would be about 80-85 days/ha. See Richard A. Swanson, "Household Composition, Rainfall, and Household Labor Time Allocation for Planting and Weeding: Some Observations and Recommenda- tions," Document No. 4, FSU/SAFGRAD, Ouagadougou, January 1981. However it should be noted that results published by ICRISAT after this report was written and based on a weekly survey of about 50 farmers on the Central Plateau give estimates of mandays per hectare that are generally higher than these, as shown below (based on 6 hours/day): Crop mandays/ha white sorghum 193 red sorghum 123 millet 99 maize 114 But the variation among farmers for the same crop and techniques is very large (e.g., the coefficient of variation for labor used in manual cultivation of millet is 0.82). See John McIntire, "Crop Production Budget in Central Upper Volta," ICRISAT, Ouagadougou, May 1981, draft.  - 39 - 1.3.20 Because of the importance of labor in Voltaic agricultural produc- tion, the shadow wage used to evaluate it must be carefully assessed. In a strict sense, the shadow wage is equal to the economic value of the marginal product of labor in its optimum use; and when the optimum use includes a consideration of the distribution of incomes, the shadow wage also measures the value of utility (or welfare) that would have to be given up were the labor to be used in a different activity. Thus, the valuation of the shadow wage will depend on a number of subjective judgments concerning how people define their welfare and how they change these definitions as incomes change. Yet even if there were clear agreement on these conceptual issues, empirical estimates of the shadow wage are likely to remain uncertain because of intrin- sic variations in data and inadequate measurement of market wages, labor inputs, and the marginal product of labor. The usual approach is to adjust wages actually paid in order to account for economic distortions. 1/ Thus, the assessment of the shadow wage involves two steps: ascertaining the financial wage; and then adjusting it to account for divergences from the marginal product of labor in an optimum situation, i.e., the wage calculated in economic prices with account being taken of utility considerations. 1.3.21 For the first step, the desired result would be to obtain the total financial wage bill for the activity being analyzed; but where employment is not entirely hired labor, this wage bill must be calculated rather than observed. This calculation is especially difficult in a traditional agricul- tural economy where labor demand varies seasonally and where labor is mostly supplied by the household and by exchange of labor among neighboring families. A common procedure--and the one followed here--is to multiply an estimated number of mandays, usually per hectare, by a well-known daily wage. Errors arise both in estimating the physical input of labor (mandays) and in valuing it, since wages paid vary depending on factors like timing (seasonal varia- tions in labor demanded and supplied) and type of work. To complicate the exercise further, the number of mandays--and thus the amount of work per- formed--probably varies inversely with the wage. A more sophisticated proce- dure can be used to estimate of the financial wage bill by adjusting for the seasonality in wage rates and labor demanded. Under this second approach, daily wages are considered to vary between some maximum value--paid during periods of peak demand for labor--and some minimum value corresponding to a reservation wage necessary to entice otherwise underemployed people to work. Thus, mandays are evaluated according to when they are employed, and the wage level at any given time depends on the amount of underemployment. In using this second method to evaluate different rainfed activities in Upper Volta, three salient features need to be kept in mind: a relatively high level of mobility within the country, which tends to integrate regional labor markets; the existence of significant and well established migration to the Ivory Coast, where money wages are probably at least double; the likely presence of underemployment during the cropping season only during slack periods in the agricultural cycle. Lack of data, and the high variability of those that do 1/ It is also possible to envisage adjustments for social considerations, such as the cost of increased consumption arising from higher incomes. While these are ignored here, their effect would usually be to raise the value of the shadow wage.  - 40 - exist, suggests that in this analysis only a rather general evaluation is possible--perhaps based on three seasons (peak periods of agricultural work, slack periods of agricultural work, and non-agricultural seasons) and a single national wage (with due account taken of inter-regional transfer costs). The generality of this estimation appears to lead to a financial wage bill that is little different than that obtained in the simpler procedure--and one well within reasonable bounds of error. 1.3.22 Estimating the financial cost of labor is best undertaken by first looking at the labor market. The labor market in Upper Volta is not exten- sive; nonetheless, some labor is hired and wage rates are often commonly known in communities. Table 1-15 reports a wide range of daily wages (CFAF 100-500 per day), with a modal value of about CFAF 300/day, which includes an imputed value for meals. These data accord well with information recently published by ICRISAT on wage labor during 1980 in villages located in an area stretching from the southwest to the north center. These survey results show cash wages of CFAF 250-300/day in the ORDs of Bobo-Dioulasso and Dedougou and of CFAF 300-500/day in Dori. There appears to be little variation during the cropping season itself i.e., soil preparation, seeding and weeding, which account for 80-85% of total labor used in growing cereals. But for harvesting and other post-season activities the wage appears to be 40-60% less. 1/ If account is taken of the value of meals and of observed seasonal wage variations, these data give an average implicit financial wage for existing crop production of CFAF 275-325/day--with a range of perhaps from 150 to 350--in the southwest and west-center; the wage in the north would be higher still. This estimated average market wage can be compared to the net financial return per manday earned from cultivating traditional cereals, the major source of agricultural employment in the country. For unimproved millet and sorghum in the center and southwest, the net return per manday appears to vary from less than CFAF 150 to over 300 per day, depending on the basis of the estimate. It is highest in the more fertile southwest and lowest in the more isolated east and arid north. For the less proficient farmers, it would of course be less, and these farmers would be expected to supply--at the margin--additional labor needed for new activities. The farm budgets presented in Annex I--based on widely accepted technical parameters available at the time they were put together--usually give returns of about CFAF 375/day, while survey results recently published by ICRISAT generally show returns of about CFAF 150/day in 1/ See John Mclntire, "Reconnaissance Surveys in North and West Upper Volta," Village Studies Report No. 3, ICRISAT West Africa Economics Program, Ouagadougou, February 1981. There are no really satisfactory explanations for the higher wages in areas where cropping is less produc- tive, although some possibilities include longer days in the north or more attractive alternatives like commerce and livestock. See also McIntire, "Crop Production Budgets in Central Upper Volta," ICRISAT, Ouagadougou, May 1981, draft, for the distribution of labor use during the agricultural season.  - 41 - the center of the country. 1/ As would be expected, the range of these figures is quite high, but the median value (275) is not inconsistent with observed market wages. 1.3.23 These financial results reflect economic distortions, which in the case of traditional cereal production consist of an implicit taxation on cereals causing financial prices for the farmer to be about 15-30% less than world prices. In the center, where returns are lower and the distortions are less, the effect of this taxation is to lower net financial returns by 15-20%, compared to what they would be if farmers were paid world prices. To the extent that the market wages also reflect these distortions in the product market, the economic value of labor should be about 20% higher. Thus, the average implicit economic wage for existing crop production would be on the order of CFAF 330-390/day in the southwest and west center, with a range of perhaps 180 to 420, depending on the season and other factors. 2/ There are, in fact, numerous other distortions that may mitigate the effect of taxation in product markets. Because of the uncertainty, these distortions are not taken into account in the analysis that follows. 1.3.24 Although these labor costs may serve adequately for evaluations on a national or regional level, there may be factors specific to a project that justify different wages. These include severe and continuing isolation of the project area from the influences of immigration and emigration and important changes in the profile of seasonal labor use as a result of new activities replacing or supplementing traditional ones. While the isolation of a project area from external influences, such as attractive employment opportunities in the Ivory Coast, may tend to depress wages locally, it also means that wages needed to attract outside workers--should they be needed--must also be higher to overcome the effects of isolation. It is also unlikely that extreme economic isolation will continue if the development project is successful. If new crops or techniques have labor profiles similar to existing traditional activities, the same wage could be used to evaluate the cost of labor in the alternatives. But if the new techniques tend to increase proportionately the 1/ See Peter J. Matlon, "Farmers' Tests of New Technology - a Case study from the ICRISAT/West Africa Economics Program," paper presented to the IDRC Workshop on Rural Economics Research Methodologies, Abidjan, April 1981; and Jon McIntire, as cited above. The differences in these esti- mates arise in part from the fact that yields measured in 1980-81 by ICRISAT were lower than those normally assumed and from the fact that ICRISAT observed slightly higher labor use per hectare that what has been commonly assumed. The lower yields reported by ICRISAT may be due in part to the below-average rainfall in 1980 and to the use of farmers' recall to estimate yields--a method that tends to understate yields by perhaps 25% according to ICRISAT findings. However, prices used for calculating net returns are higher than in this paper. A return of 150 is equivalent to about 3kg of cereals at financial prices, and therefore should be considered the minimum acceptable level. 2/ In economic prices, the minimum subsistence wage of 3 kg/day implies a minimum shadow wage of about CFAF 200/day.  - 42 - use- of labor outside periods of peak demand, the wage for this additional labor will be lower. 1/ On the other hand, increased demand for labor during the peak season could cause wages to rise at that time, which would tend to offset the gains resulting from modifications in the labor profile. In fact, if a project has a significant impact on the region's economy--increasing the demand for both agricultural and non-farm labor, the overall level of wages, irrespective of season, may be raised. 1.3.25 In the analysis of production costs that follows in this report, two different wage rates were used to give a range of results, and a slight distinction is made between the southwest zone and the center and east zones. For the former, rates of CFAF 350/day and CFAF 250/day are used. The higher rate can be viewed in part as the wage that would apply either when marginal labor would be used only at peak periods or from presently employed labor, and the lower rate when such labor comes from unemployed resources spread over the crop year. The corresponding rates in the center and east zones are CFAF 300/day and CFAF 215/day. The rate to be used in the analysis of a particular project depends upon the profile of labor to be used in that project. The choice of whether or not an activity can be profitably expanded depends on whether net economic returns are positive, and the choice of which crop or technique to promote most strongly depends on whether the return to resources devoted to it is higher than in other alternatives. Results in long run economic prices for the two different wage rates are: 2/ 1/ For example, if the average wage is CFAF 325/day for crops requiring 80 mandays, (based on 80% of the labor at peak seasons when the wage is 350 and 20% at other times when the wage is only one half), and if the new technique requires 20 additional days--half during times of peak demand, the new average wage for all the labor would be about 3% less than the original one. However, the wage for the additional, marginal labor would be only about 250-275, some 20% less than the average wage. At the margin, then, the labor cost may be significantly below the average, depending on the profile. 2/ These concepts are defined more fully in Section 5. The net economic surplus is the residual after all costs--including labor--are netted out. The resource cost ratio measures the relative efficiency of resource use--those with smaller values being more efficient.  - 43 - Net economic surplus Region, crop and technique per unit of output Resource cost ratio (CFAF/kg) 300-350/day 215-250/day 300-350/day 215-250/day Center, millet, traditional 28 39 0.6 0.4 millet, improved 5 14 0.9 0.7 millet, oxen -6 2 1.2 0.9 Center, sorghum, traditional 28 40 0.6 0.4 sorghum, improved 11 21 0.8 0.6 sorghum, oxen 6 15 0.9 0.7 Southwest, sorghum, traditional 27 38 0.6 0.4 sorghum, improved 14 24 0.7 0.5 sorghum, oxen 12 20 0.8 0.6 Southwest, maize, traditional 19 34 0.7 0.5 maize, improved 24 32 0.6 0.4 maize, oxen 25 32 0.5 0.4 Southwest, cotton, traditional 48 65 0.6 0.4 cotton, improved 29 44 0.7 0.5 cotton, oxen 37 48 0.6 0.4 The effect of the lower wage (71% of the wage used in the analysis) is to raise returns per unit of output an average of CFAF 10/kg for cereals and 14 for cotton, where labor is more important. All crops and techniques show positive returns which was also the result at the higher wage for all except millet grown in the center with animal traction. At the lower wage, the resource cost ratio improves by about 0.2, but the ranking of crops and techniques remains unchanged, except that the low wages makes improved tech- niques for maize less attractive than traditional methods. 1.3.26 In summary, significant (e.g., 25%) variations in the shadow wage rate would appear to have only a relatively minor effect on major economic conclusions such as choice of techniques or ranking of crops, although it could be more significant in its effect upon decisions as to whether or not to proceed with marginal projects in difficult areas. Capital 1.3.27 Capital takes the form of investments in land development and equip- ment and of seasonal financing of labor and intermediate inputs. In almost all cases, these charges are borne by the farm family itself, without much recourse to external funds except for modern inputs and equipment. Most irrigation development and erosion control measures are financed by public funds, except for labor furnished by farmers who will eventually use the land. It appears that capital tends to flow out of crop cultivation into other activities, especially livestock where the return is presumably higher.  - 44 - Estimates based on national account data in the recent livestock subsector review suggest a return of 5-10% in financial prices on such investment. 1/ Reinvestment of agricultural surpluses may be discouraged by the lack of more productive, divisible capital goods or of profitable intermediate inputs. Only when there are alternatives to traditional methods is the net flow of capital funds likely to be positive for crop production. Intermediate Inputs 1.3.28 Intermediate inputs consist of seeds, irrigation, fertilizers, insecticides, animal traction, and agricultural extension; seed is the only traditional intermediate input. By 1979, as shown in Table 1-14, the use of modern inputs was relatively minor on a national scale although the annual growth in the use of input since 1970 has been impressive. For crops other than sugar and vegetables, the magnitude of their use can be summarized below: Level of Use (units as indicated) Estimated % of Input 1970 1979 area (000 ha) total area Improved seed (sorghum, millet, maize) (mt) n.a. 75 1.3 1/ 0.1 2/ Cereal fertilizer (mt) 3/ 386 6,464 65 4/ 3 5/ Thioral (mt) 23.8 40 1,350 6/ 61 Irrigation (ha) n.a. 3,340 3,340 8 7/ Cotton fertilizer (mt) 3/ 1,824 7,234 56.8 8/ 69 Cotton insecticides (000 liters) 118 523 49.3 8/ 60 Animal traction (ox teams) 3,500 11/ 26,000 104,000 9/ 4 10/ 1/ See para. 1.5.02 2/ Estimated using the 1978 area. 3/ 14-23-14 with 6 units of sulphur and 1 of boracine. 4/ Based on recommended rates of 100 kg/ha. 5/ Includes land in paddy. 6/ Based on 3 gm/kg and 10 kg seed per ha. Ignores use on groundnuts. 7/ Of total rice land only. 8/ IRCT figures for 1979. 9/ Based on 4 ha per team. To/ Includes cereals, groundnuts, and cotton; IRCT reports that one third of cotton land is cultivated with animals. 11/ Estimate. 1/ The return would be higher in economic terms because of the tax on livestock exports. This duty varies from 12% for cattle for over 50% for sheep and goats.  - 45 - These estimates are only approximate, but they demonstrate that use of improved inputs is very low relative to available areas, except fertilizer and insecticides for cotton and seed treatment for cereals. Thus, the scope to expand input use is enormous, although the rate and scope for expansion is limited by prices, the distribution network, markets, technology available, and natural resources. 1.3.29 The impact of these intermediate inputs is difficult to assess, except for cotton. Between 1969 and 1979, the area of cotton fertilized has grown from about 14,000 ha to about 57,000 ha, or from 17% to 69% of total cotton area, which amounts to a growth rate of 15% per year. Application rates have also increased, although by how much is unknown. 1/ Assuming an application rate of 125 kg of fertilizer per ha, the use of fertilizer might have raised production by 16,000 mt, or about 215 kg per ha. This would account for about half the growth in yields. The impact on cereals, especially sorghum, results from both direct applications and a residual effect of fertilizer used on cotton the preceeding year. Together, these may have raised sorghum production by 2-3%. 2/ These issues are examined more in Section 1.5. D. Constraints 1.3.30 There are numerous factors that constrain the growth of Voltaic agriculture, including inadequate rainfall and the high cost of irrigation, poor soils in the face of high population density, and high costs of modern technology. The openness of the economy enforces a situation in which relative prices are unfavorable in light of resource constraints and avail- able technology. Although these issues arise in many parts of this report, the major constraints are discussed below. 1.3.31 Moisture. There is a net moisture deficit for the country, which lowers productive potential. Rainfall in Upper Volta varies from a low of 500 mm/year in the northeast to a high of 1,200 in the southwest. But annual potential evapotranspiration exceeds rainfall everywhere, ranging from 2,300 mm in the north to 1,900 mm in the south. Rainfall that does occur is irregular, making national agricultural production unstable and complicating farming practices to cope with these high risks. Interannual variation is high with the maximum annual rainfall being almost twice as great as the minimum. Although the extremes occur only rarely (every 25-40 years), the probability of smaller yet significant variations is still high. As shown on Map 15166, there is a 20% probability that the long-term average annual isohyet will move south as far as 100 km. Even if total precipitation remains unchanged, the length of the rainy season varies from year to year, starting late or ending early, and there may be extended periods of drought during the rainy season itself. Not only does lack of moisture reduce agricultural 1/ On the other hand, the nutrient level in fertilizer has declined. 2/ Based on the following assumption: 1.5 kg sorghum per kg fertilizer (nutrients plus inert matter)--which corresponds to 4 kg sorghum per kg of N + P205--and a residual effect of cotton fertilizer equivalent to 50 kg of fertilizer. (See data in Section 5).  - 46 - potential with existing resources, it both lowers the gains from new inputs that might raise productivity and increases the risk from their adoption. Agricultural development must include measures to deal with these variable and arid conditions. 1.3.32 Soils. As discussed in para. 1.2.01, the natural fertility of Voltaic soils is low; cultivation not only reduces it further but also contributes to erosion and leaching. Under shifting cultivation with long periods of fallow to restore natural fertility, traditional yields can at least be maintained. This system is very land extensive, requiring as much as 4-5 ha of land in fallow to one ha in cultivation. But the population density in much of Upper Volta increasingly precludes this solution--fallow is declin- ing and yields are said to be falling in some areas. 1.3.33 Technology. Agricultural techniques in Upper Volta have evolved slowly in response to prevailing resource constraints, available tools, genetic potentials and economic opportunities. This technology is charac- terized by a primary reliance on labor and land--in fairly constant ratios-- and selected seeds with low but stable potential (see Table 1-17). New agricultural technology--and higher productivity for labor and land--must be embodied in new inputs, such as seeds, fertilizers, chemicals for pest con- trol, water control, and equipment (sources of power). An analysis of these new inputs is provided in Sections 1.4, 1.5 and 1.6. The evidence based on current financial prices seems to suggest that these new technologies-- which raise expenses as well as augment the productivity of labor and land-- reduce the overall financial cost of production per unit of output only for maize and cotton (analyzed for the southwest). For sorghum in the southwest, there is a slight tendency to raise costs of production; and for sorghum and millet in the center, this tendency to increase costs is significant. The pattern underlying these conclusions remains unchanged even when important parameters, like wages and gains from fertilizers, are varied by as much as 25%. However, in almost all cases, returns per kg remain positive and profit- able. In economic prices, only maize in the southwest shows an increase in net value per unit of output as the result of the new technology. Thus, while it is generally possible to raise the physical productivity of land (yields) with these new techniques, they seem to raise net economic--as well as net financial--returns to labor effort only in situations where natural factors are favorable and farmers are proficient--for example, when cultivation methods like timing of operations and placement of fertilizers are good, and animal traction--together with use of manure, is used. The technological base is inadequate for two reasons: lack of research on Voltaic agriculture and inadequate infrastructure to compensate for major resource constraints (insuf- ficient moisture, infertile soils, expensive input distribution). However, in terms of international comparative advantage, world prices appear to be high enough to make the use of the new technology attractive in economic terms for the substitution of imported cereals. At prices expected to prevail over the long term for cotton, improved technology will also be attractive for exports. 1.3.34 Economics. In general, it can also be argued that the country is constrained economically--given its low technology and limited resources, high factor prices and low world commodity prices do not provide a lot of scope for agricultural modernization. The physical constraints both impose costs that reduce the value added by farm production and demand expensive  - 47 - investments to overcome insufficiencies of scarce resources. For example, lack of rainfall and poor topography combine to make irrigation expensive. Long distances from the sea raise the cost of imported inputs and lower the value of exported outputs. Poor internal transportation networks reduce the net value of output in sparsely settled areas with greater potential (e.g., the east). Moreover, the openness of the economy--coupled with a fixed exchange rate vis-a-vis its major trading partners and its insignificant share of world trade--means that the country has little scope to influence domestic prices except through distortions introduced by the government. Steady migration to the Ivory Coast where wages are at least twice as high tends to force up the local wage level (relative to productivity), and cattle exports to Abidjan help maintain high prices for draft oxen. Thus, returns to both labor and private capital are affected by economic conditions in neighboring countries-- most of whom have much higher incomes. 1.3.35 New Crops. Besides bringing additional resources into production and introducing new, complementary inputs--both approaches being limited by severe resource constraints and high costs that are difficult to overcome-- the other option for agricultural development is to change the output mix by introducing new crops. The ones that have been most intensively studied include soybeans, wheat, sugar, tobacco, sunflowers, fruits, vegetables, and root crops. Detailed estimates of comparative advantage cannot be calculated in most cases because production costs are based mostly on small experiments. But a simple analysis indicates there is little scope to raise economic productivity of the small farmer, who is the focus of concern in this study, by shifting resources to the production of new crops. In some cases, there is little scope to expand production because of limited domestic demand, and in most cases the costs of production appear too high for export. Of those examined below, however, there are a few that show enough promise to be explored more thoroughly. (a) Sugar - SOSUHV production already satisfies or exceeds national demand. Productive potential amounts to about 30,000 mt/year, while con- sumption is currently only 20,000 mt. Moreover, production costs exceed CFAF 200/kg, while the equivalent import price in 1980 was about CFAF 108/kg, delivered Bobo-Dioulasso. Thus, domestic production is protected by a tax of about 100%. Production in the Sourou Valley is thought to be cheaper, but there is no indication that costs would fall by 50%. Furthermore, developing Sourou sugar would mean idling capacity at Banfora. (b) Soybeans - Soybeans offer a replacement for groundnuts, the tradi- tional oilseed export crop. This crop can be grown in most of the southern half of the country, although farm production has occurred mostly in the east. Varietal tests in 1979 by IRHO show yields on research stations range from about 1.5 mt/ha to 2.0 mt/ha, with the maximum observed level at 2.4. Yields are somewhat higher in the southwest than in the center, although differences within the regions and among varieties appear to be greater than between areas. The response to fertilizer is rather ambiguous, although 128 kg of nutrients in one trial raised yields by 25% or 460 kg/ha. 1/ This result gives 1/ Composed of 35 kg nitrogen (N), 58 kg phosphorous (P205), and 35 kg potassium (K20)  - 48 - a response rate of 3-4 kg grain per kg nutrient. Higher levels of fertilizer do not appear to raise yields further. Yields on farms are not known with certainty, but Michigan State University's research project in the east has estimated them at 0.8 mt/ha in pure stands, the usual cultivation method. Despite physical potential, the economics of production are not encouraging. World prices in 1980 1/ indicate that exports will not be profitable if farm prices exceed 6-13 CFAF/kg. There are also other benefits from cultivating soybeans that are not fully reflected in prices of the grains--like improved soil fertility and the use of fodder as livestock feed. Production costs are, however, probably not dissimilar from those of the coarse cereals, which range from about 40 to 60 CFAF/kg (mostly labor), depending on the region, cereal and technique. Even at purchase prices of 45 CFAF/kg, response by farmers has not been very large. Moreover, fertilizers do not appear to offer a solution by raising productivity--costing some three times more than they return (even excluding complementary costs). (c) Wheat - Current annual consumption of wheat (largely as bread) amounts to some 20,000 mt, which can be expected to rise as urbanization and incomes grow and the government continues to keep bread prices from increasing as fast other starchy staples. All of this wheat is imported, at a cost reported by the Grand Moulin Voltaique of about 80 CFAF/ kg, delivered Banfora. Because wheat is a temperate crop, production of it in the Sahel necessarily must occur during the chilly part of the dry season (November-March), which necessitates irrigation. CERCI has been experimenting in the Sourou valley since 1976, and limited industrial-scale experiments have been conducted since 1979. Under carefully controlled conditions, with mechanized tillage, herbi- cides, and pump irrigation, giving yields of 3.5-4.0 mt/ha, production costs are estimated at 90 CFAF/kg, excluding depreciation charges. 2/ Transport to the mill at Banfora would further raise costs by perhaps 5 CFAF/kg. Thus under best conditions, domestic production would require a protective tariff of 15-207. Moreover, demand is fairly limited, production costs are roughly twice as high as for coarse cereals, and the production systems presently being tried are inappropriate for widespread dissemination to the small farmer. (d) Sunflowers - This alternative oilseed has not been widely explored in the country, in either research or production, and no costs or technical parameters for Upper Volta are available. But general data suggest that yields are similar to those for soybeans, and production costs may be similar (or higher). World prices for sunflower oil exceed those for oil from soy- beans, but the meal is less valuable; prices in grain equivalents are probably not very different. If these assumptions are valid, it is unlikely that sunflowers can be profitably produced for export. 1/ US$300/mt, c.i.f., Rotterdam. 2/ This cost appears reasonable, based on available coefficients. However, the management level is extremely high, and its value has probably been underestimated. With more extensive production, yields may also tend to fall, thus raising costs. Available sources include Centre d'Experimenta- tion du Riz et des Cultures Irrigues (CERCI), Riz et Cultures Irrigues - Synthese 1979, Farako-Ba, n.d.  - 49 - (e) Tobacco - Since the installation of a Voltaic cigarette factory in the mid-1960s, imports of cured tobacco have risen steadily, accounting for 3% of agricultural imports by 1978 giving scope for import substitution. Tobacco is grown traditionally during the dry season in humid lowlands, but there is no government program to promote it. A pilot program was recently started with Italian technical assistance but abandoned in the face of produc- tion problems (e.g., lack of water) and high costs relative to import prices. (f) Vegetables - Production of vegetables for export markets in both Europe and neighboring coastal countries is already a substantial dry-season agricultural activity of numerous small farmers. These exports, together with those of fruits, amount to some CFAF 400 million, or 2-5% of total exports. There appears to be a significant potential for expansion as long as marketing channels can be developed and maintained (see Section 2.3). There are some subsidies in the current system, including free or cheap irrigation (pumps often provided by foreign donors), some subsidized fertilizer (although cereals fertilizer is not used as much as other types that are essentially unsubsidized), extension and expatriate assistance, and marketing through UVOCAM (which receives special help from the government and has recently been operating at a loss). Budgets have not been prepared for these crops, but evidence that is available--based on observation of the production and market- ing that is occurring without government assistance, and on simple calculations using general coefficients and current financial prices (which are largely free market prices, except for green beans)--suggests that they are privately profitable. Interestingly, green beans, which is the vegetable most commonly promoted and exported, seem relatively less profitable than other vegetables, including onions, chillies, carrots, cabbage, and potatoes. Other possible legumes include marama beans, but there are insufficient data to evaluate this alternative. In summary, vegetables are a dry-season activity that makes good use of scarce water and merits further investigation. (g) Fruits - Mangoes are a widely grown traditional crop; trees pro- tected by fences from browsing animals increasingly dot swamplands. They constitute the most important fruit export, much of which is shipped to neighboring countries by traditional merchants. Pilot schemes being carried out by the Institute de Recherches sur les Fruits et Agrumes (IRFA) with irrigation and mechanization show very positive financial cash flows for citrus and mangoes, but these budgets have not been developed in detail. Results for other fruits, like papaya, seem less encouraging. In any case, it appears that expanded fruit production will require high levels of capital investment, including irrigation, except for mangoes and perhaps some other fruits in the Southwest. Thus, it may not be much of an alternative for most small farmers. (h) Root Crops - Yams and manioc are grown over much of the southern part of the country, on a relatively small amount of land, compared to cereals. Budgets estimated for these crops show extremely high returns using local output prices. In fact, cash returns per manday appear to be as much as five times the value of cereals and cotton. Although it is clear that these crops offer special advantages (manioc is grown in bottomlands during the dry season) and that demand in the forest zone of southern neighbors is high, these preliminary estimates are based on very uncertain data and would  - 50 - appear to be optimistic. Since local demand is limited (especially in that calories from root crops appear to cost 2-3 times as much as those from cereals) and transport abroad is made costly by a low ratio of value to volume, scope for expansion may not be large. In any case, opportunities are restricted largely to the south and southwest where rainfall is higher. Sweet potatoes are already widely grown and consumed. Potatoes are grown under irrigation during the dry season, and the activity also appears attractive at local prices. A new root crop that might be considered for the south is the yam bean, but this alternative has not been analyzed. (i) Karkade (hibiscus sabdariffa) - This is a crop commonly grown in the country (usually intercropped with cereals or groundnuts), consumed as a condiment. But it could be exported as a feedstock for the chemical dye industry, and successful programs for this have already been undertaken in Chad and Sudan where climatic conditions are similar. There are no data available, however, to analyze the economics for Upper Volta. (j) Others - There are other alternatives, such as pigeon peas, guar bean the guayule bush (for rubber), and silkworms, which have not been ana- lyzed. But in general, there appear to be few high-valued new crops that can be widely grown by small farmers under rainfed conditions. The shift to another, new crop mix to offset resource constraints and poor technology does not appear to be a viable alternative in the near term. In fact, most new crops are as constrained by the poor resource base and low technology as are the traditional crops. A change in crop mix would probably have to be limited to small shifts toward the more productive crops already grown and would also need to be accompanied by solutions to the other major constraints as well. But some crops--like sisal for fencing and leguminous trees for fodder--could strengthen the farming system, raising the productivity of traditional crops. E. Policies 1.3.36 Although many of the specific government policies and programs affecting agriculture are discussed in other sections, the general orienta- tion and effect of these policies are examined here. Policies are considered first by looking at differences between financial (private) and economic (social) prices. These differences indicate whether there are distortions between private and social returns. Second, the effects of these policies are explored, both in terms of incentives for farmers to shift techniques and reallocate resources and in terms of transfers into and out of the agriculture sector. Four major types of policies are discussed here: price support (or taxation) of domestically produced commodities, subsidies (or taxes) on inputs, public investments, and control of factor prices. 1.3.37 Commodity Price Control. The simplest way to summarize these policies is to calculate nominal protection coefficients (NPC) for commodities. This coefficient--the ratio of financial to economic prices--shows the divergence between internal prices and those on similar foreign goods (either exported or imported). A coefficient exceeding unity indicates protectionist policies--causing transfers from consumers either to the public treasury or to producers; a coefficient that is less than one means that producers are being  - 51 - taxed to the benefit of either the public budget or consumers. 1/ The coeffi- cients are summarized below: 2/ 1979-80 Prices Long Run Prices Commodity Southwest Center East Southwest Center East Paddy 1.0 1.0 0.8 0.9 0.9 0.7 Sorghum 0.7 0.8 0.6 0.7 0.8 0.6 Millet - 0.8 0.6 - 0.8 0.6 Maize 0.8 0.7 0.7 0.7 0.7 0.7 Cowpeas 1.0 1.0 1.0 - - - Cotton 0.8 0.8 0.9 0.5 0.5 0.5 Shelled groundnuts 2.1 2.4 2.4 - - - Sesame 0.9 0.9 0.8 - - - Sheanuts 1.2 1.2 1.2 - - - Soybeans - - 8.3 - - - These coefficients are, of course, subject to errors in estimating foreign prices and choosing typical local prices where the official price is not effectively controlled by the government. 3/ The first four coefficients are based on import prices; the last six on export prices. 1.3.38 Except in the case of three commodities, producers appear to have been consistently taxed in 1979-80. The production of all coarse cereals and the major annual export crops were taxed by some 15-25%; rice was only barely taxed. 4/ At long run world prices, existing local prices would tend to tax producers even more heavily than at present prices. At expected long run prices, cotton would be taxed by as much as 50% if domestic prices are not raised in real terms. The commodities that are subsidized are all minor, and--in some sense--the results are special cases. Soybeans is a new crop, 1/ In the case of cereal production that is consumed by farm families, a coefficient other than one does not cause transfers among sectors. 2/ 1979-80 prices from Table 1-12. Long run economic prices are explained in Section 1.5. Local components of economic prices have been converted to world price equivalents by using the standard conversion factor. By lowering economic prices, this procedure tends to bias upward the NPCs slightly. 3/ Only the official prices of cotton and sheanuts are used as financial prices in this analysis--for all other crops, the price used is based on the observed local market prices. 4/ Revised 1980 prices published by the World Bank in November 1980 raise the NPC for sorghum, maize, and groundnuts by about 0.2, which tends to eliminate most of the implicit taxation. However, the revision would increase taxation of cotton by about 10 percentage points.  - 52 - although there is no evidence that it could be competitive on the world mar- ket at prices attractive to Voltaic producers. The subsidy on sheanuts is a recent phenomenon and may reflect only efforts at price stabilization, although it is unclear why an uncultivated tree crop should need such support. The price support for groundnuts is more difficult to explain, until account is taken of what appears to be a deficit position in oils for the country. The coefficient is based on the export prices--an import-parity price based on the official price of groundnut oil sold by CITEC--which probably benefits from trade protection as well--gives a result much closer to unity. 1/ 1.3.39 The geographic pattern of the coefficients is fairly complicated, reflecting largely the major pattern of export trade that drains commodities through the southwest (where economic prices are higher), and the general flow of cereals from the southwest and east to the deficit center (where financial prices are higher). Thus in most cases, the producers in the center are the least taxed. There are a few exceptions to this pattern. Rice is most favored in both the southwest and center because both Bobo-Dioulasso and Ouagadougou are considered major consuming centers (deficit areas relying on imports). Cotton is most heavily taxed in the southwest and least in the east because of the Government's policy of paying all cotton producers identical prices despite higher evacuation costs from the center and east. But as almost all cotton is grown in the southwest, the practical effect of this policy is small. Maize is most favored in the south, since consumer prices are considered to be identical in the three regions (the result of the assump- tion that most existing imports come from all southern neighbors), whereas the economic price increases from west to east because supplemental imports are assumed to come in through the southwest. In summary, the eastern zone--where incomes are low but which has considerable unused potential--tends to be disfavored. The heavily farmed center--with little excess capacity with which to respond to prices--tends to be relatively favored by domestic prices, in part because of the preponderant influence of the market at Ouagadougou. 1.3.40 These price distortions suggest that Government has succeeded in controlling trade and domestic marketing to such an extent that producers are systematically taxed. Such control is feasible for cotton--for which there is no appreciable domestic demand and whose bulk requires it to be ginned before it can be easily transported abroad; it is much less plausible for traditional crops that are both exported and consumed locally, like sheanuts and sesame, and for cereals in a deficit country. For the oilseeds, it may be that the government, which exports to Europe, sets its producer price higher than neighboring countries to discourage private exports--but still low enough to realize a profit on exports. The oilseed subsector is, however, complicated by the deficit position of the country in oils. For cereals, the inflows of foreign food aid--which are large relative to the amount of creals traded--that are subsequently sold at low official prices or distributed free must tend to depress local market prices below equilibrium levels. The magnitude of this effect is difficult to assess, but there is some evidence that food aid has depressed cereal prices in Upper Volta, 1/ The price for groundnut oil is set at 300 CFAF/kg. Taking account of processing costs, revenue from cake, and conversion factors gives a local farm price of about 60 CFAF/kg. The resulting NPC equals 1.3.  - 53 - although the impact may be limited geographically. Given reasonable assump- tions about the level of food aid and market demand, the sale of food aid might have depressed prices by 15-20 CFAF/kg, or by around 20% from what they would otherwise have been. 1/ To the extent that the supply of marketed difference between import parity and actual domestic prices of cereals. However, to the extent that food aid is sold during lean periods and in chronically deficit areas, it would depress prices generally only to the extent that private traders link together surplus and deficit areas. While the evidence is that private marketing and transport appear to function well, high transport costs to deficit regions where effective demand is limited may mean that food aid sold in remote areas does not significantly displace sales of cereals produced in other areas. However, there could be a substantial localized reduction of prices. But even if sales of food aid at official prices do reduce market prices, the impact on total production may be small owing to a small elasticity of output. Assuming a reduction in prices of 20%, a supply elasticity of 0.1 would mean that output has been depressed by only some 20,000 mt--small overall albeit important at the margin. 2/ 1.3.41 Input Policies. For almost all "modern" agricultural inputs, the government practices an aggressive subsidization policy, as indicated by the subsidy rates below (percentages): 3/ Improved seeds 40-58 Sprayers 5/ 0-45 Urea 40 Ox equipment 6/ 0 Cotton fertilizer 56 Draft oxen 0 Cotton insecticides 4/ 66-72 Recurrent inputs are in general subsidized by about one half or more, while capital goods have no apparent subsidies except on their financing (see para. 1/ These calculations are based on sales of food aid of 30,000 mt out of total food aid equalling about 45,000 mt (see Tables 2-3 and 2-5), a market demand of 150,000 mt, an equilibrium market price of 70 CFAF/kg (compared to the official price of 57 CFAF/kg), and price elasticities of supply (marketed surplus only) and demand of 0.75 and -0.1, respectively. 2/ Just how low these elasticities are is hard to estimate, because of multiple factors and poor data. But changes during 1968-79 give some indication. Cotton output doubled, despite a decline in real price by one third; input-output terms of trade for modern inputs were, however, positive. Sorghum output rose by some 15%, while real prices rose 175% (relative to cotton, perhaps the major competitor, real prices rose by 300%). The resulting (shortrun) elasticity for sorghum was then 0.05-0.09; for cotton, it depends on the amount of increased produc- tivity. 3/ Percentage that subsidy is of economic price. Based on prices in Table 1-12 for the southwest. 4/ Endrine (for back sprayers) and nuvacron (for ULVs). 5/ No apparent subsidy on ULVs. 6/ No direct subsidy, but see Section 1.6.  - 54 - 1.3.39 below and Section 1.6). Although the official selling prices for these inputs are established nationwide, subsidies in other parts of the country tend to be less than in the southwest despite the fact that these inputs--virtually entirely imported, have higher economic prices in the center and east. The pattern exists less from conscious policy than as the secondary effect from relatively more external financing in the southwest that can be used to subsidize distribution costs between the ORD centers and farmers. 1.3.42 The effect of these input subsidies is to reduce the implicit tax on commodities for those producers that avail themselves of the new inputs. However, despite the size of these input subsidies, the most efficient cereal production continues to be taxed on balance, although cotton was slightly subsidized in 1979-80 as illustrated by the effective protection coefficients for improved production methods: 1/ 1979-80 Prices Long Run Prices cotton (southwest) 1.1 0.5 cotton (center) 1.1 0.4 sorghum (southwest) 0.8 0.8 sorghum (center) 0.9 0.9 millet (center) 0 9 0.9 maize (southwest) 0.9 0.8 However, at long run prices, the Government policies would significantly increase the net taxation of the cotton sector; effects on other crops would change very little. From a public finance viewpoint, problems arise because most of the tax on output is implicit (except for cotton)--passing from producers to consumers directly, while the subsidies are explicit--being paid by the public treasury. As a result, government practices that depress agriculture do not generate revenue that can be used to pay for subsidies. 2/ 1/ This coefficient equals the ratio of value added in domestic (financial) prices to value added in world (economic) prices. The figures here are approximations, since they only take account of value added at the farm level and ignore value added by input distribution. The figures are based on prices in Table 1-12 (for 1979-80) and in Section 5 (for long run figures) and on the following technical coefficients: yield NPK urea seeds endrine nuvacron thioral ------------kg/ha1---------- -------l/ha------- -kg/ha- Cotton (SW) 1,100 120 50 40 2.5 9.0 -- Cotton (C) 900 120 50 40 2.5 9.0 -- Sorghum (SW) 1,100 100 50 20 -- -- 0.05 Sorghum (C) 800 100 50 20 -- -- 0.05 Millet (C) 650 100 50 20 -- -- 0.05 Maize (SW) 1,600 150 75 25 -- -- 0.065 Revised estimates for 1980 (see first footnote to paragraph 1.3.38) would raise the EPC for cereals (lower value added in world prices) while lowering if for cotton. 2/ Government sales of food aid, which are partly responsible for depres- sive cereal prices, generate substantial revenue (CFAF 1.6 billion), part of which could be used to pay input subsidies.  - 55 - 1.3.43 Public investment. Government investment in the sector is an indicator of the priority accorded to its development. The amount of the investment is also an indication of the extent of the effort to overcome resource constraints. Specific issues related to public investment are discussed elsewhere in the study, and irrigation and research are analyzed in Sections 1.4 and 1.7. This section merely reviews the trends and levels (based on Table 1-23). The second and third five-year plans each allocated roughly 30% of their expected expenditures to productive investments in the rural sector; the total actually going to the sector would be higher since investments in infrastructure and social services can also benefit rural areas. For these 10 years (1972-81), the proposed expenditure on the rural sector amounts to CFAF 83 million (in current francs), representing 14% of agricultural GDP for the same period. From the first to the second half of the decade, however, the share of agricultural GDP more than doubled from only 8% to 18%. Actual expenditures, which are almost completely financed exter- nally, have more or less reached planned levels. The allocation of the investments within the rural sector has given roughly 60% to crop production. This amount is, in turn, divided as: Irrigation 28% Rainfed agriculture 1/ 65% Fruits and vegetables 7% With respect to the major resource constraints outlined earlier, it is notable that relatively little public investment is being undertaken to improve poor soils. Finally, it is important to note that this public investment more than offsets the implicit and explicit taxes on agricultural output. 2/ 1.3.44 Factor prices. Government policies affect the prices of land, labor, and capital to only a minor degree and in limited geographic areas. The program to eradicate river blindness reduces the implicit rental value of land by increasing its overall availability. The most recent estimates suggest that some 2.2 million ha--a significant share of Voltaic arable land--is not currently being used in the zones to be freed of onchocerciasis, of which about 70% are the sandy tropical alfisols common on the overpopulated central plateau. 3/ Part of this land has probably been under traditional cultiva- tion even before the eradication program; in any case it is clear that 1/ Defined as "Integrated Rural Development". 2/ To illustrate, in 1979 perhaps 1.5 billion CFAF were transferred from farmers by low cereal prices (15 CFAF/kg implicit tax over 100,000 mt marketed) and less than 0.5 billion CFAF were taxed from cotton (sub- sidies appear to more than offset taxes for improved production and the unimproved production (maybe 15,000 mt) is taxed at 14 CFAF/kg). Public foreign funds committed to the agricultural sector, excluding livestock, in 1979 amounted to 15 billion CFAF of which 3.5 was allocated to integrated rural development. 3/ World Bank, "Onchocerciasis Control Program: Economic Review Mission" Washington, October 1978, p. 15  - 56 - onchocerciasis is not always the only constraint preventing use of this land. It is not yet apparent that this program alone can alleviate the relative scarcity of land in the country. The AVV facilitates settlement of this arable land in part by subsidizing clearing costs--although the extent of the subsidy appears small and does not appear to be necessary to encourage settlement. 1.3.45 The government has a minimum wage policy--primarily for urban industrial workers. In 1979 the guaranteed wage amounted to CFAF 90/hour or CFAF 720/day--over twice as much as the rural wages observed for farm work during peak times. The evolution of this minimum wage has fairly closely followed the rise in urban food prices and has exceeded the general rate of inflation, as shown below by the indices in 1979: 1/ Base Minimum wage GDP inflation Urban food prices Year index in 1979 index in 1979 index in 1979 1963 310 234 303 1970 290 225 265 Employment at this official wage is rationed by the limited number of avail- able jobs. In 1978, the total number of employees in the modern sector amounted to about 50,000 compared to a work force of over 2.5 million. Only about two thirds of those in the modern sector can be considered unskilled, or comparable to agricultural labor. Thus, although the official urban wage is higher than the market wage, it has probably had no impact on raising the rural wage. Moreover, it does not appear to have evolved any more quickly than agricultural incomes. Between 1970 and 1979, both the official and private market prices for cereals rose faster than the minimum wage (price indices of 422 and 333, respectively), although the cotton price rose more slowly (price index of 172). 1.3.46 Government policies toward credit have directly affected the purchase of modern inputs and equipment, and these policies have become increasingly favorable to farming. The amount of credit has increased and the terms become cheaper. In the early 1960s, agricultural credit carried a real interest rate of about 5% and had to be repaid over only 2-3 years with no grace period. The current terms of the Caisse Nationale de Credit Agricole (CNCA) are a real interest rate of 1% or less, repaid over 5 years with 1 year of grace. Downpayments are also less than previously. Agricultural credit is 1/ Price movements based on Table 1-8. Wage movements taken from BCEAO "Statistiques Economiques et Monetaires-Haute Volta", Paris, No. 274, July 1979.  - 57 - now subsidized by more than 50%. 1/ However, the number of farmers benefiting from subsidized credit is limited--perhaps no more than 50-75,000 out of a total of some 500,000. 2/ At the margin, the Government credit subsidies may be important but its limited supply and special eligibility requirements mean that it is effectively rationed only to qualified farmers. Moreover, the major programs do not cover the working capital requirements for labor--the major input. 3/ 1.3.47 In summary, the impact of government policies affecting factor prices is to favor the agricultural sector in limited ways by reducing the cost of land and credit. Wage effects are probably nil. Credit effects are limited to the use of modern inputs and are rationed to certain farmers-- perhaps no more than 10-15%. The impact of policies directly affecting the costs of bringing rainfed land into production are felt by an insignificant number of farmers, although the increased availability of arable land could potentially help a much larger proportion by reducing pressure in areas heavily cultivated. 1/ In economic terms, for the nominal interest rate to take fully into account all the costs of lending, it should be about 30-35%, as illustrated below: Opportunity cost of capital 8 Inflation 10 Administrative costs 15 Total 33 The administrative charges cover bad debts. The USAID-financed rural credit scheme in Fada ORD has operating costs of 10.8%, excluding salaries of credit agents. The overall USAID rural credit program handled by the DSA appears to have had functioning costs of about 15%. In India, direct administrative costs, plus risk premium, taxes, and indirect costs incurred by development agencies, amount to about 9%; see C.D. Datay, "The Financial Cost of Agricultural Credit: A Case Study of Indian Experience," Staff Working Paper 296, World Bank, Washington, October 1978. 2/ For example, 56,800 ha of cotton are fertilized; at 1.2 ha/farm, about 50,000 farmers may get credit for fertilizer. These are likely to be the same farmers getting credit for cereal fertilizer, equipment, and oxen. 3/ Cereal banks offer one means to help cover these needs; otherwise farmers must rely on their own savings--usually in the form of grain, on loans from merchants against the future harvest, or on delayed payment to hired workers.  - 58 - 4. IRRIGATION AND EROSION CONTROL 1.4.01 Since one of the major constraints to agricultural development in Upper Volta is an uncertain climate and insufficient water for crops, it is reasonable to look to irrigation or other types of water management, including erosion control, as a means of breaking this constraint. The purpose of this section is to review the prospects for such measures as irrigation, or the application of water to fields, and erosion control and water conservation to increase infiltration. More drought-resistant varieties and better husbandry practices can also help cope with an uncertain climate, but these are not discussed here. A thorough examination of these measures is beyond the scope of this study; in any case, the evaluation of costs and gains from such investments is problematical because there is not yet a large body of results for Upper Volta. Much of the analysis offered below is thus based on assump- tions, estimates for the country, and evidence from other areas. Conclusions are tentative and will have to be confirmed by further work. 1.4.02 Investments in these areas could play a very important role in the agricultural development of the country. Lack of moisture, caused by low, irregular rainfall and high evapotranspiration rates, and worsening soil erosion--especially in the central zone, are serious constraints on higher productivity in traditional agriculture. Production is highly variable, and the risk of shortfalls in food output is always present for a country on the margin of self-sufficiency. Not only do these problems suppress yields under traditional methods, however; they also limit the gains that can be achieved from new technologies like high-yielding varieties and fertilizers. They thus make agricultural modernization more difficult to achieve. The government, and donors, have recognized the potential importance of such measures, and during the last decade public investment has accordingly increased. 1.4.03 Despite the importance of irrigation to an agriculture that is more productive and secure, the experience in Upper Volta makes most large-scale irrigation difficult to justify at present on strictly economic grounds except perhaps for crops that have a high value per unit, like vegetables. The sugar scheme functions well, but is heavily protected against competition from imports and relies on expatriate management of a plantation. Irrigated rice production generally relies on largely subsidized investments--that are seldom adequately maintained; it can be speculated that the same investment in rain- fed agriculture would give larger returns in terms of food production. These conclusions are broadly consistent with results in much of West Africa, 1/ but a more thorough collection of data and analysis is clearly warranted to determine the place of irrigation in agricultural strategy. 2/ 1/ For example, on irrigated rice See C. Humphreys and S. Pearson, "Choice of Technique in Sahelian Rice Production", Food Research Institute Studies, vol. XVII, No. 3. 1979-80. 2/ The monitoring of the pilot scheme intended to rehabilitate flood control and irrigation works on the Niena plain will be an important source of data.  - 59 - 1.4.04 There are, however, potential benefits that are not reflected by a simple comparison of static costs and gains. As farmers and institutions become more proficient in the use of irrigation--including the use of modern inputs, costs per unit of output may fall sufficiently to make cereal produc- tion profitable in a narrow economic sense. A key question is the time required for learning: the degradation of past investments in Upper Volta and in the Sahel generally suggests that a long period of subsidies and protection may be needed. In a general sense, the efficiency of irrigation use depends on a high population pressure and on inadequate and insecure rainfed produc- tion. Because most of the irrigation potential of the country seems to lie in areas with higher rainfall and lower population densities, it may be difficult in the near-term to intensify irrigated production sufficiently to make it competitive with rainfed farming in the same area. The major exception of course, is small scale irrigated vegetable production--a dry season activity that can be (and is) widely undertaken on the impoverished central plateau. Such production near major urban centers has become an important development, and could be expanded if wider markets are found. 1.4.05 Perhaps the most important benefit is the power to reduce the insecurity of food supplies--both by reducing variations in national produc- tion and by reducing reliance on a fluctuating world market. A key question here is whether irrigation--as it is likely to be developed and managed--really does reduce variations in output and whether this increased security is worth the cost. If so, then subsidies and trade protection for Voltaic irrigation schemes can be socially justified. There is some considerable reason to believe such a case could be made for Upper Volta. 1/ 1.4.06 Erosion control, like irrigation, is good in principle because it could help alleviate two pressing resource constraints--poor land and shortage of water. Also as with irrigation, there is much conflicting evidence about the technical and economic viability of this measure. Hopes are high but experience is not very convincing. The profitability of erosion control is probably closely linked to the adoption of improved seeds, fertilizer, and, possibly, animal traction. As such, the measure is part of structural trans- formation in rainfed agriculture that may not occur except over a long period of time with continued public support. In the short term, there are known to be problems of poor maintenance--perhaps in part because of social problems; and the effects on yields have never been well documented. 2/ What does seem 1/ C.L. Jabara and R.L. Thompson, "Agricultural Comparative Advantage under International Price Uncertainty: The Case of Senegal, "American Journal of Agricultural Economics", Vol. 62, May 1980, pp. 188-196, have agreed that it is in Senegal's best interest to subsidize, or protect, local production of cereals--even at the cost of lower exports of cash crops--in order to have less exposure to international price fluctuations. The issue is also affected by expectations regarding the future avail- ability of foreign exchange, especially concessional aid, to pay for needed imports of food. If these are expected to decline in the future, it may be wise to make investments now to help compensate for the future decline in the capacity to import. 2/ The research on the development of catchment areas that was proposed to be carried out under the Koudougou project might have provided data for a better evaluation.  - 60 - clear is that bunds to control erosion are unlikely to be widely accepted by farmers unless continuing assistance in laying them out--and perhaps in constructing and maintaining--is supported in part with public funds. While public support will continue to be needed, much larger numbers of extension staff than at present will have to be taught simple farm layout techniques using simple instruments (as used in East Africa). A. Irrigation 1.4.07 Areas that could reasonably be irrigated with full water control are estimated at 125,000 ha. In addition, there are an estimated 25-30,000 ha that could be developed with partial water control, mostly swampy bottom- lands and areas below small earthen dams. 1/ The attached Map 15166 shows the location of most of the major sites, which are listed in Table 1-13. Both the small dams and the bottomlands are widely dispersed, although most of the bottomlands are located in the southwest and southeast. 1.4.08 Very little of the irrigation potential has yet been realized--less than 10,000 ha, or not much more than 5%. Moreover, the history of this development has been uneven and not very encouraging. Several schemes were initiated before independence, including 1,500 ha of controlled flooding on the Niena plain and a dam at Malba near Bourgouriba. After independence, irrigation development continued slowly, with investments in small, multi-use earthen dams and bottomlands, as well as in a few major schemes. The 1968-73 drought was a major impetus to expand irrigation facilities, and the rate of investment has increased during the 1970s. The Government adopted ambitious goals--led by the desire to grow more cereals--that included the development of 20,000 ha of dam irrigation by 1990 and of 90,000 ha of irrigated land in total by 2000. The Kou Valley scheme, using gravity irrigation, was completed between 1970 and 1974. The Banfora sugar plantation, also using mostly gravity irrigation, started production in 1975. The development of Banzo for rice cultivation using dam irrigation was begun in 1977. The creation of the Rural Development Fund in 1972 accelerated the development of bottomlands. The establishment in 1974 of the Office National des Barrages et des Irriga- tions (ONBI) strengthened governmental efforts both to expand areas irrigated below an estimated 240 existing dams and to build an additional 40 dams, about two-fifths with potential for irrigation; by 1979 only nine new dams had been completed. 1.4.09 Most of these efforts have suffered from one or more defects, including inadequate technical designs, bad management, sociological problems, and insufficient interest of farmers. As a result, most irrigation schemes are poorly maintained, and much current investment is really only rehabilita- tion of older developments no longer used. 2/ For example, none of the 1/ See CILSS, Club du Sahel, "Developpement des Cultures Irriguees en Haute Volta," Paris (?), October 1979; World Bank, "Upper Volta - Niena Dionkele Rice Development Project - Staff Appraisal Report," Washington, December 1979; and Nations Unis, PNUD, Eau et Hydraulique - Haute Volta, "Rapport Technique d'Ensemble pour une Politique Nationale de l'Eau," New York, 1977. 2/ For example, see proposals submitted under RDF II--in particular the schemes for Tougou, Donse and Bidiga.  - 61 - pre-independence schemes has lasted, in part because of poor design and support. Poor drainage and inadequate maintenance have lowered rice yields in the Kou Valley and reduced the area actually cultivated by about a fourth. Of bottomlands developed during the last two decades, perhaps no more than 50% are still being cultivated. Of the major irrigation programs, only the Banfora sugar scheme appears to be functioning well. Its apparent success is probably due to special conditions, including a highly protected commodity, cheap irrigation permitted by the drop of the Banfora escarpment, and well managed, plantation-style production that seems to work well for sugar. In contrast, however, there are some small-scale, often privately financed, irrigation schemes for producing vegetables north of Ouagadougou (e.g. Lac de Bam) that seem to be functioning well and profitably. 1.4.10 Costs of irrigation investments depend on the source of water and degree of control, as indicated below: Cropping CFAF/ha Duration Intensity Type of Investment (000) (years) (crops/year) Simple bottomland (1980)1/ 75 3-5 1.0 Improved bottomland (1980)2/ 250 5-10 1.0 Vegetable gardens (1979)2/ 1,050 5 (?) 1.0-1.5 Below dams (1977)3/ 750-1,250 4/ 5-10 1.0 Banfora (SOSUHV) (1974) 1,400 (?) (perennial) Bagre (1978) 1,890 4/ (?) 1.5 Kompienga (1980) 1,600 20 1.7 Obviously, these figures are illustrative, but they show the range of invest- ment costs, from CFAF 75-250,000/ha for bottomlands that give imperfect water control to CFAF 1-2 million/ha for pumping and gravity-fed schemes. To obtain yearly costs, these investments must be annualized, and operation and mainte- nance costs must be added. Illustrative results are shown below for simple bottomlands and irrigation below dams: 1/ Based largely on experience under RDF II. Excludes farmers' contribu- tions, estimated by the ORD of Yatenga to be as high as 100 mandays, worth CFAF 30,000 at wages used in this analysis. A simple bottomland has only limited bunding; the improved bottomland generally includes a dam with an outlet, and protection dikes. 2/ Pumping. 3/ From proposals submitted for RDF II financing, often for rehabilitation. 4/ Excludes cost of dams and investments made by farmers (e.g. labor time).  - 62 - annuity at 8% per year maintenance Total (000 CFAF) (years) (000 CFAF) (000 CFAF) Simple bottomlands 1/ 23 (4) 0 23 Dams 149 (10) 25 174 If paddy is grown on these schemes--as is usually anticipated, and if yields are 1.25 mt/ha for bottomlands and 3.5 mt/ha below dams--which are realistic in view of results to date, the cost of water control alone per kg of rice is 28 CFAF for bottomlands and 76 CFAF for dams. 2/ This cost amounts to 22-59% of the relevant long-term import parity price for rice, leaving little to pay for other inputs--including labor. Moreover, in terms of national food production, rainfed cereal production costs less. The total economic costs of fertilized, rainfed sorghum or maize in the southwest is only 40-50 CFAF/kg, which is less than the cost of water control alone for some types of rice production. 1.4.11 Irrigation development in Upper Volta appears to be limited by three major factors: (a) High cost relative to returns; (b) Lack of a well-defined organizational structure to manage the development; and (c) Lack of experience by farmers and extension agents in using irrigation systems, resulting in inefficient use. High costs result from a combination of high investment costs--caused in part by a lack of large flood plains and major rivers, high rates of evapotranspira- tion, low rates of utilization and low yields actually achieved. 3/ Whereas irrigation seems to provide sufficiently high returns for vegetables--high 1/ No maintenance cost is charged because these are allowed to fall into disuse in only 4 years. In fact, about 50% of the bottomlands developed by the RDF continue to be used, which means that this annuity charge is too high while the maintenance charge is too low. 2/ These results also appear broadly consistent with those estimated for Kompienga. With an investment of CFAF 1.6 million/ha exclusive of dam and settlement costs but including work contributed by farmers (0.5 million), a lifetime of 20 years, 8% interest, annual maintenance costs of 4% of the investment, a cropping intensity of 1.7 and yields of 3.5 mt paddy/ha, irrigation costs alone amount to about CFAF 59/kg rice. 3/ A similar case is argued by World Bank, The Economic Development of Upper Volta, Vol. 2, "Agriculture", Washington, 1970, p. 2.  - 63 - enough to make some private development feasible--cultivation of cereals is almost always subsidized. Since it seems unlikely that costs of irrigation can be lowered, efforts to make irrigation more economical must rest on improving the efficiency of irrigation use. Given past experience, it seems doubtful that agricultural productivity can be raised sufficiently to offset the high cost of water control, at least in the short term, in order to provide an attractive rate of return. 1.4.12 The Government places primary emphasis on rainfed agriculture in its sectoral strategy, but considers the development of irrigation essential to its goal of food security, to substitute for imports of crops such as wheat and rice, and to realize social benefits from the creation of dams. For the irrigation investments that are made, there is a preference for the small-scale schemes developed by the RDF and for vegetable production. The large-scale systems, for which no more than pilot schemes have been developed--unless the 1,200 ha of the Kou Valley is considered major, are limited to the southwest area where the potential is best. There are active plans to develop the irrigation potential of the Bagre dam, should it be constructed, and with the completion of the master plan for the Black Volta and Sourou rivers, pressure for larger-scale investments will probably increase. In view of the poor maintenance of previous developments and the high cost of investments, a prudent approach is appropriate to ensure that major expenditures on large- scale schemes are not undertaken before solutions to technical and managerial problems can be found. B. Erosion Control 1.4.13 The second major type of water control consists of efforts to improve water infiltration and reduce erosion in rainfed agriculture. The investment is simple: use of tractors to construct contour bunds that are manually compacted and repaired by farmers. The bunds impede runoff and catch silt. As with irrigation works, these also have a long, rather mixed history, often characterized by bad design, inadequate execution, poor maintenance and disuse. 1/ Since the drought, and through interventions by the Rural Development Fund, experience seems to have been more encouraging. Under RDF I and II, almost 10,000 ha had been developed by 1980, and the third RDF preparation proposes improvement of another 20,000 ha. While modest compared to total cropped land (less than 2 percent if all 30,000 ha were effectively protected), the program is said to be a response to the allegedly strong demand for water conservation--as well as erosion control-- manifested by farmers in more arid areas. In fact, such demand may simply 1/ See World Bank, The Economic Development of Upper Volta, Vol. 2, "Agriculture", Report No. AW-19a, Washington, 1970, pp. 36-37, which describes the European-financed project near Ouahigouya during 1961- 64.  - 64 - reflect the fact that these improvements are offered to farmers by a govern- ment program on a largely subsidized basis. And many earlier investments are probably no longer usable. 1/ 1.4.14 Investment costs are much lower than for irrigation--RDF II appraised them at 15,000 CFAF/ha in the mid-1970s, exclusive of labor con- tributed by farmers. In current prices, total costs may exceed 25,000 CFAF/ha including farm labor. Annual costs are also difficult to calculate, but they may be as high as CFAF 4,000,2/ equivalent to about 55/kg of sorghum, at long-run economic prices. The gains from these investments can only be roughly indicated. Bunds help reduce the constraint on production caused by low moisture and poor soils by reducing run-off and erosion. FAO data indi- cate that anti-erosion bunds reduce run-off by a factor of 2-10, depending on the method of measurement. The use of open ridges--similar to bunds--reduces soil erosion by a factor of 3-4. 3/ Technically, these resource gains can be significant. The effect on yields--especially over the long run--should be positive, compared to unprotected land. Appraisal reports have estimated yield increases of up to 150 kg/ha for sorghum and 135 for unshelled ground- nuts. 4/ To the extent that yields are raised in unfavorable years, produc- tion becomes more secure; and increased moisture will raise returns to other, modern inputs. Reduced erosion will safeguard one of the country's major resources -- land, although much of the benefit will accrue to future genera- tions rather than being realized by farmers today. Thus, the investment has 1/ A recent study funded by the Rural Development Fund (RDF) argues that experience lhas shown that these anti-erosion bunds are unlikely to last long unless reinforced by hedgerows. See Republique de Haute Volta, Ministere du Developpement Rural, Direction des Services Agricoles, Service National des Sols, Vers l'Agro-Ecologie Optimale--Etude de la Conservation et de la Fertilite des Sols dans Quelques Organismes Regionaux de Developpement (ORD), Haute Volta, (by Centre de Recherche pour le Developpement Agricole International, Heidelberg, RFA), Ouaga- dougou, May 1980, p. 35. In the past, hedgerows were evidently seldom planted on bunds, in part because they are used traditionally to designate property boundaries. Their use on bunds, which cross property lines, could give rise to land tenure disputes. However, hedgerows are now being planted on bunds developed by the RDF. 2/ Based on a 15-year life at 8% interest, plus about 3-4 days labor for maintenance. These figures are only indicative and may be too low given that bunds seldom last this long and that proper annual maintenance may equal 25% of capital costs. 3/ UNDP, "Creation d'un Service des Sols - Haute Volta - Etat des Connais- sances des Sols", (AG:DP/UPV/74/007 - Rapport technique 1), Rome, 1980, pp. 15-16. 4/ Appraisal Report for RDF II dated May 24, 1976, Report No. 1068b-UV, p. 28. Increases include the effects of improved seeds, thioral and better plant spacing and timing. Such improvements appear optimistic and are not yet verified by supervision reports, although RDF has been quoting increases of 20 to 40% over traditional yields of 400 to 500 kg/ha.  - 65 - numerous advantages--small-scale, few, if any, changes in the farm system, and increased security of production. But the cost of the investment-and perhaps even maintenance--remains beyond the reach of most farmers, especially since the increase in production is not yet verified and may scarcely cover costs. But because there are significant social gains, public financing can be justified. Given the difficulty for the Government both to collect a user's charge on widely dispersed investments like these and to levy a tax on tradi- tional farm production that will accrue to the budget, these investments may have to be subsidized on a continuing basis. Efforts should be made to reduce recurrent public support of maintenance, however. C. Recommendations 1.4.15 The Voltaic government should continue to use caution in develop- ing large irrigation schemes and to give priority to rainfed agriculture. There are 3 major reasons for this stance: (a) Large-scale irrigation schemes will benefit the southern regions which are already favored by higher rainfall and per capita produc- tion. Large-scale schemes appear to be too costly to be profitable, except perhaps for high value crops like vegetables that do not need large areas. Managerial and maintenance problems continue to persist, making demands on scarce administrative talent and reducing the profitability of these operations. In fact, agricultural production with large dam irrigation may create net losses in economic terms, which means that the inclusion of this component to help justify large dams may reduce, not increase the overall rate of return. (b) Small-scale irrigation, especially for gardens, has potential throughout the country. Farmers can play a more active role in both the investment in and operation of the system, thereby reducing the need for government control, supervision and expense. Such systems are also more amenable to integration with existing farming systems, in part because they are dry-season activities. (c) Erosion control builds on current rainfed farming practices, and helps conserve and stabilize two critical and scarce Voltaic resources--rainfall and arable land. Because of these factors, investments in erosion control may be easier to extend than classi- cal irrigation systems. The two major issues are how to help finance their development--an effort that is probably inherently deficit--and how to improve their maintenance and effectiveness without undue public budgetary support. The effective development of soil and water conservation measures also depends on three kinds of action: (a) collaboration among the several ministries and services with interests in these activities; (b) implementation of a land tenure system which provides incentive to farmers to invest in land improvements; and (c) research into traditional practices which can be more widely adopted to reduce erosion. 1.4.16 In addition to restraining major investments in irrigation, the government should refrain from adopting price policies to compensate for uneconomic investments. In particular, there are demands for trade protec- tion -- especially for rice production. Given that irrigation costs are already virtually fully subsidized and other modern inputs are also heavily subsidized, additional commodity price support should not be necessary.  - 66 - 5. SEEDS AND FERTILIZERS 1.5.01 Improved seeds and chemical fertilizers have formed the backbone of the agricultural revolution in less developed countries during the last two to three decades. Changes in plant architecture have increased the ability of plants to use additional fertilizer for grain, with consequent increase in yields and net returns. Improved insecticides and their expanded application have further increased yields. Upper Volta has participated in this revolu- tion only marginally, as the trends in national output show (see Section 3). Except for cotton, only a small share of national production depends on these "modern" inputs. However, the use of fertilizers has increased at almost an exponential rate. Between 1968 and 1979 use of compound fertilizer rose from 500 tons to 16,000 tons in 1979. In the long run, however, the use of improved seeds and fertilizers must expand even more if agricultural growth is to occur since traditional production is limited by available manpower and land. The issue is what needs to be done to help expand use. 1.5.02 In the section that follows (as well as in Section 6) the analysis aims to draw two different judgments: whether these new techniques are more efficient than traditional methods currently practiced and whether it is in the country's best economic interest to encourage them. The first judgment-- whether or not a new technique is better than its traditional counterpart (in the sense of lower costs per unit of output)--is intended to rank techniques and crops, in order to establish priorities for action and extension. It is not so sensitive to differences in assumptions about prices, although physical coefficients can be important. The second judgment is whether or not to promote improved seeds, fertilizers and animal traction, regardless of whether they raise or lower costs per unit. Such a judgment is important because the lack of additional labor, as well as land, limits the scope to expand tradi- tional techniques. In this case, the concern is that total costs of produc- tion--including labor--be less than the value of the commodity on the world market, irrespective of the technique of production. Absolute values are important. These estimates, however, must be viewed with caution, owing to the complexity of the analysis, the uncertainty of the assumptions and the fairly wide range of plausible values for many of the variables (e.g., the response rate assumed for fertilizers and estimates of labor costs, world prices, and exchange rates). Furthermore, conclusions may vary depending on the criteria used to evaluate financial and economic attractiveness. Thus, in making this decision, a range of plausible values is used, in order to ascer- tain the sensitivity of various results to different assumptions. 1.5.03 One of the important messages in this section is that with respect to the first judgment the seed-fertilizer package makes a poor showing rela- tive to traditional practices in many cases--especially those in areas with less than 900 mm annual rainfall and farming alfisols. This inadequacy--which means that the gains are not sufficient to make adoption of the new inputs attractive--persists because of poor soil and water resources and the lack of new varieties that are adapted to these poor conditions. Of course, good farmers, with access to deeper soils or living in wetter areas, can make good use of these new inputs--and the extra output they produce is not insignifi- cant as a share of the marketed surplus of grains. More can be done through  - 67 - extension and delivery of inputs to make new varieties and more fertilizers available to such farmers. However, the second judgment--whether to encourage expansion of modern techniques--is often positive, within certain limits. Although new techniques often fail to lower costs of production per unit of output, they remain profitable in many instances; as such, they offer a means to expand national output. A critical question--which remains unanswered--is the scope for such expansion before costs exceed the gains. 1.5.04 For improved seeds, the evidence in this study is that quantities used for coarse cereals are both small and of uncertain purity, despite the many varieties with very high technical potential that have been released to the extension service. There is a two-fold explanation for this discrepancy between the ostensibly high-quality seed technology that is available and its low utilization. First, the study suggests--often on the basis of circumstan- tial evidence--that the new varieties of sorghum and millet are on the whole not very attractive to most farmers who find it too costly or impossible to provide the extra inputs and effort that are necessary to maximize grain output per ha, even though results on research stations are better. 1/ The one exception appears to be maize, which has a high yield potential, including the ability to use fertilizer and other improved inputs efficiently. New varieties will have to be developed that fit within the constraints facing the Voltaic farmer--a task more difficult for millet than for sorghum and easiest for maize and rice. Second, the study suggests that low utilization might equally be caused by insufficient and impure seeds--even if the varieties themselves are adequate--and by a poor distribution network. Although the issue needs more information and analysis, it is fairly certain that improve- ments must occur across the board--in adaptive research, in multiplication, and in demonstration and distribution. 1.5.05 In the case of fertilizers, the net value of marginal returns is positive in financial and economic prices except for millets under some circumstances. In current financial prices and at the response rates assumed, the use of fertilizers tends to lower unit production costs--as compared to traditional production--for maize and cotton, but not for sorghum and millet. In current economic prices, it appears to lower costs only for maize. The problem resides in the low productivity of fertilizer used on most farms; and at both current and expected world prices the long-term solution must be to raise productivity. There are three options that can be pursued. First, fertilizers can be applied more effectively (better placement, proper timing, optimum levels), which must be solved by on-farm research, extension, and perhaps better farm equipment. Second, genetic potential--in the face of the country's resource constraints--can be further improved, as it has been for maize. Third, some of the resource constraints themselves might be alleviated--for example by improving water control (e.g., bunding and better soil porosity by plowing in crop residues). All these longer-term options require increased investments; and if the recent growth in fertilizer usage is to be maintained, recurrent subsidies would be necessary in the short run. 1/ This is confirmed by the discussion of the returns and costs of higher yields from fertilizer, given below.  - 68 - A. Seeds 1.5.06 Although improved seeds have been available from IRAT research stations and foreign sources for several years, a national seed service was created only in 1974, in conjunction with foreign financing (USAID) and the IRAT facility at Farako-Ba. The operating principle is for research agencies to furnish the foundation seeds that ORDs will multiply to produce certified seeds--usually on publicly-operated farms. The focus has been on improved varieties for maize, rice, groundnuts, and cowpeas, although some improved millet and sorghum varieties have been developed. The capacity is estimated at about 500 mt of certified (R2) and foundation (RI) seeds per year. As shown in Table 1-14, total production has varied from year to year, usually below capacity. There is no apparent trend, although production for use in 1980 fell by three-fourths as the result of an effort to restrict output to quality seeds only. 1/ The annual average production for the five years is about 325 mt, of which only about 65% are actually certified seeds available for farm use (R2 seeds). For the five years 1975-79, total seed production was distributed among the various crops as follows: Crops _ millet 4 sorghum 8 maize 7 paddy 45 groundnuts 32 cowpeas 1 sesame 1 soybeans 4 Thus, less than one fifth of the seeds were for traditional rainfed cereals. 1.5.07 If account is taken of poor quality seed, the share of foundation seeds (RI) in the total, and the distribution among crops, current (1979) certified seed production available for distribution could be estimated at: Seed rate Maximum area Crops mt (kg/ha) planted (ha) 2/ millet 2.8 3-5 560-933 sorghum 7.5 8 938 maize 6.6 15 439 paddy 42.3 40-100 3/ 423-1,058 1/ Production for use in 1981 is estimated at 200 mt, of which 90% are certified (R2) seeds. 2/ First year only. 3/ Lower rate for transplanting; higher rate for direct seeding.  - 69 - Farmers can replant these varieties from their own production for 3-4 years without losing much varietal purity, thus augmenting by 3-400% the area actually covered by the seed initially distributed. In addition, farmers who plant improved varieties may provide seeds to other farmers, thereby further multiplying the real area covered by certified seeds distributed by state agencies. These effects have never been measured, but even with generous assumptions the share of crop land seeded in improved varieties is probably less than about 2-3%, except for rice and possibly maize. The regional effects are, however, quite varied. About 80% of all improved seeds have been planted in only 2 ORDs (Dedougou and Bougouriba), explained largely by the fact that the bulk of the seeds is paddy rice and groundnuts. 1.5.08 Given the low prices of these certified seeds compared to market prices, it is possible that some have been used for consumption rather than planting. To illustrate this anomaly in pricing selected seeds, the following figures give the ratio of official seed prices (Table 1-10) and consumer market prices (Table 1-8)_: Maize Sorghum Paddy l/ 1976 0.7 0.8 0.8 1977 0.3 0.4 0.7 1978 0.3 0.4 0.9 1979 0.6 0.8 0.9 In all cases for all years, the seed price is less than the consumer price. 1.5.09 Despite the relatively small amount of research on food grains in the semi-arid tropics (see Section 7), a number of selected cereal varieties are considered by local research agencies to be suitable for distribution to farmers. The major ones are summarized in Table 1-24. Varieties most commonly used as controls in field trials include S29, 940 and Gnofing for sorghum and Jaune Flint de Saria and Massayomba for maize. No iiaproved millet variety appears very widely used, in part owing to the need to adapt millet varieties to extremely localized conditions. There are hopes that ICRISAT's new sorghum, E 35-1--originally developed in Ethiopia--will become more extensively cultivated in the future, although it apparently suffers from poorer germination rates than local varieties--an important constraint where seasons are short. Trials carried out by ICRISAT on farmers' fields in 1980 showed that there was only an increase of 11% in average yields when E 35-1 was compared to local varieties, a difference that is not statistically signi- ficant given the high variation in yields. However, in favored situations, as on plots located close to the household compound, yields of E 35-1 were 23% higher, which is statistically significant. When the local varieties were planted late, and E 35-1 was planted at the correct time (which is 2 weeks 1/ Based on rice price, less 9 CFAF/kg for milling, converted to paddy at 65% milling outturn.  - 70 - later than local varieties), the increase in yields was 38%. Thus, this new variety seems to have a limited advantage. 1/ There is, however, still a need for a sorghum variety that will increase yields significantly under a wide range of conditions. In view of the lack of success in upgrading local varieties, more emphasis might be placed on varieties imported from areas with similar ecological conditions, like India. A number of these varieties (including CSH5, CSH6, CSH9, and SPV 245) are showing promise in trials. Perhaps more of this seed could be imported in order to increase the pace of testing at the village level. 1.5.10 The technically possible yields in Upper Volta with improved varie- ties are much higher than those currently achieved by farmers with traditional varieties and methods, as illustrated in Table 1-17. These results indicate the large potential for gains in output without increasing cultivated land, although yield gaps between farmers and research stations reduce the degree to which this potential can be realized. It appears that farmers can expect to get consistently no more than about 60% of the yields achieved on research stations, and sometimes only half as much. 2/ Explanations for this shortfall include the better soils on stations (fertility is maintained from year to year), the fact that labor input is unconstrained (operations are done ade- quately at the right time by hiring in labor), and management is better (e.g., seeding is done at the proper moment, seedbeds are well prepared, and spac- ing is optimal). Even assuming conservative potential yields and further discounting them by 40% to account for poorer conditions and practices on farms, output per ha could conceivably increase by 1-200% for the coarse cereals simply by adopting new varieties (along with adequate applications of complementary inputs, including labor, management, and fertilizers), as shown below: 1/ Peter J. Matlon, "Farmers' Tests on New Technology - a Case Study from the ICRISAT/West Africa Economics Program," paper presented at the IDRC Workshop on Rural Economics Research Methodologies, Abidjan, April 1981. 2/ The rule of thumb seems to be about 50% less for farmers on the average compared to research stations, although IRAT and ICRISAT researchers suggested ranges of 30-40% less. Data for 1979-80 from northern Nigeria suggest larger yield gaps, as shown below by the percentage reduction in yields of seed farms and demonstration plots when compared to those obtained by farmers: Funtua Gusau Cotton -72 n.a. Maize -48 -61 Sorghum -2 n.a. Millet n.a. -65 Groundnut n.a. -46 Varieties are identical and yields are in sole-crop equivalents, but it is not clear that farmers applied the same amount of fertilizers. However, if research trials are poorly conducted, as is sometimes the case, the gap may be less because research results will themselves be poorer.  - 71 - Average Potential Yields less Increased yield in research 40% for % increase output on Upper Volta yield farmers over current 30% area Crop (mt/ha) (mt/ha) (mt/ha) yield 1/ (000 mt) millet 0.4 2.0 1.2 200 75 sorghum 0.6 3.0 1.8 200 130 maize 0.6 4.0 2.4 300 25 If such results were achieved on only 10% of currently planted areas, production of cereals would rise by almost 250,000 mt, over 20% greater than production now. The gain would still be significant even if yield increases were only half as great. The critical question is what constrains the wider use of supposedly superior genetic stock. 1.5.11 The issue must be examined from several facets, including the feasibility for farmers actually to achieve the potential yields (i.e., the sufficiency of the genetic improvements), the ability of the National Seed Service to produce seeds that are both high quality and demanded by farmers, and the capacity of the ORDs to distribute the seeds to farmers and to demonstrate their superiority and how to cultivate them. Before examining each of these possible explanations, it must be noted that there are vir- tually no data on how many improved seeds are actually planted and with what result. Nor has there been any systematic effort to measure the demand by farmers for more seeds of improved cereal varieties. Thus, although the insignificant use of these seeds is a fact, efforts to understand why must be based in part on speculation. 1.5.12 Farmers generally find improved varieties for groundnuts, rice, and perhaps maize better than their local varieties, it is not certain that they are able to get the same good results from improved sorghums and millets--the two crops that produce the bulk of agricultural output. 2/ 1/ In the demonstration trials recently conducted in selected Voltaic villages, where rainfall ranged from 570 to 980 mm, local varieties of white sorghum were compared to E 35-1 developed by ICRISAT. Yields increased from 3-400 kg/ha for local sorghums under traditional manage- ment on millet soils to 1200-1300 kg/ha for the new variety with improved management and techniques, including inputs. Thus it should not be too difficult to get the yield increases shown here, given the right variety and practices. In actuality, yield increases due to variety alone may be less than shown because the necessary husbandry and inputs may not be provided. See Matlon, cited above. 2/ USAID, Project Evaluation Summary (PES) - Part I, "Seed multiplication No. 686-0202)", March 27, 1980, Ouagadougou, para. 19: "Research on sorghum and millet seeds, the two primary staples, has not made a significant improvement on varieties grown by Voltaic farmers". The Director of ICRISAT also indicates that research cannot beat local varieties of food crops although the new sorghum variety E 35-1 would appear to have some characteristics that can increase yields by 10-30% and returns per manday (in financial prices) by up to 30% in certain circumstances.  - 72 - The first constraint is almost certainly that the varieties of these crops developed by the research institutes do not really give improved results under the wide range of conditions and practices of most farmers intended to use the seeds. The new varieties often demand certain growing conditions, which the extension service does not always adequately explain to farmers, and addi- tional modern inputs, which are not always provided or even available. Thus, the great majority of farmers do not find them attractive. It is not surpris- ing that research cannot yet compete with farmers' own varieties of sorghum and millet. Both maize and rice have benefitted from decades of global research; by comparison, research on African sorghum is either recent or very limited. Millet is even more difficult to improve than sorghum because of its extremely narrow adaptability within specific locations and its sensitivity to several important diseases. Maize and rice are also generally grown under relatively more favorable climatic, soil and water conditions, which most improved varieties require. Moreover, past research has been deficient in adapting varieties to farm conditions (see also Section 7). Standard agro- nomic research practice usually dictates that new varieties be grown under optimum conditions with unconstrained inputs. But such practice may mask the high risk associated with high potential and downplay the importance of using adequate fertilizers and other inputs and of changing cultivation practices. Farmers are unlikely to be able to bear the higher risks that result from more unstable yields and higher costs, and they may find the increased inputs too costly (or simply unavailable). Researchers have tended to concentrate on maximizing physical returns to a single input--land, rather than on maximizing economic returns to all inputs, including additional farm labor and management (although improved varieties may not always need more labor than traditional ones). There may also be factors that researchers have not considered, like the use of crops for fodder as well as grain and the palatability of cereals. In increasing grain yields, researchers may have sacrificed other attributes, making the crop less attractive to the farmer. Solutions to this problem require, as a minimum, increased agronomic and socio-economic research under farmers' conditions. More research on maize for drier zones might be reward- ing, since maize appears to have a good response to improved management. Since there has been a tendency for research groups in Upper Volta to try to improve local sorghum varieties or those from neighboring countries, rather than to import new varieties developed in other parts of the world, it may be useful to test more of these foreign varieties, including hybrids now available for somewhat similar ecological zones in India that have given significant increases in output over a wide range of growing conditions (see para 1.5.09). 1.5.13 Even if the genetic stock itself is adequate for many farm condi- tions, the seeds actually distributed may be of low quality. The decision by the National Seed Service to certify only 89 mt of seeds in 1979, compared with 425 in 1978 (See Table 1-14), is one indication of the magnitude of the problem of poor quality seeds in the past. Thus, it is not unreasonable to speculate that most of the seeds farmers have been purchasing were incapable of providing the full measure of increased output even if all the other inputs were applied. The solution to this problem requires improvements in the structure to multiply improved varieties, including better supervision of and higher incentives to seed farmers.  - 73 - 1.5.14 The second major reason for the apparent failure of the seed program is that seed marketing has been inadequately organized--even though seed prices should not have posed any constraint because they are lower than consumer prices. Thus, even if good quality seed for improved varieties is produced, it may not get disseminated. Input delivery and extension are considered in detail in Chapter 2, but three comments should be made here. First, the right varieties might not be provided in adequate quantities--although there is no evidence that demand exceeds supply of improved seeds. The demand for improved seeds is assessed annually by the ORDs, but the estimates can be improved. The extension service itself may not be adequately trained to teach the new farming practices that must often accompany the use of improved varieties. 1/ Solutions to these problems must come from all fronts, including: (a) more on-farm research to develop viable cultivation practices to accompany the new varieties; (b) better interaction between researchers and extension workers to assure that the latter can conduct demonstrations and teach new practices; and (c) an input supply service capable of timely provision of the seeds demanded. B. Fertilizers 1.5.15 There are several possible ways to raise soil fertility in Upper Volta, including the application of imported manufactured fertilizer and natural rock phosphates, the use of manure and crop residues, and the practice of rotations and intercropping. The first two--chemical fertilizers and rock phosphates--bring in nutrients from outside the farm. The other three rely on a reorganization of nutrients already on the farm, and thus they are less likely to give the large gains possible from manufactured fertilizers and rock phosphates. While manufactured fertilizers offer the best means to increase fertility substantially and rapidly, they are insufficient over the long run unless coupled with measures to control acidity and to improve soil structure. While also providing nutrients, the other types help to overcome these problems. Manufactured Fertilizers 1.5.16 Expanded Use: Growth in the use of manufactured fertilizers has been very rapid, as can be seen from data in Table 1-14. Information is not totally reliable, but orders of magnitude are sufficiently large to show the overall evolution. Total consumption has risen from about 350 mt 2/ in the mid-1960s for cereals, cotton, and groundnuts to over 13,500 mt estimated for 1979 for the same crops. 3/ Total imports of fertilizers grew from 500 to 16,000 mt 1/ To illustrate, ICRISAT's E 35-1 must be thinned because plant density is critical; this is a practice that farmers already know about, but they aim for a different density than required for new varieties. See Peter J. Matlon, "Local Varieties, Planting Strategies, and Early Season Farming Activities in Two Villages of Central Upper Volta", Village Studies Report No. 2, ICRISAT/West Africa, Ouagadougou, September, 1980. 2/ Compared to reported imports of about 575 mt. 3/ Figure excludes 1,500 mt of urea.  - 74 - between 1965 and 1978. Although fertilizer usage is not high by international standards, the change over the 14-year period represents an extremely rapid growth rate (30% per year), most of which has occurred since the end of the drought. Creation of the Banfora sugar plantation in 1975 and expanded vegetable production have also increased aggregate fertilizer use. Fertilizer applications on cotton have been a major impetus for this growth, but use on cereals appears to have grown as much but from a lower initial level. 1/ 1.5.17 This rapid growth has probably been caused by several factors, the two most important being an increased understanding and availability of fertilizer--linked largely to development projects, and a declining real price of fertilizer to the farmer. Rapidly increasing real prices for cereals have probably also played a role in making fertilizer use on these crops more attractive. The change in price ratios illustrates the increased attractive- ness of fertilizer use (based on Table 1-11). 2/ percent 1968 1979 change Fertilizer: cotton price ratio 1.1 0.9 -18 Fertilizer: sorghum (market prices) 1.7 0.4 -78 price (official prices) 3.3 1.3 -63 ratio The increased use on cotton land over the same 11 years was over 650%, and on cereal land the increase was over 2,000%, implying a very elastic response to price. Of course, much of the growth in usage has been induced by factors other than price, including the growing availability of fertilizer, greater knowledge of its application, and increased use of complementary inputs (e.g., insecticides on cotton). 3/ 1/ See Table 1-14. Between 1965-70 and 1979, use of fertilizers on cotton grew at about 20% per year, while it grew at about 30% on cereals. The absolute increase, however, on cotton was 3,250 mt (nutrients) and 3,150 on cereals. 21 These ratios take into account the change in fertilizer composition in 1978 (from 18-35-0 to 14-23-14), which effectively raised the price by 43% for N and P205. If no account were taken of this change, the 1979 ratios would have been 0.6, 0.3 and 0.9 for cotton, sorghum at market, and sorghum at official prices, respectively. 3/ The crude elasticities here are -38 and -25 for cotton and sorghum, respectively. According to figures reported by James A. Seagraves, "Agricultural Production and Supply Response Research: A Review for Project Planners in Developing Countries", World Bank Working Paper 57, Washington, January 1970, pp. 18-19, more sophisticated estimates range from -1.3 to -5.0. For example, the longrun elasticity for fertilizer on maize in the US has been estimated at about -2.5. If -5.0 is taken as a reasonable price elasticity, then roughly one-eighth of the growth of cotton fertilizer and roughly one-fifth of the growth of cereal ferti- lizer is due to price.  - 75 - 1.5.18 The increasing use of fertilizer in cereals in Upper Volta is beginning to raise a number of questions from scientists (concerned about its effects on soils), economists (concerned about its true economic value), farmers (concerned about the increased risks and returns) and government officials (concerned about subsidy levels and the problems of maintaining them). There is however enough evidence to show that natural soil fertility declines as cultivation increases and fallow periods become too short to rebuild fertility. Inputs that are cheap and financially feasible have to be introduced not only to avert this situation but also to increase land produc- tivity to feed the increasing population (both urban and rural) and to expand exports and to make returns to labor sufficiently attractive to provide an incentive to farm better and to keep people on the land. Better husbandry is a start but gains are often not sufficient to make the new practices attrac- tive. Use of manure, composting and soil conservation are additional impor- tant improvements, but they cannot be applied in every case or to the extent necessary (especially by the poorest farmers). Leguminous crops and animal traction are others. Fertilizer that is properly used can enhance all these operations. While nitrogen is not the only nutrient necessary, this nutrient has been important in increasing cereal production and in both developing and developed countries. Increases in yields have been almost perfectly corre- lated with nitrogen use 1/. This increase has also been associated with improvements in crop varieties to take advantage of the additional fertilizer. If improvements in cereal and cotton yields are to be maintained and further improved in Upper Volta, it is clear that fertilizers have a place in the farming system. To what extent at any one time must depend on circumstances affecting the use of all the other factors and techniques of production. These aspects will be covered in the examination that follows of the physical, financial and economic returns to be gained from using fertilizers. 1.5.19 Physical Returns: Before considering in more detail the actual response rates (i.e., the increase in grain yields resulting from the use of fertilizers) under which fertilizer might be financially and economically attractive, it is useful to consider the factors that affect the actual response rate to be obtained from any given application of fertilizer. These factors include climate, soils and their fertility, timeliness of operations, soil and water conservation measures, ability of the farmer, labor availability and use of animal traction, varieties of crops and quality of the seed, and use of irrigation. With the exception of climate, all these factors can change over time creating permutations that can cause responses to vary considerably among farmers and within farms. This variability is most impor- tant since many areas in Upper Volta, for various reasons, are at the limits of economically viable fertilizer use. But the issue of whether or not to use fertilizer is not a simple one, as many factors are involved. Each of these factors will be taken in turn. 1/ RWF Havilef and U.D. Havelka, "Nitrogen Fixation Research: A Key to World Food?" Science, Vol. 188, Page 633. For example, the use of N in less developed countries has risen from 3-4 kg/ha in 1956 to 23 kg in 1971; cereals yields rose from an average of 1,200 kg/ha to 1,400. In the more developed countries, the use of N rose from 23 kg/ha to 80 dur- ing the same period; corresponding cereals yields rose from 1,500 kg/ha to 2,400.  - 76 - (a) Climate: In areas with less than 400 mm of rain, the length of the rainy season (under 60 days and lasting from mid-July to September) is insufficient for crops to reach maturity, unless supported by irrigation to lengthen the growing season--and water requirements under these conditions are very high. Between 400 mm and 500 mm of rain, the season lasts from 60 to 70 days and cropping, mainly millet and cowpeas, becomes possible. However, crop failures can occur in 25% of the years, and yields will be below average in 40% of the years. Fertilizer use under these conditions is clearly not possible. In the 500 to 700 mm zone, the cropping season lasts for 70 to 100 days (starting at the end of June and finishing in September) and sorghum is increasingly grown. Chances of complete crop failure decline to 10% but yields below average (350 to 450 kg for millet) can still occur in 40% of the years. There appears to be a direct correlation between the date when the rains begin (length of season) and the yield, so that early planting in this zone, as in others, is of paramount importance. With proper management, good soil conservation, and use of manure in this and other zones, it is possible to double the average yields of sorghum. Fertilizer can also enhance yields but climate and the short growing season still severely limit the potential for plant growth so that response to fertilizer in terms of unit of output per unit of input is likely to be low. In view of this and the climatic risks, it is probable that only on the more favorable soils and under excellent manage- ment will it be possible to get sufficiently high response rates. In the 700 to 900 mm rainfall subzone, the growing season starts about mid-June and lasts for 100 to 120 days. Risks of complete crop failure are less than 10% although yields are 40% or more below average in 25% of the years. Cotton and maize production is satisfactory where soil conditions are favorable. The climate and length of growing season are sufficient to permit a reasonable fertilizer response provided that soils, crop varieties and husbandry are also satisfactory. As in the lower rainfall zones, however, rainfall is too low for adequate leaching so that soil acidity can build up if the wrong fertilizer is used. Above 900 mm rainfall, fertilizer use will have fewer limitations, as long as some precaution is taken against acidity--again attention must be given to tailoring recommendations according to various other conditions. (b) Soils and state of fertility: Soil types and depth vary as to whether they are on the top of the slope or at the bottom, which affects percolation, drainage and fertility. The length of fallow and the rotation of legumes and cereals affect fertility of any particular field. All soils are deficient in phosphorus and some, especially those under continuous cultivation, are deficient in potassium. Plants generally benefit from nitrogen but the value of this fertilizer depends on the general growing conditions. Thus the better the land, the fertility, length of growing season, and responsiveness of variety, the greater the return to this nutri- ent. Much of the land on the Central plateau is so degraded that, without improvements in soil structure from the use of manure, it is unlikely that fertilizer response will be high enough to make its use economic. The prob- lems of acidity caused by fertilizer must also be dealt with by crop rota- tions, plowing under legumes, fallows, choice and application rates of ferti- lizer and use of manure and compost. Fertility also vari-es according to the location of fields, which varies from plots located next to the household  - 77 - compound to extensive bush fields far from the village (up to 3 km). The management and use of inputs varies with the location of the field, with those closest to the household being managed most intensively. 1/ Farmers with big plots near their compounds and with lots of livestock for manure can be expected to get greater responses for fertilizer use. (c) Water and soil conservation. These measures are always necessary but usually absent. Where slopes are steep, water available for crops is less than normal, and soil erosion accelerates the decline in fertility. A farmer usually has a mixture of land of varying topography. (d) Timeliness of operations and labor availability depends on size of family, ability to hire in or borrow labor, distribution of holdings and use of oxen or donkeys--as well as on the managerial capability of the farmer. Because of the short growing season, early planting is critical throughout Upper Volta, but it is especially important in the center, east, and north and for millets, sorghums, and cowpeas. 2/ But this constraint can be relaxed by developing varieties with shorter growing seasons, as well as perhaps the development of better animal-drawn seeders. Timeliness of weeding is also important, and it might be improved by better use of animal-drawn equipment. (e) Varieties of crops and seed. Cereals respond to all three major nutrients, but especially to nitrogen; for legumes, phosphates seem to be most important. Response to fertilizers is better for cereals planted after legumes than after cereals; and mixtures of legumes and cereals increase total output per unit of land. Of the cereals, maize seems to have a higher response rate to fertilizer than does sorghum, although this may also have something to do with when and where it is planted. Millet has a lower response rate than sorghum. Improved varieties of cereals require better husbandry and higher soil fertility to achieve their potential. (f) Level of farming ability is crucial to get the most out of land, labor, and other inputs; and farmers must learn how to use new techniques and inputs and how his own land responds to them. When farming is profitable, farmers will continue to improve their ability to use inputs and husbandry so that over time there should be a growth in the number of farmers who adopt new techniques and an increase in yields from the use of those improved techniques, as well as improvements in techniques themselves. 1/ For example ICRISAT demonstration plots for sorghum near the compound yielded 710 kg/ ha under local management while those in the bush yielded only 532 kg/ha. With the new variety (E35-l) and better management, the former yielded 1,400 kg/ha, while the bush field gave only 1,106 kg/ha. See Matlon, 1981, cited earlier. 2/ On the issue of timeliness, see Richard A. Swanson, "Household Consump- tion, Rainfall, and Household Labor Time Allocation for Planting and Weeding. Some Observations and Recommendations," SAFGRAD Doe. No. 4, Ouagadougou, January, 1981.  - 78 - 1.5.20 It is important to bear in mind that these aspects may affect each individual farmer differently, since the next part of this analysis will try to determine in general terms the value of fertilizer--assuming a farmer achieves the range of fertilizer responses given. In this analysis the response is spoken of as response to fertilizer alone but in fact the response to fertilizer on farms is a mixture of fertilizer plus the changes in husbandry practices and the increased labor needed to use the fertilizer. It would be interesting when considering the figures to add an element to the response rate for better husbandry in order to stimulate what actually happens when a farmer applies fertilizers. In such cases, it would, of course, also be necessary to take account of the increased quantity and quality of labor that better husbandry may require. An effort to do this is made implicitly in the financial and economic analysis based on the farm budgets in Annex I, but no effort has been made to associate yield increases solely with changes in husbandry practices. 1/ 1.5.21 The approach used in this analysis is to estimate a range of average response rates--expressed as kg of additional grain per kg of nitrogen and phosphates, the two limiting nutrients. Although these average responses are intended to measure the most likely impact of fertilizer use at the level of both the farm and the nation, there is in fact a probablistic distribution of responses--being highest for proficient farmers in good areas and years, and being lowest for mediocre farmers in unfavored regions and poor years. The aggregate impact of fertilizer use depends closely on the shape of this distribution of response rates, which is largely unknown. The compromise solution followed in this paper is to analyse fertilizers using a low and a high response rate. The profitability of response rates for both research stations and for farmers will be examined in financial and economic terms. From this, it will be possible to deduce whether or not a response rate is sufficient to warrant promotion of the crop, given the prices of various inputs. It should be kept in mind that even though the use of fertilizers may be less efficient than traditional production, there may still be scope for expanding its use in order to raise the physical productivity of available labor and land--as long as its overall profitability remains positive. The scope for expanded use of fertilizers in development projects will depend on the number of proficient farmers, the availability of labor, and the amount of suitable land, which together can be expected to provide adequate responses from better husbandry, new varieties, more fertilizer and other inputs like manure. In drier or more degraded areas, the scope may be relatively small initially, while in the wetter areas the possibilities will be greater. 1/ Obviously there are experiments showing gains from timely planting, seeding in line, and careful, sufficient weeding. And often these gains result not so much from an increase in labor but from a rearrange- ment of the labor profile and from better management. The issue, of course, is why such practices are not currently being used by farmers.  - 79 - 1.5.22 The response rates to fertilizer are low by usual standards, as experimental results in Table 1-16 show. 1/ The various results are difficult to synthesize, in part because the ranges are large, but the following figures might be taken as typical (in kg of output per kg of N plus P205): Experimental Farm Responses Farm-level 2nd Bougouriba Crop Response Range Used in Analysis 1/ Trial Results Project 4/ (Table 1-16) Lower Upper FAO 2/ ICRISAT 3/ Millet 2-6 2 4 5-7 - - Sorghum 2-15 4 7 6-8 12-15 6.7 Maize 5-19 8 13 9-10 - - Cotton 6-8 4 7 7-9 - 6.6 Groundnuts 1-8 2 4 6-22 5/ - 1/ The Upper bound is taken as the median value of the experimental response range; the lower bound is equal to about 60% of the upper bound. 2/ From FAO, Programme Engrais de la FAO en Haute Volta, Rapport Annuel: Saison Culturales 1977, 1978, 1979, Rapport No. AG:GCP/UPV/18/BEL, Ouagadougou, 1980. Results cover all of Upper Volta and are averaged for the three years. Farmers were aided directly by extension agents to use improved techniques on both control and fertilized plots--including seed- ing in line, proper density, early weeding and treatment of seeds. 3/ Peter Matlon, "Farmers' Tests of New Technology - A Case Study from the ICRISAT/West African Economic Program," paper presented at the IDRC Workshop on Rural Economies Research Methodologies," Abidjan, April 1981. Near Ouagadougou in 1980. Response includes both fertilizer and improved practices, but control yields may have been underestimated by as much as 25% (which would lower response rates to 10-13.) 4/ See World Bank, "Upper Volta-Second Bougouriba Agricultural Development Project - Staff Appraisal Report", Report No. 3126-UV, Washington, 15 December 1981. 5/ The high rate is the result of applying only phosphatic fertilizer, since the response of groundnuts to nitrogen appears to be negligible. l/ The calculation of physical response rates is based on some simplifying assumptions about the nature of fertilizer used. There are three basic nutrients: nitrogen (N), phosphorous (P205), and potash, or potassium (K20). The percentages for each nutrient are given by the formula (x - y - z), where x is nitrogen, y is phosphorous, and z is potash. Compound (or "NPK") fertilizers in Upper Volta also contain small quanti- ties of sulphur and boracine. Because the percentage of nutrients varies according to the type of fertilizer, most of the analysis is carried out in terms of nutrients, not the quantity of bulk fertilizer applied. Moreover, response rates are calculated only in terms of the quantities of N and P205 that are applied. Nutrients other than N and P205 become important only over the long run (after at least 5 years of continuous cropping) and in certain areas. Leaving potash out when calculating response rates has no effect on the economic conclusions because the coefficients are based on trials that generally include some potash. Its effect, if positive, will simply be reflected in higher physical returns to the nitrogen and phosphates. The price of fertilizer also includes the cost of potash and trace minerals, as explained above. See notes to Table 1-16.  - 80 - The range in results from experimental research trials could be due to a number of factors, including differences in research management as well as in soils, fertility, and rainfall. The lower farm-level responses assumed for the analysis reflect the generally poorer condition of farmers' soils (com- pared to research stations) and the fact that they do not provide sufficient complementary inputs of labor and management to maximize physical returns. The farm-level trial results, which are similar to the upper bound assumed for farm responses for sorghum and cotton, are based on fertility trials conducted with cooperating farmers, under the active participation and super- vision of extension agents and researchers. The FAO results could be said to represent the yield responses that might be obtained by a "better" farmer receiving adequate extension advice and putting the fertilizer on the right soils. The better farmer might get more and the poorer farmer less - and the latter would probably stop using fertilizers. On top of this could be added a response for husbandry, the level of which can be tentatively suggested comparing the FAO results to those of ICRISAT. These figures therefore represent ranges that might reasonably be expected from fertilizer used to good advantage under a good extension program in average years. These are responses at the generally recommended rates of fertilizer application, 1/ although farmers probably use less. Response curves are not usually calcu- lated by researchers but can be assumed to be fairly linear at these nutrient levels, despite minor evidence of diminishing and increasing returns. 2/ For the sensitivity analysis. The lower response represents the average of farmers who manage their fertilized plots poorly or who put fertilizer on mediocre soils - or the response in years of inadequate rainfall. The upper response is that which should be achievable by good farmers, and as will be seen later, is a level which farmers should not fall below. 1.5.23 In physical terms, maize has the highest return, consistent with the large amount of research done on this crop. The return for cotton appears to be the most stable, suggesting that improved cotton is a reasonable innova- tion to promote where risk aversion is a problem. 3/ Responses by millet 1/ Recommended fertilizer rates are 150 kg/ha of 14-23-14 and 50 kg/ha of urea (46-0-0) for millet, sorghum, and cotton; 100 kg/ha of 14-23-14 and 100 kg/ha of urea for maize; and 100 kg/ha of 14-23-14 and 50 kg/ha of potassium chloride (0-0-60) for groundnuts. 2/ At the fertilizer levels used, the response rates for millet and sorghum may be diminishing so that lower fertilizer applications would raise margi- nal returns per unit of fertilizer. Response rates appear to be increasing or constant for maize and cotton so that more fertilizer would raise response rates even farther. The practical implications are that more attention should be paid to assessing the most economical rate of ferti- lizer application according to expected rainfall, soil type, variety and management ability of the farmer. 3/ The same conclusion was reached by the 1970 economic mission, also based on trials at research stations. The coefficients of variation are M: Sorghum and millet 45 Cotton 20 Groundnuts 16 Yields of cotton are roughly twice as stable as those of cereals.  - 81 - are low, indicating that with currently available genetic stock there is less scope for augmenting yields. 1.5.24 These are not long-run equilibrium response rates--10 year; of continuous cropping experiments by IRAT have shown that sorghum yields can be reduced to only 15-60 kg/ha, regardless of the level of mineral fertilizer, and that cotton yields can be lowered from 1.9 to 1.4 mt/ha even though nutrient levels were quadrupled--from 88 to 335 kg/ha. 1/ For the responses tabulated above to be maintained, there will have to be additional changes in the farming system to keep acidity levels from rising and tco maintain the structure and organic matter of the soil. 1.5.25 Bougouriba responses for cotton and sorghum accord well with research results; they are based on FAO trials on farmers' fields, in the region, adjusted downward to allow for farm yields to be somewhat lower during the earlier stages of the project. 1.5.26 Financial Evaluation. The past growth of fertilizer use suggests that farmers find manufactured fertilizers financially prof.itable. Using financial prices in Table 1-12 and the response rates given above, the net marginal gains to farmers from using a kg of fertilizer are 'ina CFAF): 2/ Crop Low response High response Millet (center) -8 110 Sorghum (center) 106 280 Sorghum (southwest) 67 205 Maize (southwest) 319 594 Cotton (southwest) 95 254 In all cases except low response for millet, results are positive, as expected. Moreover, in most cases, results are significantly posit`v'a, showing a high return to expenditures on fertilizers. It is often believed that farmers will adopt fertilizer only when they expect to get at least 100% return on the expenditure. A comparison of marginal gains with fertili:2er costs--the value-cost ratio--shows this to be generally the case: Ratio of: (a) extra value of p,roduction per kg of nutrients; and (b) cost of nutrients Crop Low response High reFJponse Millet (center) 0.9 1.9 Sorghum (center) 1.8 3.2 Sorghum (southwest) 1.6 2..8 Maize (southwest) 3.6 5.9 Cotton (southwest) 1.8 3.2 1/ See IRCT, "Comite de la Recherche Agronomique", 1980, Bobo-Dioulasso, 1980 (?); and IRAT, Rapport de Synthese 1979, in.1p., March 1980. 2/ Gain net of fertilizer cost, based on recommendei rates. For millet, sorghum and cotton, these costs amount to 117 and 126 CFAF/kg (N+P205) in the southwest and center. For maize, the cos,t is 121, in the south- west.  - 82 - For all cro,;s at the high response level and for maize at the low response level, the private incentive to use fertilizer is strong, as shown by a value-cost ratio of about 2.0 or above. Even at low response levels, the incentive is moderately attractive for cotton producers in the southwest and for sorghum producers in the center. The existing domestic price structure, even though berth cotton and cereals are taxed relative to world prices, favors the use of fertilizer. 1.5.27 The preceeding results are based on a partial analysis of the direct financial gains and costs associated with using fertilizers. In order to assess incentives to the farmer, it is necessary to analyze the productive activity in its entirety, taking into account changes in the costs of seeds, labor and other inputs that accompany the use of fertilizer. On the basis of farm budgets prepared for this report, 1/ some of the effects of adopting a package of seeds and fertilizers--along with some associated changes in crop husbandry--are summarized below, where figures are the changes compared to traditional methodis that result from the adoption of a fertilizer package. Crop (region) Change in net returns per unit of output (CFAF/kg) High wages Low wages Low fertilizer High fertilizer Low fertilizer High fertilizer _response response response response Millet (center) -7 -3 -9 -6 Sorghum (center) -5 0 -7 -3 Sorghum (southwest) -3 1 -4 -1 Maize (southwest) 16 20 7 13 Cotton (southwest) 1 9 -2 4 1/ See Annex I, "AnaLysis and Derivation of Crop Budgets." Net returns equal the differenice between the value of output per ha minus all costs, including labor, divided by the quantity produced (yield/ha). Prices are financial prices and are those given in Table 1-12. The two wage levels are CFAF 215-250 anid 300-350 per day. The two response rates for fer- tilizers fall roughlly on either side of the upper bound of the farm responses used in the analysis, as explained above. They are (kg of output per kg of nitrogen and phosphate): Crop (region) Low High Millet (center) 3.3 4.1 Sorghum (center) 4.2 5.3 Sorghum (southwest) 5.8 7.3 Maize (southwest) 10.0 12.5 Cotton (southwest) 8.2 10.3 The high response is .5% higher than the low response. Improvements in crop husbandry are not treated separately, but some improvements are assumed to accompany the use of fertilizer. In the recent ICRISAT Vil- lage Study it is suggested that net output per hour on sorghums increased from 25 CFAF to CFAF 7.5 using better husbandry, manure and fertilizer (see Matlon, 1981). Bnink projections are usually more modest increasing only about 15% from 203 to 233 CFAF per manday for husbandry alone (see Bougouriba Staff Appraisal Report (No. 3126-UV), December 1980).  - 83 - For maize and cotton in the southwest, unit costs tend to fall; for sorghum and millet they tend to increase. 1.5.28 However, the use of fertilizer can still be attractive even if unit costs rise because of the increase in the physical productivity of labor. The family may produce a larger volume with the result that the total value of output per farm is higher than before. Such incentives can be indicated by changes in net returns to labor or land, factors that are relatively fiv.ed for a farm family. Again, figures are the changes compared .o traditionlal production that result from the adoption of the fertilizer package, depending on various assumptions. Crop (region) Changes in returns Changes in returns per hectare (CFAF) per manday (CFAF) High Wages Low Wiages Low High Low High Low High fertilizer fertilizer fertilizer fertilizer fertilizer fertilizer response response response response response _esponse CFAF (%) CFAF (%) Millet (center) -44 (-11) 0 (0) -2,150 900 -1,250 1,550 Sorghum (center) -28 ( -7) 26 (7) -1,250 2,750 150 4,850 Sorghum (southwest) -28 ( -7) 19 (5) -1,900 3,000 850 5,550 Maize (southwest) 197 (56) 277 (79) 25,900 32,000 29,100 39,900 Cotton (southwest) -7 ( -3) 44 (16) -6,050 2,150 550 8,500 Regardless of assumptions, improved maize raises nat financial returns. For the other crops, higher net returns to labor occur at the higher, but not the lower fertilizer response rate. Higher net return,; to land occur at either the higher fertilizer response rate or at the lowe- wage, but not at the initial base assumptions. Thus, there is some evicence that tiany farmers will find the shift to improved techniques attractive. Shifts to improved cotton may be attractive to farmers even at the low response rate because of the secure marketing arrangements for it, the stability of cotton yields, the residual effect of cotton fertilizer in raising cereals yieldE, and the access to modern inputs that participating in the cotton pr-ogram guarantees. 1.5.29 Were the government to eliminate the subsidy on fertilizer without simultaneously raising commodity prices, 1/ the incefntive to use fertilizer would fall; the value-cost ratios (at the low response level) become only 0.9 for cotton and 0.8 for sorghum--implying that fertilizer costs more than it returns even ignoring other inputs. A priori, fertiLizer use by these farmers would fall. It must be stressed in this analysis thazt no value has been 1/ The Government could depress the price of cereals through food aid, for example.  - 84 - placed or, the stovers used for stock feed and fuel or on the production of manure from feeding the stovers to cattle. Stovers are an important feed for cattle iii the dry season and it has been estimated that cultivated fallow land and its stovers in the dry season produces as much as 30% of the feed for cattle. Cereals have a harvest index of 25 to 40% (i.e. weight of seed to aerial dry matter o-c plant) - probably nearer 25% in the case of Upper Volta. Higher grain yields would give proportionately more stovers and leafy matter. If stovers were used for stock feed, the output of livestock and manure could increasec since it is the availability of feed in the dry season that often limits the expansion of the cattle herd. 1/ 1.5.30 Economic Evaluation. Owing to price distortions described in Sectionl 3, financial results are not necessarily a good indication of the econom:ic worth of the technology, which is usually determined on the basis of international prices. The following sub-sections carry out this analy- sis, first by examining prices and then by looking at economic costs and returns at the farm level in both a partial and more general economic analysis. Sensitivity analysis--based on lower and upper values for input and output prices, for wages, and for fertilizer response rates--is used to obtain a ranget of results, which are further qualified by discussing possible external effects. 1.5.31 Input andl output prices are mostly given in Table 1-12; factor prices (of labor and land) are discussed in Section 3. Because 1979-80 prices are below both long-te:-m historical averages and projected long-term increases, they rerresent a lower bound. The 1990 projections represent an upper bound and are considerel more representative of long term conditions. Summaries and conclusions are thus based on these prices. 2/ When account is taken of shipping costs, which are assumed not to change, the ranges of economic prices are (in constant CFAF/kg): 1/ Valves for stovers and snanure are discussed in the World Bank, "Upper Volta: Lives3tock Subsector Review," Report No. 3306-UV, April 1981. 2/ Based on projections pi%blished in World Bank, "Price Prospects for Major Primary Coinmodities", Report No. 814/80, Washington, January 1980. For cereals, thra 1990 prices--in constant terms--are broadly similar to those that prevailed during the 1960s. It should be stressed that, with the exception of cotton and to some extent ferti- lizers, these prices a,re derived from numerous assumptions rather than based on actual costs observed in Upper Volta. A more detailed study of current prices is 'qarranted.  - 85 - Lower bound 1/ Upper Bound Sorghum/millet - import 64-74 2/ 69-79 - export 4/ 37-27 42-32 Maize - import 69-79 75-84 - export 4/ 42-32 48-37 Cotton - export 67-62 113-108 Rice-(paddy) - import 73-79 84-90 Urea - import 100-109 120-128 NPK - import 91-99 103-l11 3/ For the sensitivity analysis, it is estimated that long run (upper bound) economic prices are roughly 8% higher than 1979-80 prices for coarse cereals, 70% higher for cotton, 13% higher for compound fertilizer, and 20% higher for urea. 5/ 1.5.32 These prices are based on world prices, which is reasonable as all commodities are tradable. Chemical fertilizers are currently fully imported and are likely to remain so, given the low domestic consumption. 6/ Even a local blending plant would rely entirely on imported feedstocks. 1/ Revised estimates for 1980 published by the World Bank in November 1980 show generally lower world prices for cereals and higher ones for cotton. Thus, the new lower bound prices would be approximately: Sorghum/millet - import 58-68 - export 31-21 Maize - import 60-70 - export 33-23 Cotton - export 72-67 Rice (paddy) - import 70-77 New estimates show urea costing 10% more and DAP 8% less in 1980 than projected, but prices used here represent those paid earlier for delivery in 1980; thus they do not need revision. Upper bound prices (1990) have not been changed. As a result, import substitution for cereals will be less attractive, while exports of cotton will be more attractive. Over the same period, however, the CFA franc has depreciated, which tends to offset the effects of these revised prices on the analysis here. 2/ The first price refers to the southwest region, the second to the east. Prices for the central plateau are in between. 3/ Projection based on di-ammonium phosphate. 4/ Based on import parity price in Abidjan. 5/ These projections assume that only the world price of the commodity changes, with all the shipping and marketing costs remaining constant in real terms. These intermediate costs account for roughly half the value of imported commodities. 6/ There have been proposals to construct a bulk blending plant (see the IFDC study). The IFDC argues that local mixing could lower costs by US$100/mt (1976), owing to the high cost of mixing small orders else- where. The justification implies there are diseconomies of scale in fertilizer mixing, which is not commonly thought.  - 86 - Cotton is almost entirely exported and is most likely to remain a signifi- cant export crop. Cereals are currently imported--either commercially or as foreign aid, reflecting the lack of self-sufficiency in food. Export equiva- lent prices for cereals are useful for assessing the comparative advantage of the country in exporting food--a remote possibility, but one which must be considered if the country is to be completely self-sufficient. Table 1 - 4 shows that cereals production swings normally 5 - 10% above the mean with about a 25% fall every 10 years. To make sure of surplus in most years, it is necessary to aim for a small surplus in the good years which is either stored, fed to stock or exported. At present there are no plans for any of these options, with the result that a major surplus--produced using costly inputs--is likely to depress local prices and discourage continued high-cost production. Selecting the correct world price--quite apart from assumptions about costs--requires that several qualifying factors be considered that may tend to bias the observed or calculated price. The issue is most critical within respect to food imports. Given the variability of world prices and the large fluctuations in Voltaic output, there may be justification for increas- ing the unit value of imports to reflect the risk of relying on them. 1/ 1.5.33 In order to carry out the analysis, fertilizer prices must be put in terms of nutrients. In the form of urea delivered to the farm, nitrogen (N) costs from 217-237 CFAF/kg at the low end of the range to 261-278 at the high end. Nitrogen and phosphates (P205) together, in the form of mixed NPK, or "cotton", fertilizer cost from 246-268 CFAF/ kg to 278-300. 2/ 1.5.34 The simplest assessment can be made by comparing direct costs of fertilizers with the gross gains in output, using economic prices. This analysis is partial, in that it holds all complementary inputs at the same level of use as without fertilizer. Taking the southwest region as an illustra- tion--where fertilizer and cereal import prices are lowest and cotton export prices are highest --the following marginal economic returns to fertilizer can be calculated: Net Marginal Gain (CFAF) per kg of Fertilizer 3/ (Nutrient/output ratio in parenthesis) 1980 prices; 1980 prices; Longrun prices; Longrun prices; Crop Low response High response Low response High response Sorghum 18 (4) 210 (7) 3 210 Millet -110 (2) 18 (4) -135 3 Maize 322 (8) 667 (13) 331 706 Cotton 30 (4) 231 (7) 179 518 1/ On the other hand, to the extent that much of the imported food is aid, the opportunity cost of it to the country is lower than commercial world prices--if such aid can be expected to continue. 2/ For di-ammonium phosphate (DAP), the cost of N and P205 together is 175-188 CFAF/kg (low end of range). Higher costs of the cotton ferti- lizer are caused by its lower concentration (37% N and P205, compared to 64% for DAP) and the addition of potash, sulphur and boracine. 3/ Calculated as the difference between the cost of one kg of fertilizer and the value of the crop obtained from it. All ancillary costs asso- ciated with fertilizer use are ignored. 4/ At a response rate of 1 to 12 this would rise to CFAF 530, a situation that might pertain where varieties and conditions were very suitable.  - 87 - These figures show the net gain in the value of output for each kg of fer- tilizer applied, less the cost of the fertilizer itself. At 1980 prices and low physical responses, average farm-level returns for crops other than maize would appear fairly low--almost zero for sorghum and significantly negative for millet. For good farmers with good resources, however, the gains would be uniformly positive and quite significant for all crops except millet. The use of long-run prices--for both crops and fertilizers--worsens or does not improve results for millet and sorghum because fertilizer costs increase more than cereals prices; the situation improves slightly for maize. Long-run trends clearly favor improved cotton, however, compared with prices used for 1980. On this basis it would seem profitable for the country to grow certain cereals using fertilizer if adequate response rates could be obtained. 1.5.35 The calculations above are partial because they do not take into account other costs, especially the additional labor needed to apply the fertilizer, to control the extra weeds it feeds, and to harvest the larger output. In order to determine if it would pay farmers to use fertilizers if economic prices prevailed, these other costs must be taken into account. The simplest way to include these considerations is to use the rule of thumb that farmers would adopt fertilizers only if they expect to get a 100% return on expenditures. In other words, the ratio of (a) the extra value of production and (b) the expenditure on fertilizer usually must exceed two before small farmers would find fertilization attractive. The ratios based on data above and in economic prices are: 1980 prices; 1980 prices; Longrun prices; Longrun prices; Crop Low responses High responses Low responses High responses Sorghum 1.1 1.9 1/ 1.0 1.8 Millet 0.5 1.1 0.5 1.0 Maize 2.4 3.9 2.2 3.6 Cotton 1.1 2.0 1.7 2.9 1.5.36 In economic prices, this rule of thumb suggests that fertilizer use would be viable for maize at even conservative response rates, but it is a crop whose production is limited to areas over 700 - 800 mm of rainfall, particularly the southwest. Use of fertilizer on cotton and sorghum would be marginally attractive at the higher response ratio and emphasizes the need, in the case of sorghum especially, to try to increase the response to N+P205 to over 7 through improved husbandry and careful selection of fields. Results for millet are discouraging even under the best of circumstances. In the other regions, results for cereals might be slightly more favorable because of higher import-parity prices; they will be worse for cotton owing to lower export prices and higher fertilizer prices. Thus, it is clear that there is some scope to use fertilizer profitably, but its application should be selec- tive. However, until more is known about the distribution of good and bad farmers and soil quality, it is difficult to determine the scope for profit- able expansion. 1/ At a ratio of 1:12 this would rise to 3.2.  - 88 - 1.5.37 A more sophisticated analysis than using the value-cost rule of thumb is to attempt to estimate directly the several additional costs asso- ciated with fertilizer use when it is part of a package of improved practices. The following figures are based on the farm budgets prepared for this study (see Annex I) and show the changes that result by shifting from traditional to improved techniques based on fertilizers, improved seeds, and some associated changes in husbandry. All results are in long run economic prices. Crop (region) Change in net returns per unit of output (CFAF/kg) High wage Low wage Low High Low High fertilizer fertilizer fertilizer fertilizer response response response response Millet (center) -23 -18 -25 -21 Sorghum (center) -17 -11 -19 -14 Sorghum (southwest) -13 -8 -14 -10 Maize (southwest) 5 11 -2 3 Cotton (southwest) -19 -9 -21 -13 Except for maize, the shift to the new techniques clearly increases costs per unit of output; the pattern is much more definite than with current financial prices. This conclusion holds regardless of the assumptions about wages and fertilizer response rates. But given the uncertainty of the data, more research is needed before a final judgment can be made on the attractiveness of new input packages. There will be instances where seeds and fertilizers may increase net costs, and thus lower returns; and there will be others where they lower costs and improve profitability. It will be important to expand research programs at the farm level in order to learn what these conditions are, so that recommendations and extension programs can be tailored better to fit the circumstances. 1.5.38 These figures suggest that the fertilizer technology tends to be cost-increasing for all crops examined except maize--each additional kg produced with fertilizer costs more than those grown under existing methods. However, use of fertilizer may be one of the few ways available to farmers to expand their total output because it raises the physical productivity of their labor and land resources. To the extent that the increased output can be sold profitably (i.e., marginal costs are less than the price of the crop) the new technology can be profitably employed and should be encouraged. This appears to be the case for all the crops analyzed here; net returns per kg of produc- tion remain positive after the adoption of the fertilizer package, regardless of the assumptions. 1.5.39 However, the choice what to promote most strongly depends on rela- tive comparative advantages of different crops and techniques. For example, for some crops it may make the most economic sense to encourage adoption of fertilizers; for others it may make more sense to expand traditional produc- tion at the expense of some other crop. Comparative advantage must be  - 89 - measured in terms of the best alternative use of domestic resources, and an indicator of this is the domestic resource cost (DRC) ratio. 1/ Estimates of this ratio are tabulated below, based on long run economic prices: Crop (region) - technique High Wage Low Wage Low High Low High fertilizer fertilizer fertilizer fertilizer response response response response millet (center) - traditional 0.6 0.6 0.4 0.4 - improved 0.9 0.8 0.7 0.6 Sorghum (center) - traditional 0.6 0.6 0.4 0.4 - improved 0.8 0.7 0.6 0.5 Sorghum (southwest) - traditional 0.6 0.6 0.4 0.4 - improved 0.7 0.6 0.5 0.5 Maize (southwest) - traditional 0.7 0.7 0.5 0.5 - improved 0.6 0.5 0.4 0.4 Cotton (southwest) - traditional 0.6 0.6 0.4 0.4 - improved 0.7 0.6 0.5 0.4 1.5.40 Relative to traditional techniques, the use of improved varieties and fertilizer--along with appropriate farm practices--does not appear to improve comparative advantage except for maize. 2/ From these figures, it is easy to see that production of maize for import substitution clearly has the strongest comparative advantage, although production of cotton for export is almost as competitive--especially if wage costs are lower and fertilizer responses are higher. Sorghum, in the southwest, appears to be as economic an alternative as cotton--in fact, cultivating sorghum with traditional techniques to substitute for imported cereals may make more economic sense than growing improved cotton for export. In terms of regional differences, the southwest is uniformly more competitive than the center, despite higher wages assumed for the former. Moreover, the shift to improved techniques in the center tends to reduce the country's comparative advantage more than similar shifts in the southwest, suggesting that intensification efforts in the center--needed to expand physical output--will reduce economic productiv- ity more severely than in the south. Finally, the comparative advantage in 1/ The DRC equals the ratio of domestic factor costs--valued in shadow prices--and domestic value added-measured in world prices. A value below unity indicates comparative advantage; and a value above unity suggest that substituting for imports, or exporting, is inefficient. 2/ Results also improve for groundnuts, but data are much less reliable in this case.  - 90 - substituting for imported cereals largely disappears if cereals are exported-- the DRCs rise to 1.0-1.1 for maize and to 1.3-1.5 for sorghum for production in the southwest. 1.5.41 The results of the economic analysis for manufactured fertilizers indicates that seed-fertilizer technology appears to lower, not raise eco- nomic gains per unit of output when current world prices are used to evaluate physical gains. The technical packages are not yet sufficient for these farmers who have little control over a difficult environment, which is a constraint that extension advice can do little to overcome. There are, however, some encouraging indications that marginal gains for the country from the use of manufactured fertilizer and the related technical package-- especially for maize and sorghum production intended to substitute for imports--are economically viable, even for average farmers, despite the fact that production costs will rise. For cotton, the results are quite encourag- ing if world prices rise to expected long-run levels. Rock Phosphates 1.5.42 The second type of fertilizer is rock phosphate, which can be used to overcome the phosphorous deficiency common to most Voltaic soils. Yield responses are encouraging; and at prevailing costs of fertilizer, the use of local rock phosphates to substitute for some of the imported soluble phosphatic fertilizer that would otherwise be required appears to be warranted for cotton and maize, but less so for the other cereals. 1.5.43 The substantial reserves in Upper Volta have been known at least since 1970 and are estimated at about 100 million mt, at least a third of which are located near Kodjari in the southeast corner of the country. Mining and grinding on a small scale started in 1978 under German financing with a current annual output of 1,000 mt. The production is under the control of the Bureau Voltaique de la Geologie et des Mines (BUVOGMI); the DSA, together with the ORDs, is in charge of distribution to farmers as with other fertilizers. 1.5.44 This local phosphate appears to be of fairly low quality, with a low percentage of P205 and low solubility. In terms of effects on vegetative production, as measured in laboratory tests, Voltaic rock phosphate gives results similar to those for phosphates from Togo and Senegal, but worse than for phosphates from Mali and Niger. 1/ On the basis of preliminary analyses, IFDC has suggested that the solubility may be too low for direct application; and IRAT tests with a variety of soil samples--though none from Upper Volta-- show only modest effects on vegetative growth. 1/ The percentage of P205 (in mineral form) ranges from 17-31%; solubility in neutral citrate is 6-8%. See RHV, MDR, DSA, Project Phosphate de la Haute Volta, "Utilisation Agricole des Phosphates Naturels de Haute Volta," by Martin Bikienga, Michel Sedogo and Dominique Ouattara, March 1980, pp. 6-7; IFDC, West Africa Fertilizer Study, "Upper Volta", Vol. 4, Florence, Alabama, March 1977, p. 28; and Truong Binh, J. Pichot, and P. Beunard, "Caracterisation of Comparaison des phosphates naturels tricalciques d'afrique de l'ouest en vue de leur utilisation directe en agriculture," L'Agronomie Tropicale, Vol. 33, Avril-Juin 1978, pp. 143-145.  - 91 - 1.5.45 Response rates to rock phosphate are still unknown with certainty, since the first demonstrations were carried out only in 1976. In general, most crops respond. The yield effect is largest for cereals, among which maize appears to have the highest response. Cowpeas respond less well than millet or sorghum. Imported soluble phosphatic fertilizer tends to give a better yield response than rock phosphate alone, especially at low levels of application, but the response to rock phosphates could be improved by finer grinding, partial acidification, and the complementary use of soluble phos- phates at critical stages in the plants' growth. Over the long term, applica- tion of rock phosphates may further raise yields by reducing soil acidity as the result of the large amount of calcium (Ca) they contain (estimated at about 34%). This potential has yet to be fully demonstrated and will be reduced to the extent that natural phosphates are chemically treated with various acids to improve their solubility. 1.5.46 Although several institutions are carrying out field trials, 1/ the available research results must be interpreted with caution because of ambiguities in estimating the amount of P205 actually released yearly from rock phosphate and because fertilizer levels with and without rock phosphate are not always equivalent. 2/ The longest and probably most reliable series has been reported by IRAT. Because the need to reduce the phosphorous defi- ciency in Voltaic soils can be taken for granted, the interest in using rock phosphates is to replace imported phosphatic fertilizer. Thus, comparisons made between results achieved with equivalent levels of fertilization from the two sources of P205 indicate that for all crops the yields with rock phosphates alone are lower than with soluble phosphates. For the cereals, the decline in yields is significant. With half rock phosphates and half soluble phosphates, however, the declines in yields are much smaller; yields even 1/ These agencies include IRAT (1976-79), SAFGRAD (1979), ICRISAT (1979), the Dedougou ORD (1977), and the Phosphate Project itself (1978). The various results are summarized in RHV, MDR, DSA, Projet Phosphate de la Haute Volta, "Utilisation Agricole des Phosphates Naturels de Haute Volta," by Martin Bikienga, Michel Sedogo, and Dominique Ouattara, Ouagadougou, March 1980. Results given here are from this report except as otherwise noted. The FAO has carried out other tests with rock phosphates in 1979 on groundnuts grown in the center and east. See FAO, Programme Engrais de la FAO en Haute Volta, Rapport Annuel: Saisons Culturales 1977, 1978, 1979, (AG:GCP/UPV/18/BEL.), Ouagadougou, 1980. 2/ It is estimated that about one-third of the available phosphates are dissolved each year over 3 years, but this is not verified. Recommenda- tions for applications on cereals range from IRAT's proposal to apply 400 kg/ha in a basic application followed by annual use of chemical ferti- lizers and more rock phosphate to SAFGRAD's proposal to apply 100 kg/ha/ year together with additional nitrogen (urea or manure).  - 92 - increase for maize. 1/ The FAO one-year study of groundnuts shows that yields increase with rock phosphates only, when compared with simple super- phosphates estimated to give the same level of P205. 1.5.47 This lower response may be justified if local rock phosphates are a much cheaper source of P205 than imported soluble phosphates. At Ouagadougou, local phosphates appear to cost only about 40% of foreign phosphates, regardless of source. 2/ Since the world price of phosphatic fertilizers is expected to rise in real terms--although by much less than nitrogenous fertilizers, the long run prices (about 7% higher for farmers than the 1979-80 level for triple superphosphate) would make local rock phosphates look even more attractive than imported substitutes. When account is taken of 1/ Yields in kg/ha: All Rock Half Rock NPK Phosphate Phosphate Crop, Dates, Location Fertilizer plus N and K & Half NPK Cotton, 1976-79, Saria 1,260 1,155 1,137 Cotton, 1976-77, Farako-Ba 732 377 776 Sorghum, 1976-79, Saria 1,505 828 1,202 Millet, 1976-79, Farako-Ba 964 680 839 Maize, 1977-79, Farako-Ba 1,870 1,115 1,923 Groundnuts, 1976-79, Saria 1,178 1,062 1,164 Groundnuts, 1979, East-Center (FAO) 298 413 - Fertilizer levels are (in kg of NPK nutrients per ha): Cotton 44-35-21 Millet and sorghum 37-23-14 Maize 60-23-44 Groundnuts 14-23-14 Groundnuts (FAO) 0-25-0 2/ Costs are not easy to compare, but the following figures give some indications: CFAF/kg, Ouagadougou Type of Phosphate Total P205 Remarks bulk only Rock phosphate, Kodjari 20 80 Excludes depreciation and finan- (0-25-0) cial costs; includes 12 CFAF transport. Foreign rock phosphate 64 194 9 CFAF fob Casablanca plus (0-33-0) 18 CFAF for ocean freight and handling. Triple-super-phosphate 94 204 39 CFAF fob Florida plus 18 CFAF (0-46-0) for ocean freight and handling. Excludes certain costs but assumes a modest percentage of P205 and takes no account of local taxes on transport.  - 93 - the value of the loss in output compared to the cost savings from using rock phosphates rather than imported fertilizer, it appears that the use of rock phosphates as a cheaper source of P205 to substitute completely for foreign phosphates does not seem justified economically. 1/ However, the yield penalties from a mixture of rock phosphate and soluble phosphate are less. For maize and cotton the substitution of local rock phosphates warrants further consideration, although for millet and sorghum there appears to be less scope for profitable substitution. 2/ The same analysis was not done for groundnuts, but the results from the FAO fertilizer trials in 1978-79 indicate that response rates to rock phosphates, especially in the western part of the country, may be high enough to justify their use. In any case, the issue deserves further research. 1/ The yield penalties from using only local phosphates are high--ranging from 230 kg/ha for cotton, 284 kg/ha for millet, 677 kg/ha for sorghum, and 755 kg/ha for maize. These estimates are taken from on-station trials. The effect for farmers may be less marked because of the lower yields that farmers usually obtain relative to results on research sta- tions. The economic value of this lost output is about (in 1979-80 prices in the center 2one): CFAF/ha Cotton 15,180 Millet 19,880 Sorghum 47,390 Maize 55,870 In long run prices these losses would be about 8 percent greater for the cereals and 70 percent greater for cotton. Savings from using local phos phates are about 2,852 CFAF/ha (in the center zone) for the cereals and 4,340 for cotton. The rock phosphate project calculates more en- couraging results, arguing that in quasi-economic prices, rock phosphate on sorghum is nearly as good and on millet is better. 2/ The declines in yields range from 40 kg/ha for cotton, 125 kg/ha for millet, and 303 kg/ha for sorghum, to a gain of 53 kg/ha for maize. The value of this lost output amounts to: CFAF/ha Cotton 2,640 Millet 8,750 Sorghum 21,210 Maize (gain) The value of the savings are about 1,426 CFAF for cereals and 2,170 for cotton. These calculations are based on prices in the center zone, where rock phosphates and cotton are cheaper. The results would be less encouraging for the southwest zone where most of the cotton is produced.  - 94 - 1.5.48 The major nonquantifiable advantage of rock phosphate is its liming effect that ought to raise the Ph of the soil. Acidic soils are a serious constraint in any case, and soluble phosphatic fertilizers exacerbate it. Un- fortunately, in short-term experiments, the evidence that yields are increased as a result is unconvincing. In conclusion, on average the application of rock phosphates is difficult to justify. But at the margin, and considering its value in maintaining future output, its use warrants more careful con- sideration. Other Fertilizers 1,5.49 While mineral fertilizers and rock phosphates must be purchased, the farmer can avail himself of three other possible means to improve soil fertility: manure, crop residues, and rotation or intercropping. It appears that farmers are already well aware of the value of these nutrient sources, and all of them appear to augment yields at little apparent cost. But some are in short supply; there are often substantial handling costs; and technical constraints make it difficult to augment their use on crops. 1.5.50 The availability of manure can be increased by more animals, which may require forage production and the closer integration of livestock with agriculture. The expansion of animal traction represents a first step in this direction. A pair of oxen probably produce about 100 kg of N per year, worth some 20,000 CFAF at current economic prices and some 20 percent more at long run prices. Although there is a cost for collecting and applying this manure, the cost is reduced by using ox carts for transport. 1/ In addition to the nitrogen it provides, manure also improves soil structure. Its use becomes critically important as mineral fertilizers are applied at higher levels and over longer periods. There also appears to be some evidence of a positive interaction between manure and chemical fertilizer. The promotion of manure stables and smallholder cattle fattening represent other methods to increase the availability and use of manure, although.they are not likely to be widely adopted at the present time because they are less closely linked to agricultural production and are profitable only under certain circumstances. 2/ Finally, the amount of manure could be effectively increased by improving the methods of applying it, placing it next to plants rather than spreading it. 1.5.51 The returns from using manure vary by crop, and appear to be more important for cereals and cotton than for legumes. Field trials by IRAT in 1979 show responses rates of 5-7 kg per kg of N, which are in line with expected results for research stations. Yield increases as low as 100 1/ There is also a cost for feeding and tending the animals (as much as 45 man days per pair of oxen), but this cost is charged either to their use as draft animals or against the value of the beef produced if stall fattened. 2/ For a discussion of small-holder fattening, see the World Bank, "Upper Volta: Livestock Subsector Review," Report No. 3306-WV, April 1981, Washington.  - 95 - kg/ha would add some 5,000 CFAF to the gross value of output (financial prices), with little additional direct cost. 1/ 1.5.52 Crop residues (e.g., stalks, straw, leaves) are either removed or burned in traditional systems, in part because they cannot be incorporated into the soil by hand cultivation. However, their use becomes increasingly important to counter the negative effects of increased application of chemi- cal fertilizer as cultivation intensifies. Crop residues also improve the porosity of soil and increase its capacity to hold water, helping to overcome the moisture constraint. Experiments by IRAT over 1973-79 indicate positive physical results. 2/ In many areas, crop residues are used for fuel or animal feeds; thus their use as a source of soil nutrients is not costless. Local markets appear to provide an outlet for crop residues at CFAF 5-10 kg for sorghum/millet stalks and at CFAF 10-75/kg for legume tops. At traditional yields, the value of these residues - including the substantial labor involved in collecting and transporting them--is about CFAF 6,500/ha, 3/ which corre- sponds to about 150 kg of cereals (at about CFAF 50/kg). Use of crop residues to increase yields is doubtlessly justified especially since many residues are 1/ The following are yield improvements from using the manure that can be expected from a team of oxen during a year (in kg/ha): With only With 37-23-14 Total Crops 37-23-14 and 5 mt manure increase Cotton 1,490 2,192 702 Sorghum 1,069 1,523 454 Cowpeas 1,304 1,160 -144 IRAT, Rapport de Synthese, 1979, n.p., March 1980. These yield responses may be optimistic because the experimental plots were heavily limed in 1978 to lower soil acidity. 2/ The following physical gains can be expected from keeping crop residues in the production cycle (in kg/ha). Hoe Cultivation Ox Plowing Sorghum Cotton Sorghum Cotton Removal of residues 1,364 936 1,626 1,133 Burning of residues 1,337 1,017 1,707 1,238 Reincorporation of residues 1,593 1,057 1,875 1,306 Increase over removal 229 121 168 167 Increase over burning 257 41 249 68 Average Increase - total 243 81 209 118 - % 18 8 13 10 See IRAT, Rapport de Synthese, 1979. n.p. March 1980. 3/ See World Bank, "Upper Volta: Livestock Subsector Review," Report No. 3306-UV, Washington, April 1981. Fodder yields are estimated at 1.0 mt/ha for cereals and 0.15 mt/ha for cowpeas (intercropped). See also IRAT, Rapport de Synthese, 1979, n.p., March 1980. Calculations are based on lowest market prices.  - 96 - currently discarded, but incentives and capability for farmers to use them for this may have to be improved. 1.5.53 Several changes in farming and rural households may thus be neces- sary to expand the utilization of fertilizers available to farmers. First, farmers must have access to animal-drawn plows (probably ox-drawn) to be able to turn under the residues (to the extent that this is preferable to no-till farming). Second, alternative sources of fodder may need to be introduced to feed oxen and small ruminants who now consume much of the residue. This production may itself require additional fertilization--especially if it is on fallow land. Third, other sources of household fuel and fencing will have to be found, especially for the central plateau where forests are depleted. Research has only begun to address these latter two problems. 6. ANIMAL TRACTION 1.6.01 In addition to seeds, fertilizers,and related inputs for intensify- ing agriculture, animal traction is the other major technological innovation. In general, its adoption is associated with a more extensive production system that enables more land to be brought under cultivation by increasing the land- labor ratio. In effect, by providing a new source of power, it substitutes capital (and labor to take care of the oxen) for labor used to cultivate crops. By breaking seasonal labor bottlenecks, it also allows farmers to make better use of available labor at other times of the season. It is often argued, however, that under Voltaic conditions animal traction may be more instrumental in making production more intensive (e.g., helping raise yields) than it is in expanding area cultivated by saving labor. Neither effect necessarily occurs, and preliminary results from the country--based on direct costs and benefits-- suggest that animal traction may not yet be economically viable as a new tech- nology for most farmers, although its recent, rapid spread indicates it is financially attractive for many farmers in more productive areas. After a summary of major conclusions, the following section discusses the evolution of animal traction, its potential and observed effects in saving labor and expanding area cultivated, and what government policy should be in the future. 1.6.02 Animal traction is a rapidly growing technique, promoted by develop- ment agencies, extension and credit, facilitated by widespread availability of equipment, and encouraged by relatively favorable prices. The growth of cotton cultivation also appears to have stimulated the adoption of ox traction. It is a technique that appears to hold considerable potential for raising the physical productivity of the country's scarce resources--land and water--and for encouraging reinvestment of agricultural surpluses in farming. The tech- nique has the potential to raise the physical productivity of labor engaged in crop production as well as to provide indirect benefits like easier farm transport and production of beef and manure. Research consistently confirms this potential, and experience in neighboring countries indicates that farmers can realize it. But the positive evidence from Upper Volta is scanty--other than the increased use of the technique. 1/ 1/ Some information on the development of animal traction in Upper Volta--as well as in other Sahelian countries--is reported in Merritt W. Sargent, John A. Lichte, Peter J. Matlon and Roger Bloom, "An Assessment of Animal Traction in Francophone West Africa," Working Paper No. 34, African Rural Economy Program, Michigan State University, March 1981.  - 97 - 1.6.03 In financial terms, the technique is attractive in many circum- stances; governmental policies--primarily credit--tend to subsidize its adoption by perhaps one-third. From an economic viewpoint, it appears that, compared to manual cultivation, the use of ox traction can raise the net returns from cultivating improved cotton, and perhaps maize, especially in the southwest. Results for sorghum indicate there may also be slight gains, while those for millet are uniformly negative. What is important to keep in mind is that animal traction interacts favorably with improved varieties and ferti- lizers to augment their productivity. j/ These conclusions are obviously sensitive to assumptions, although the pattern of these results seem fairly insensitive to the different assumptions about wage levels and fertilizer response rates. In general there may be a tendency to understate the attrac- tiveness of the technique. 1.6.04 This potential gain from annual traction is far from fully ex- ploited, and more work needs to be done to realize it. First, there may need to be subsidies on the initial purchase of equipment, given the long time (3-4 years) required to learn how to use the equipment effectively--during which farm returns may rise little, if at all. Such a subsidy is also justified to the extent that the use of animal traction by farmers could help bring about results (like reduced soil erosion or degradation) that also benefit the rest of society. The best policy would be to offer more favorable credit terms for first-time purchase of equipment. Draft oxen, already part of attractive private investment schemes, probably need no such financing. Second, research should be focused on the development of additional equipment--like seeders-- that can break a significant labor bottleneck and improve the productivity of both existing equipment and improved seeds and fertilizers. Third, extension messages on the use of draft oxen may need to be improved--in conjunction with research--in order to shorten the learning time required. Fourth, more efforts must be made to strengthen the integration of livestock with crop farming--as implied by the use of animal traction--perhaps through fencing and fodder production and conservation (although these are long-term measures that may not yet be practical). Research has begun, but more will be needed. Fifth, veterinary services to farmers may need to be increased and reoriented to provide curative care for individual animals rather than mere preventative treatment against epidemic diseases. A. Evolution 1.6.05 It is difficult to document how the use of animal traction has evolved in Upper Volta, especially since there has never been an agricul- tural census. Data in Table 1-14 suggest that the number of ox teams has grown from a mere 1,000 nationwide in 1965 to at least 26,000 in 1979. Some estimates put the figure as high as 30-40,000 ox teams to which must be added donkeys also used for draft power, 1/ but others estimate that animal traction was used on only 15,000 farms in 1978, employing perhaps 23,000 ox 1/ The recent ICRISAT village study showed a very small increase in output and financial returns per hour from animal traction without inputs but a 20% or more increase when manure and good husbandry were applied com- pared with these inputs applied by hand methods (see Matlon, 1981). 2/ For example, experience under RDF II shows that 77% of the credit accorded for plows in 1976-78 was for smaller donkey plows.  - 98 - teams. 1/ Total units of equipment owned and used by farmers are also unknown, in part because both actual utilization and depreciation rates have not been well studied. Growth rates for investment in animal traction can only be roughly established, but indications are that ox teams may be growing at the rate of about 20-25 percent per year. 2/ This rate gives estimates of quantity increases that correspond well with the actual number of ox plows sold in 1975-76 (2,362 compared to an estimated 2,662), but it overestimates the level of increase later (for 1977, the estimated increase is 4,169 compared to 2,500 supposedly put in place--see Table 1-14). It is significant to note that this growth has occurred despite apparent increases in the real price of oxen (see Table 1-11). 1.6.06 Geographically, animal traction is used throughout the country but it is concentrated in cotton-producing areas. As shown in Table 1-18, the two ORDs with 65% of cotton area and 81% of production (Dedougou and Bobo- Dioulasso) contained about 53% of the ox teams. 3/ The two other ORDs where the density of animal traction (per habitant) is above the national average are Koudougou and Yatenga. Population density--which is a measure of the relative incentive to adopt the technique--does not appear to be well-corre- lated with the adoption of animal traction; nor do food production or cattle per capita, which are measures of relative wealth. Even though cotton cultivation is perhaps the best explanatory variable, it is significant to note that the use of animal traction has grown most during the period when cotton areas were stable. These aggregate trends suggest that cotton revenues finance animal traction, but they do not indicate that animal traction has been vital for expanding area cultivated. Micro-level studies might show different results. 1/ Based on 3.2 oxen per household by the third year after adoption. See Republique de Haute Volta, Ministere de Developpement Rural, "Enquete sur l'Impact de la Culture Attelee sur la Production Agricole et les Revenus de l'Exploitant", by the project FAO/TF/UPV/17/DEN, Ouagadougou, October 1979. 2/ For example, an increase from 1-2,000 ox teams in 1965 to 26,000 in 1979 gives a growth rate of 20-26% (see Table 1-14). In Bobo-Dioulasso ORD, ox teams grew by 29% per year between 1975/76 and 1978/79, and plows owned increased by 23% per year over the same period; see RHV, MDR, ORD des Hauts Bassins, Bobo-Dioulasso, "Rapport Technique 1978-79" Bobo-Dioulasso, n.d., p. 51. This is a high growth rate because of the very low starting point. It can be expected to fall; for example the growth rate in Mali is thought to be about 10%, but requiring some 30-40,000 additional oxen. See the 1979 World Bank Agricultural Sector Study. 3/ The 1970 economic study by the World Bank (vol. 3, "Livestock", Annex 5, p.4) stresses the opposite pattern--that cotton output varies in- versely with the number of oxen used--based on an ox census of several cercles in 1969. The reasoning was that labor for harvesting is the major constraint, and in areas with a low density of population, where oxen are most likely to be used, there is a shortage of such labor.  - 99 - 1.6.07 Efforts to promote animal traction began before independence and several small organizations, often supported by foreign, religious groups, sought both to encourage more widespread use of draft animals and to manu- facture implements designed for Voltaic conditions. Among the implements developed in the 1960s was the tined triangle cultivator--the Houe Manga-- versions of which are still being produced and used. By 1968, two local firms, SOVICA and SAFI, were producing equipment locally, but only SOVICA continues to manufacture carts (3-5,000 per year). In 1975 the FAO helped establish a new manufacturing system based on two central workshops (ARCOMA-- Atelier Regional de la Construction des Materiels Agricoles) and nine assembly units (COREMMA--Cooperatives Regionales de Montages des Materiels Agricoles) located in most of the ORDs. In 1975 a special credit program financed by foreign donors was launched to encourage the purchase of oxen and equipment, and it funded 1,400 ox teams in 1979. Most rural development projects have contained a component to help finance purchases by farmers. These programs have probably had a significant impact in sustaining the high rate of adoption. B. Advantages 1.6.08 The advantages argued for animal traction generally include an expansion of cultivated area per worker and higher yields per ha. For Upper Volta, the most important would be higher yields; it is also the most complex to measure and explain. There are numerous secondary advantages such as better transport of inputs and commodities. 1.6.09 Higher yields. The theoretical support for higher yields from the use of draft animals is based on potential improvements in husbandry that raise the efficiency of resource use. First, because oxen provide more power enabling a farmer to work more rapidly, operations can be more timely, enabling earlier planting to maximize the short rainy season, and faster, more frequent weedings to reduce competition for scarce nutrients. Second, plowing conserves water by increasing infiltration of rainfall. Third, it improves soil structure--particularly of sandy, tropical ferruginous soils common in Upper Volta--by loosening particles to facilitate root development. Fourth, it makes it easier to incorporate crop residues, which may raise soil fertility and reduce the runoff of rainfall. 1/ Fifth, it can augment the efficiency of chemical fertilizers by getting them closer to the root zone. Incorporating fertilizers into the soil in this way may be critical in maximizing the yield increases from using local rock phosphates. Finally, keeping draft animals provides manure that can be used to raise soil fertility. 1.6.10 Much agronomic research verifies these effects, as illustrated in Table 1-19. These results, which show possible yield increases of 20-30% for sorghum, millet, cowpeas, and cotton and of almost 50% for maize, are based on trials where animal traction is properly used and crops are well managed and fertilized at high levels. Results tend to be better on sandy soils and with moldboard plows--rather than with scarification devices 1/ In many situations, no-till farming--in which crop residues are left undisturbed on the surface--may be the most effective way to control soil erosion and protect fertility.  - 100 - like the Houe Manga. The SAFGRAD results, which are based on experiments that did not apply manufactured fertilizers, show no yield increases from using animal traction; output per hour and return per hour however could still be equivalent or higher than with hand cultivation. 1/ There is also research evidence suggesting that local millet varieties do not respond much to better soil preparation by animal traction. 1.6.11 Evidence from farmers' fields is rather ambiguous although farmers often believe they obtain higher yields. Comparisons between farmers who do and do not use animal traction are complicated by the high probability that adopters were better farmers to begin with. The following results, taken from a recent survey undertaken to measure these effects, give the increase in yields obtained by farmers after three years of using animal traction compared to neighboring farmers using manual techniques (yield increases for farmers using animal traction as a percent of yields in manual cultivation):2/ REGION MILLET SORGHUM MAIZE GROUNDNUTS COTTON North 3 -24 n.a. 36 n.a. Central -4 4 n.a. n.a. 38 West n.a. 5 ? 13 52 The performance for foodcrops shows no particular advantage in yields for animal traction, and yields of sorghum in the north--where the growing season is shortest--seem much worse with ox cultivation. Unfortunately, no figures on output per hour or net returns per hour are given and farmers could be sacrificing yields for higher returns on their labor, using any savings for other work on the farm or for work elsewhere (e.g., in Ivory Coast) where returns to labor are higher. This could be so particularly in the North. Yields for groundnuts and cotton appear consistently higher with ox cultiva- tion. The latter two crops are more likely to be fertilized than cereals, suggesting a positive interaction between ox cultivation and fertilizers. 1/ The ICRISAT Village Study (see Matlon, 1981) showed a decline in output per hectare (but not output per hour) when animal traction was used on sorghum without modern inputs as compared with a 15 percent increase in yield due to animal traction on sorghum grown with modern inputs. 2/ The study was based on a small number of farmers, with only one yield plot from each. These figures are different from those actually reported because the study compared yields of adopters with average yields for the ORD as a whole as reported by the ORD's administration. These average ORD yields were often far below those achieved by the control group, causing the conclusions drawn by the study to appear unduly optimistic. Moreover, reasons advanced to explain yield increases do not accord with the data presented. Farmers who perform more operations with ox cultiva- tion on a larger percent of cropland are no more likely to have higher yields than they are to have the same or even lower yields. Republique de Haute Volta, Ministere de Developpement Rural, "Enquete sur l'Impact de la Culture Attelee sur la Production Agricole et les Revenus de l'Exploitant", by the project FAO/TF/UPV/17/DEN, Ouagadougou, October 1979.  - 101 - 1.6.12 There are numerous reasons why farmers do not in fact achieve the higher yields attained on research stations. First, normal farm yields are usually below those in the field trials, and these yields may be constrained by factors unaffected by animal traction (e.g., low soil fertility, unim- proved seed varieties). Second, plowing with animal traction may actually delay planting--and shorten the available growing season--if the usual farm practice was to seed without prior land preparation. Third, animal traction might increase runoff of rainfall, reducing scarce moisture. However, the evidence is contradictory on this third point, and measurements have only been made on research plots.l/ When ox cultivation is improperly done the likelihood of more runoff is probably greater. 1.6.13 Changes in land area: By saving time during critical periods of the cultivation season, the use of draft animals can theoretically enable a family to cultivate more land, without recourse to outside labor. Overall farm sizes do tend to be larger for families using animal traction, in part because large families--who already cultivate larger areas--are the most likely to adopt the technique. The critical question is whether the ratio of area per worker also increases with the use of animals--indicating that labor has become more productive physically. The Michigan State University research in the Fada ORD suggests that areas cultivated per worker are only about 10% higher in families using animal traction, but animal traction is new in the region and its potential may still be underutilized. 2/ A feasibility study for the CNCA notes that one-fourth of families adopting animal traction in Banfora ORD expanded the area cultivated, as did an unspecified number of farmers in Bobo-Dioulasso ORD. 3/ Reasons that discourage expansion of 1/ IRAT tests in 1979 showed runoff to be identical with manual and animal cultivation when residues were not incorporated, but about one fourth less for animal cultivation when crop residues were turned under; see Rapport de Synthese, 1979, n.p., March 1980. Research by IRAT-CIEH shows runoff to be over 150% higher with continuous ox cultivation, although the comparison was with manual cultivation following fallow; see F. Forest and J.F. Poulain, "Etude de Ruissellement et de ses Consequences au Niveau du Bilan Hydrique des Cultures Pluviales", IRAT-CIEH (MDR, DSA), Saria, 1977. Other IRAT-CIEH experiments show runoff to be nearly identical regardless of the type of cultivation, with a tendency for it to be worse under ox cultivation when residues are not plowed in. See CIEH, Departement Agro-climatologie, and IRAT, Etude de Ruissellement a la Parcelle et de ses Cons6guences sur le Bilan Hydrigue des Cultures Pluviales en Sol Peu Profond, Rapport 1978, by B. Lidon, G. Sola, P. Morant, and M. Sedogo, Ouagadougou, n.d., p. 34. 2/ See ORD de l'Est, Bureau de l'Analyse Economique et de la Planification "Note Preliminaire sur les Caracteristiques Descriptives des Menages Agricoles dans l'ORD de l'Est," Fada N'Gourma, April 8, 1980. This difference falls within the estimated 10-20% confidence interval and thus may not be statistically significant. 3/ See Caisse Centrale de Cooperation Economique, "Rapport de Mission sur le Credit Agricole en Haute Volta--Evaluation du Projet de Creation d'une Caisse Nationale de Credit Agricole", by G. Pince, Paris (?) January 1980, p. 25. The report also implies that farmers in Koudougou did not expand areas.  - 102 - cultivated areas include labor constraints at other times of the season (e.g., planting) that animal traction does not alleviate and lack of avail- able land in the farming community. It is also possible that labor savings are not used to expand land areas but in off-farm employment. In any case, given the relative scarcity of land in the country and growing concerns about deforestation and erosion, expansion of cultivated area per household--without decreasing the number of farm households--may not be a desirable long term goal except where there is unused arable land. C. Disadvantages 1.6.14 It is also important to evaluate potential indirect dangers from the expanded use of animal traction that could raise the long term social cost of the technique. The most important danger--especially pertinent for Upper Volta--is the likelihood of increased soil erosion. Recent research evidence, however, suggests this danger is not inherent in the technique, 1/ and--by making it easier to plow in crop residues--animal traction may improve the ability and willingness of farmers to control erosion. Of course, safeguarding against erosion requires proper cultivation, whether manual or with animals, including contour plowing and closed ridges. 2/ D. Economic and Financial Considerations 1.6.15 Costs. The costs and returns for animal traction are difficult to ascertain because of ambiguous costs--like labor for herding, feed supplements, and damage to crops, and highly variable rates of utilization. This subsection considers direct costs, divided into capital and recurrent costs. Investment costs in 1980 financial prices are: 3/ Ox team CFAF 75,000 (Includes 5,000 for training) Equipment CFAF 36,500 (Plow, ridger, and weeder) Annualized capital costs--reflecting the flow of capital services--vary depending on the method used to calculate them. The estimated average annual capital costs thus amount to (CFAF per ox team): l/ The amount of soil lost is not significantly greater under ox plowing (4.09 mt/ha) compared to manual cultivation (3.69 mt/ha). More importantly, the incorporation of crop residues--which is more likely to occur with ox cultivation--can reduce erosion by about 1.8 mt--or nearly 50%--regardless of the type of cultivation. See IRAT, Rapport de Synthese, 1979, n.p. March 1980, p. 24; these are results from care- fully controlled experiments, not necessarily what would be achieved on farmers' fields. Earlier experimental research showed 28% less erosion with animal traction alone and 34% less with both ox plowing and incor- poration of crop residues. 2/ The most effective way to control soil erosion may be no-tillage farming, which usually requires the use of chemical herbicides. This possibility has not yet been evaluated in Upper Volta. 3/ There may be minor price distortions. The export tax on cattle may depress the financial price of oxen 10-12% below the economic price. There are also probably subsidies in the price of ARCOMA equipment, but their magnitude has not yet been determined. For simplicity, financial and economic prices are assumed to be equal.  - 103 - Financial Economic Capital Investment Cost 1/ Investment Cost 2/ Recovery Factor 3/ Ox team -2,428 7,935 -5,932 Equipment 7,052 10,774 5,440 Total 4,624 18,709 -492 The economic costs used in the analysis are higher than both financial costs and theoretical costs based on annuities. They thus represent the high end of a range of estimates. 1.6.16 Recurrent costs to cover maintenance and upkeep are estimated at (CFAF/year/team): Economic and Financial Recurrent Costs Ox team 20,000 Equipment 738 Total 20,738 Because of the uncertain nature of these costs, no distinction is made between financial and economic prices. These costs are for the southwest region; elsewhere they may be slightly higher. Costs also exclude herding labor, which some studies have argued to be quite substantial--especially in the cropping season. 4/ 1 1.6.17 For a team of oxen, total annual investment and maintenance costs, both cash and imputed, thus amount to about CFAF 25,350 in financial prices and CFAF 39,450 in economic prices. The difference is the result of government credit policies that set nominal interest rates below inflation and that do not charge administrative costs. The net effect appears to be a subsidy of about 35%. 1.6.18 These costs must be calculated on a per ha basis to assess gains from the use of animal traction. The number of hectares that can be farmed is limited primarily by the amount of time available for various farm 1/ These are average constant costs discounted to 1980 and averaged over the life of the oxen and equipment, calculated under the credit schemes likely to be followed by the CNCA. These results are drawn mostly from calculations presented in Annex I, "Analysis and Derivation of Crop Budgets". In its recent analysis, ICRISAT has used CFAF 2,349/ha as the capital cost of animal equipment, but this is based on only a donkey and a Houe Manga, which are less expensive than the package assumed here. In addition, ICRISAT estimated capital charges on the basis of the capital recovery factor, which gives a lower value than the method used here. See McIntire, May 1981. 2/ Includes the cost of administering small-farmer credit. 3/ Based on 8% opportunity cost of capital. 4/ Christopher Delgado, "Livestock Versus Food Grain Production in South- eastern Upper Volta; A Resource Allocation Analysis," Ph.D. Disserta- tion, Cornell University, 1978.  - 104 - operations, the most important of which is plowing. At 5 days/ha needed for plowing, the short rainy season in much of Upper Volta limits the number of hectares that a team can plow to probably no more than 4 to 5--not all of which have to be on the same farm if oxen are lent or rented. Average economic costs would equal about CFAF 8-10,000/ha, and financial costs about CFAF 6-8,000/ha for the range of 4-5 ha/team. Actual market rental rates in Upper Volta, as shown in Table 1-20, range from CFAF 4-7,000/ ha in the south where the season is longer to CFAF 10-12,000/ha in the arid north. These observed prices accord surprisingly well with assumptions about both capacity and financial costs. 1/ 1.6.19 Gains. Direct gains from the use of animal traction include the potential to raise both yields and the physical and economic productivity of farmers, which were discussed under Advantages (subsection B). The avail- able evidence for this is not encouraging, and most observers seem to agree that initial increases in agricultural production cannot pay for the addi- tional cost of animal traction. Even though adoption of the technique may be necessary before other measures to raise productivity and conserve land are likely to be profitable for farmers, it nonetheless appears that much of the technical potential may be currently wasted. Its initial use must thus be subsidized by government credit programs or financed privately from non-agri- cultural funds (e.g. livestock). 1.6.20 There are also three indirect gains from animal traction: beef, manure, and transport. The production of beef--resulting from the growth of bullocks and the higher price per kg for older slaughter animals--has already been netted out of the costs. In private prices, it amounts to some CFAF 70,000 per team over 4-6 years. 2/ The value of manure has been discussed in Section 5; the amount produced annually by a team of oxen contains nitrogen worth about CFAF 24,000 in long run economic prices. Local prices are much lower--about CFAF 1,500/mt or CFAF 7,500 per team per year--reflecting both handling costs and the fact that not all the N can be utilized. To the extent that manure helps augment yields, however, it is also already considered in the analysis. The value of transport depends on ownership of a cart, which has been excluded from this analysis. But as an illustration, the FAO survey of animal traction indicated that 0-55 days/year of transport may be hired out (an average of 2-3 days/team) at a value of about CFAF 1,250/day. However, donkeys are the preferred source of transport power. 1/ Most evidence suggests that oxen are not, however, fully utilized. Of the 60 some days during the plowing and weeding season when oxen could be used, teams are often employed no more than 5 days per year (e.g., in Fada), which is equivalent to plowing about 1 ha. In the southwest, however, some fields may be plowed, weeded and ridged all by ox cultivation (requiring 10-14 days per ha). At 4 ha per team, total use would be substantial, though not full. 2/ The economic value is slightly higher than this figure owing to the 12% export tax on cattle.  - 105 - 1.6.21 Results. These various partial considerations are more fully reflected in the crop budget analysis. 1/ A comparison of improved methods with and without animal traction, using estimated financial prices, indicates that animal traction tends to reduce net returns per ha and per manday in the center but--by lowering the farmer's cost of production and raising his yields--to increase them in the southwest, except perhaps for sorghum. The change in net financial returns brought about by adding animal traction to improved methods (e.g., seeds, fertilizers, and some associated husbandry) are shown below in CFAF): 2/ Returns/Manday Returns/ha Crop (region) Low High Low fertilizer High fertilizer fertilizer fertilizer responses responses responses responses Low wages High wages Low wages High wages Millet (center) -56 -57 -3,820 -3,910 -4,090 -4,170 Sorghum (center) -13 -9 -1,750 -1,400 -1,775 -1,300 Sorghum (southwest) 2 9 -600 50 -550 250 Maize (southwest) 102 128 2,750 5,750 3,250 6,550 Cotton (southwest) 64 73 8,400 10,800 7,650 9,200 The pattern of change in returns per manday is invariant with respect to the fertilizer response rate chosen, although improvements are, of course, greater when responses to fertilizer are higher. For changes in returns per hectare, the pattern is also fairly insensitive to assumptions about wages and ferti- lizer response rates, but the magnitude of the improvements are higher at higher response rates and wage levels, as would be expected since animal traction is a labor-saving technique. These financial returns are consistent with the observed, rapid increase in the use of ox cultivation, especially in the southwest. 1/ See Annex I, "Analysis and Derivation of Crop Budgets." All the caveats given for the analysis of fertilizers apply here equally as well. Results are sensitive to the choice of assumptions about yield effects (generally assumed to be nil), the amount of labor saved by mechanized plowing and weeding, and the cost of owning and using the ox team and equipment. Thus, these figures should be considered indicative, pending results founded on actual farm-level data. 2/ Estimates based on costs of production per kg output given in Table 3 of Annex I. Includes working capital. The recent ICRISAT survey of sorghum farmers in the country, using financial prices, gives ambiguous results for the gains from shifting to animal traction, depending on the seed variety. For E 35-1, there is a gain of CFAF 3,250/ha, whereas for local varieties there is a loss of 9,150. The results calculated on the basis of data in Annex I are, on balance, more favorable to the adoption of animal traction.  - 106 - 1.6.22 The same pattern of results exists in economic prices, except that sorghum in the southwest becomes less profitable with ox cultivation. In financial prices it was about as profitable as manual cultivation. In long run economic prices, the adoption of animal traction--compared to improved methods with manual cultivation--tends to lower net returns (or to raise costs of production) per ha and per manday for millet and sorghum, but it appears to raise net returns for maize and especially for cotton (in the southwest). These changes in net economic returns brought about by adding animal traction to improved methods are shown below (in CFAF): Returns/Manday Returns/ha Crop (region) Low High Low fertilizer High fertilizer fertilizer fertilizer responses responses responses responses Low wages High wages Low wages High wages Millet (center) -52 -100 -7,750 -7,210 -6,920 -7,000 Sorghum (center) -38 -34 -4,050 -3,700 -4,250 -3,775 Sorghum (southwest) 2 -6 -3,400 -1,600 -3,600 -2,800 Maize (southwest) 98 131 1,600 2,850 1,850 3,350 Cotton (southwest) 143 173 9,200 12,500 10,600 13,350 The pattern of results is again invariant with respect to major assumptions. In contrast to the results in financial prices, however, cotton--rather than maize--shows the largest improvements--per manday and per hectare--of all the crops. The aggregate results hide several differences. For millet, costs increase because virtually no labor is saved (there is no land preparation prior to planting in manual systems) and yields rise very little. This result accords well with actual farm practices and available research results. For sorghum, the effect is similar for the same reasons, although labor savings in the south are slightly greater and yields rise more than for millet. For maize in the southwest, there appear to be gains from the technique largely because yields rise slightly and the labor saved (25 days) offsets the addi- tional cost of animal cultivation. If labor savings for sorghum were also as great as for maize grown in the same region, animal traction would raise the profitability of sorghum as well. Results are also positive for cotton, with the larger gains for it stemming from higher yield increases. 1.6.23 These results are sensitive to small changes in assumptions, and therefore must be treated with caution. On the evidence here, the amount of labor saved per ha is unlikely to be sufficient by itself to offset the cost of ox cultivation except where it is possible to mechanize a sufficiently large number of tasks. This condition exists in the southwest where the rate of utilization of oxen appears to be much higher than elsewhere (based on market rental rates), thus reducing direct costs of the technique per ha. Second, animal traction appears to be profitable only if there are concurrent yield increases. The gain in physical productivity of land--resulting from a better utilization of existing and new inputs--permits both physical and economic productivity of other traditional factors to be increased. At what point the technique becomes profitable depends critically on its costs, the  - 107 - amount of labor saved, and the extent of yield increases. None of these has been studied at the farm level, but indications are that ox cultivation is already profitable in the southwest (where rental rates are less than the equivalent value of direct labor that is saved). 1/ It is difficult to assess net labor saved; while labor for field cultivation is reduced, other labor is needed to care for the animals. This extra labor may be both considerable and have high opportunity costs during the growing season, unless oxen can be penned and fed on fodder. On the other hand, children who cannot do field work can probably herd animals. 1.6.24 The attractiveness of ox traction to the country can be indicated by its effect on comparative advantage, as measured by the domestic resource cost ratio. The adoption of ox traction in conjunction with improved seeds and fertilizers tends to make the country somewhat more competitive in pro- ducing cotton and maize, and perhaps marginally for sorghum in the southwest if one assumes high response rates for fertilizers and low wages. Otherwise, it appears that animal traction does not enhance the country's comparative advantage in producing coarse cereals--even though in most cases such produc- tion remains profitable compared to imports. This is illustrated by estimated DRC ratios for techniques using improved varieties and fertilizers: 2/ High wage Low wage Crop (region) - Low High Low High technique fertilizer fertilizer fertilizer fertilizer response response response response Millet (center) - improved 0.9 0.8 0.7 0.6 - oxen 1.2 1.0 0.9 0.8 Sorghum (center) - improved 0.8 0.7 0.6 0.6 - oxen 0.9 0.8 0.7 0.6 Sorghum (southwest) - improved 0.7 0.6 0.5 0.5 - oxen 0.8 0.7 0.6 0.5 Maize (southwest) - improved 0.6 0.5 0.4 0.4 - oxen 0.5 0.5 0.4 0.4 Cotton (southwest) - improved 0.7 0.6 0.5 0.4 - oxen 0.6 0.5 0.4 0.4 1.6.25 These results are sensitive to assumptions, but the most likely alternative assumptions would simply make the technique look more favorable. Although herding costs have been ignored, annual capital costs may have been overestimated. Gains from transport and economies of scale from larger farm sizes have been excluded. 1/ These private rental rates include the contradictory effects of govern- ment credit subsidy programs and taxes on the value of beef produced. In addition, government subsidies on fertilizer tend to reduce the value of manure to the farmer. It may be that these private rental rates are thus a fair indicator of the social price. 2/ Based on data in Annex I. Estimates exclude working capital.  - 108 - 1.6.26 While potential profitability appears to be high, it is likely to be realized only after several years. Animal traction must be judged in dynamic, as well as static, terms. Complementary inputs--such as new seed varieties and fertilizers--may not be necessary to assure acceptable returns, but they will increase the potential to the extent that there is an interac- tive effect. Development of rental markets for ox services that can compete with hired labor--as appears to be the case in the southwest zone, will reduce underutilization of capacity and increase farm income. Opportunities to use the labor saved--either in expanding area or for better crop husbandry--will also have to evolve. In a sense, these opportunities have improved recently: land is being freed of onchocerciasis in the southwest zone--allowing larger farms; real wages appear to be rising in the Ivory Coast 1l--the market for 20% of the Voltaic labor force; new seeds are being developed that respond to better husbandry made easier with animal traction. 1.6.27 As agriculture and livestock become progressively integrated, these costs will fall. Yields are likely to rise, although there may be a con- siderable delay in realizing this effect. Cropping patterns may interfere with initial adoption; for example, weeding with an ox-drawn hoe is difficult when the rambling, local variety of cowpea is intercropped with cereals--which is common practice. Logistical constraints, in terms of handling and main- taining draft oxen in the midst of fields during the crop season, have probably discouraged the adoption of the technique. There may also have been learning problems--studies usually show that the utilization and productivity of animal traction increase over time and that 3-4 years at least are needed to acquire sufficient knowledge. It may be that now, after 10-15 years of experience, 2/ solutions to these difficulties are being worked out as farmers gain more experience. E. Constraints 1.6.28 It has been argued in the past that the adoption of animal traction in Upper Volta is constrained by numerous factors, including high costs and low returns. 3/ As a result, its use in the country is less than 1/ See Charles P. Humphreys, "Analysis of Rice Production in the Ivory Coast", in Scott R. Pearson, et al, Rice in West Africa: Policy and Economics, Stanford University, 1981. 2/ This is a short period. Animal traction was introduced in Mali before World War II and was widely promoted before independence. 3/ See for example, World Bank, The Economic Development of Upper Volta, Vol. 2, "Agriculture", Washington, 1970, pp. 35-36. From the experience with animal traction in the Ouagadougou ORD, the report notes that the introduction of draft animals poses many problems, including lack of farmer and ox training, danger of crop destruction, shortage of herding labor, poor nourishment, disease, and cost. It even states "that the use of draft animals has been introduced... in all those areas where it is practicable", implying no further scope for expansion.  - 109 - in some of its neighbors (Mali has an estimated 150-175,000 ox teams), 1/ despite efforts by various agencies to promote it. High growth rates (an average increase of over 25% per year since 1965) suggest, however, that the low use of animal traction in Upper Volta may simply reflect the fact that it was started later in the country. It is also clear that some constraints are being overcome--including the availability of equipment, financing for purchases, familiarity with the technique. Economically, the terms of trade have at least been neutral with respect to animal traction, and improvements in productivity may have increased them. 1.6.29 Oxen. It is unlikely that there is a physical shortage of oxen for animal traction, although the growing demand may increase the cost of the investment. Use of oxen for draft does not reduce the size of the national herd; it simply transfers ownership of cattle from one group to another and may postpone slaughter. And at present, the relatively large number of young stock being sold at rather low prices suggests that the supply of young oxen exceeds the demand. There may be distributional problems in getting young stock from the north to the south where animal traction is more profitable, but this can probably be handled mostly with- in the existing marketing network. Finally, both cows and donkeys may be substituted for bullocks for numerous tasks; for transport, donkeys are in fact preferred. 1.6.30 Equipment. Although equipment--especially carts and hoes--have been fabricated in the country since the 1960s, relatively large-scale manufacturing of the whole range of equipment began only in the mid-1970s with the development of the ARCOMA and COREMMA system. This system consists of two fully equipped workshops (ARCOMA) that produce a complete range of parts for animal-drawn agricultural implements, which are then assembled by decentralized units (COREMMA). In 1980, there were 9 assembly units, with several more scheduled to be built. The installations under the ARCOMA system are said to have a capacity of some 25,000 units per year, 2/ and in 1979/80, ARCOMA supposedly produced some 5,000 plows, nearly 5,000 cultivators ("houes") and 5,000 carts. 3/ 1/ World Bank, RMWA, Mali-Situation et Perspectives de l'Elevage, Abidjan, April, 1980, p. 13. 2/ A unit equals either one cart or a plow plus a cultivator. 3/ These are figures reported by the mission from RMWA, however, no evidence of corresponding financial flows could be produced. The agricultural issues mission was told that production was 10,000 plows, 10,000 cultiva- tors, and 6,000 carts, nearly twice the level reported to RMWA.  - 110 - 1.6.31 It is virtually impossible to ascertain whether this equipment is subsidized or not because the ARCOMA apparently has kept no balance sheets or accounts of profit and loss. 1/ But circumstantial evidence suggests that the equipment is sold below its true cost. The system has been developed through foreign aid, presumably grants, that totaled over one billion CFAF during 1975-80. This money finances 3-5 expatriates, along with equipment and certain manufactured parts, the value of which is not reflected in the selling prices of the equipment. There are no direct government subsidies on these manufactures, but ARCOMA is exonerated from all import duties on inputs and no value-added tax is levied on equipment. The non-budget subsidy, therefore, is more than CFAF 8,000, or over 40% of the current sale price. 2/ There may also be a chronic operating deficit caused in part by insufficient working capital or prefinancing and in part by poor management. 1.6.32 In comparison with equipment produced elsewhere, prices appear low, as shown below (in CFAF): ARCOMA 9" ox plow 19,355 (1977-80) BM2M imported, Ouagadougou 25,000 (estimate) SMECMA TM plow, Mali 24,761 (1980) SISCOMA plow, delivered to Mali 29,213 (1980) ARCOMA multicultivator 36,500 (1977-80) SISCOMA multicultivator, delivered to Mali 56,193 (1980) SMECMA multicultivator, Mali 44,378 (1980) ARCOMA donkey cart 43,500 (1977-80) SMECMA 500 kg cart (with floor and sides evaluated at 30,000) 63,375 (1980) SISCOMA cart (with floor and sides evaluated at 30,000 delivered to Mali 64,014 (1980) Although ARCOMA equipment appears to be technically sound and well designed, there is no research institute charged specifically with improving it and expanding the range of equipment offered. A major deficiency is alleged to be the lack of mechanical seeder at an affordable price. One-row seeders developed and produced by SISCOMA and SMECMA cost about CFAF 30-40,000, as much as an entire set of cultivating equipment. Some researchers argue that the lack of this piece of equipment creates a significant constraint on increased agricultural productivity because of the short growing season, 1/ Audits have since become available, however. 2/ This is a rough calculation based on 50% imported materials, average import duties of 75%, and a value added tax of 14% on 35% value added (including marketing margins).  - 111 - labor constraints at the time of planting, and the need for greater preci- sion when new cereal varieties are cultivated. 1/ An alternative to a seeder drawn by animals would be a manual seeder; the jab planter developed by IITA would improve seeding without the delays caused by prior land preparation needed for the animal-drawn seeders. 1.6.33 Credit. Financial constraints may be the most persistent. Investment in a team and a complete set of cultivation equipment amounts to over CFAF 100,000--equal to perhaps one-half the yearly average family income or the gross proceeds from almost 2 ha of cotton. On the other hand, families most likely to adopt new techniques--larger, more productive farmers--usually have investments in livestock that could be transferred to animal traction. Also, credit schemes have become more favorable since the mid-1970s, with lower real rates, less down payment, and longer repayment periods. Finally, the costs of other investments may have risen, making animal traction a more attractive alternative for farm families. For example, given that cattle ownership is usually part of the investment strategy of families, investment in animal traction will have appeared increasingly remunerative given the increased cost of entrusting cattle for extensive herding--coupled with profitable new uses for cattle kept near the homesite. 1.6.34 Prices. The terms of trade appear to have moved less favorably for animal traction than for other inputs during the last decade, as shown in Table 1-11, yet they are probably still positive over the period. Although equipment prices appear to have risen less than general GDP inflation, prices for oxen may have risen twice as fast. But because oxen tend to appreciate in value, the farmer will profit from the higher price when selling older draft animals. The price of cotton, alleged to be the major crop for animal trac- tion, has risen only half as fast as the cost of equipment and one-fourth as fast as that of oxen. However, to the extent that animal traction has been responsible for raising the productivity of cotton, the real change in terms of trade will be better than is indicated by the simple comparison of prices. Prices of cereals have risen much faster than any input, which should have encouraged animal traction to some extent. 7. AGRICULTURAL RESEARCH 1.7.01 Constraints to agricultural expansion in Upper Volta are so severe that gains from further research should be sought, even though they may well be modest. Although research has probably been neglected in the past, recent efforts--supported by infusions of funds and personnel from international institutions--are helping to redress that balance. But there are still not fully developed packages for rainfed agriculture in drier areas with poorer soils (the central region primarily) that can raise yields significantly under 1/ New varieties, like ICRISAT's E-35-1 sorghum, are sensitive to plant density, and IRRI research on rice shows that fertilizer application can be reduced by up to 30% with no decline in yields when fertilizer is placed in the root zone at the time of seeding.  - 112 - average farmer conditions. To overcome this constraint, improvement in the structure and focus of Voltaic agricultural research is needed. This chapter describes the existing situation in the country, including institutions, funding, staffing and programs. After a brief review of results, the section concludes with recommendations calling for a clearer national research strategy--perhaps with concentration on fewer activities--that puts primary emphasis on both applied and adaptive research. It stresses the need for a more coherent research organization, along with better linkages between research and extension. Finally, it discusses the possible need to improve incentives to personnel and to expand facilities. A. Organization 1.7.02 Agricultural research in Upper Volta has not been well organized, although recent efforts to improve the situation have been made. This situa- tion prevails in part because most of the agricultural research is carried out by separate, semi-autonomous organizations with their own budgets. Although these research institutes report to one or another government agency, they remain mostly independent, initiating and carrying out the programs they choose. Prior to 1979, research was coordinated by the Ministry of Rural Development, with responsibility nominally held by the Service de la Recherche Agronomique (SRA) located in the Direction des Services Agricoles (DSA). The function of the SRA was to elaborate the program of research with the various research institutes and to coordinate these activities. Each year, a meeting of the Comite Specialise de la Recherche Agronomique (CSRA) was held to hear and to discuss reports of research activities and to adopt recommendations-- including new seed varieties to be disseminated. For example, the current work by IRAT on rootcrops was started in 1976-77 following a recommendation by the CSRA. However, the CSRA had no formal authority to enforce its recom- mendations. This system provided little guidance and support that could strengthen either Voltaic control over research activities or the ability of research to compete for scarce resources. As a result, research objectives were not necessarily focused on immediate problems facing farmers; institutions did not (or could not) provide extension services with needed support; and there was little encouragement to train or recruit Voltaic researchers. 1.7.03 An effort to reorganize research was undertaken in October 1978 by the creation of the Institut de Recherches Agronomiques (IRA) in the Direction Generale de la Recherche Scientifique et Technologique (DGRST) under the Ministry of Higher Education. The IRA was charged with two func- tions: coordinating all agricultural research, which is currently fully carried out by foreign institutions but with voltaic contributions of staff and funds; and undertaking research itself. The change attempted to shift control of research from the Ministry of Rural Development, but the shift was incomplete. The IRA had nominal control over most of the GERDAT  - 113 - institutions, 1/ while the internationally funded research agencies (mainly CERCI, ICRISAT, and SAFGRAD) continued to report to the DSA. Moreover, the DSA and various foreign research institutes still own and operate the four main research stations (Kamboinse, Saria, Farako-Ba and Niangoloko). A fifth station, Gampela, was started in 1979 by the University. Rather than taking control of existing stations, the IRA proposed creating a new major station near Ouagadougou. The agency lacked the means and power to direct, control, or carry out agricultural research. 1.7.04 In March 1981, the Government created the Institut Voltaique de Recherche Agronomique et Zootechnique (IVRAZ) under the Director General of Scientific Research and Technology in the Ministry of Higher Education to replace the IRA. The new organization is to supervise all research institu- tions in the country, including CERCI, ICRISAT AND SAFGRAD; it thus eliminates one anomaly of the 1978 change. However, the real control over resources is still confused because the research stations and most of the personnel remain under the Ministry of Rural Development. Coordination between the Ministry of Higher Education and the Ministry of Rural Development continues to be an important issue in the redirection of agricultural research. A Service of Experimentation and Applied Research has recently been created in the rural development ministry as a first step towards providing this important coordina- tion. In order to make research carried out by the institutes responsive to the needs of the tMRD and the agricultural sector, several technical commis- sions have also been established to take the place of the former CSRA. Each commission is a permanent body serving a different crop or problem area. Results will be synthesized each year and only salient aspects presented to an annual meeting that will include the users (i.e., the DSA). This approach puts the focus on separate crops rather than ecological zones or farming systems, even though the latter may be more relevant. B. Expenditure 1.7.05 The level of agricultural research effort in Upper Volta is shown in Tables 1-21 and 1-22. As of 1980, there are some 20 different agencies engaged in agricultural research, most of them working on crop production. Crop research is located on 5 major stations with at least 17 additional research sites in rural areas (see Map 15152). The geographical concentration of these research sites favors the more agriculturally rich southwest and more heavily cultivated center. The east and the more arid north have been ignored, and the proposal to construct a sixth major facility near Ouagadougou will not redress the balance. The use of minor research sites, some of which have basic facilities, helps to offset this excessive concentration. However, 1/ Groupement des Etudes et des Recherches pour le Developpement Agrono- mique Tropical. These are: IRAT--Institut de Recherche Agronomique Tropical et des Cultures Vivrieres, CTFT--Centre Technique Forestier Tropical, IRCT--Institut de Recherche du Coton et des Textiles Exoti- ques, and IRHO--Institut de Recherches des Huiles and Oleagineux. IRFA, Institut de Recherches des Fruits et Agrumes, remained under DSA control.  - 114 - there is no well developed or integrated plan to assure that the geographical balance of research is adequate to cover most climatic, soil and demographic conditions. 1.7.06 In 1979-80, the budget for crops research amounted to about CFAF 1.2 billion, of which at least 18%, or over 0.2 billion, was funded by the country itself. 1/ This funding supported approximately 49 foreign and 27 Voltaic research scientists, for a total of 76, as well as 75 technicians and 786 supplementary personnel. Crop research accounts for over 80% of agricultural research funds and skilled personnel, although crop production contributes only about 60% to agricultural GDP (1972-78 average). On balance, then, research in Upper Volta favors crop production. Roughly 80-85% of this crops research is oriented essentially to rainfed agriculture--which is less than the share of rainfed farming in agricultural GDP but more than the share of public investment in agriculture that is allocated to dryland crops. 2/ As shown below, it appears that all agricultural research in the country amounts Other less developed Upper Volta West Africa 3/ Countries 3/ Expenditure as % of Agricultural GDP 1.9 4/ 0.6 0.3 Expenditure (CFAF) per capita of 281 5/ 346 6/ 134 6/ agricultural population Expenditure per scientist 15.6 8.1 6/ 5.9 6/ (CFAF million) Technicians per scientist 0.99 0.94 7/ 0.92 1/ See Table 1-21. Excludes the CTFT, the livestock stations, the veteri- nary laboratory, the CRTA (trypanosomiasis) research, and the National Soil Service. Includes the CILSS/FAO fodder project. Information for WARDA, IRFA, ORSTOM, and Dutch studies is not available. 2/ Based on data only for CERCI. Inclusion of IRFA pilot schemes would increase the share devoted to irrigated crops. 3/ Taken from Peter Oram, "Current and Projected Agricultural Research Expenditures and Staff in Developing Countries", IFPRI Working Paper 30, Washington, November 1978. Original data are for 1975 or earlier. Converted from US$ at CFAF 210= US$1. Data are not, however, strictly comparable to those assembled for Upper Volta. 4/ Agricultural GDP estimated as 40% of 1979 GDP (Table 1-1). 5/ Agricultural population estimated as 90% of total residents in 1979. 6/ Projected to 1979 levels using the international inflation index in Table 1-8. 7/ All Africa.  - 115 - to 1.9% of agricultural GDP, a figure that is high by comparison to other less developed countries. On a per capita basis, however, expenditures do not seem large by West African standards, which partly reflects the extreme poverty of the country. Research costs appear high in Upper Volta--an indication of the high proportion of expatriate scientists (about two-thirds). 1.7.07 This apparently favorable position of agricultural research in Upper Volta needs to be qualified in two important aspects. First, it is a recent phenomenon. Figures reported by IFPRI show that in 1975 there was an agricultural research budget of only CFAF 48 million, employing 11 scientists and amounting to less than 0.1% of agricultural GDP. 1/ Since that time the research effort has been vastly expanded and more Voltaics trained. Although CERCI and the AVV were started in 1973, it was probably too early for their now substantial research activities to be reflected in the 1975 estimates. Two major international crops research programs--ICRISAT and SAFGRAD--were initiated in 1975 and 1978, respectively, and have become fully operational only recently. Other activities--including the CRTA trypanosomiasis research, CILSS fodder research, MSU studies, and FAO fertilizer trials--started only in 1977 or 1978. Although not included in the current figure, IRFA research was not begun until 1976. Since the bulk of these funds is furnished by foreign donors, Upper Volta has little control over their appropriation--in either the past or future. There is no certainty that these high levels will continue. 1.7.08 Second, this seemingly high proportion of research compared to GDP reflects more the extremely low productivity of Voltaic agriculture than an abnormally large funding for research. Expenditures per capita appear to be lower than in much of the rest of West Africa despite the high level of GDP spent on research because agricultural output per capita is generally lower in Upper Volta than in neighboring countries. Although such low produc- tivity results from numerous constraints that further research is unlikely to eliminate (see Section 3), improved technology can help increase productivity in the face of these constraints. It may thus be necessary to devote an even larger share of GDP to agricultural research to compensate for both the poverty of the country and the insufficiency of research expenditures in the past. 1.7.09 Of the eleven projects in agriculture and rural development approved by the Bank, only four have included explicit research components (Bougouriba I and II, Niena-Dionkele, and Rural Development Fund III). For Upper Volta, as for the Bank at large, the trend has been to increase the share allocated to research and studies. Most of these actions, however, are fairly isolated and do not directly strengthen the capacity of Voltaics to coordinate, control and carry out agronomic research. A specific research project which would aim to develop institutional capacity in agricultural research is presently under preparation. 1/ See Peter Oram, "Current and Projected Agricultural Research Expendi- tures and Staff in Developing Countries", IFPRI Working Paper 30, Washington, November 1979.  - 116 - C. Policy and Results 1.7.10 Upper Volta has no national research policy into which the various agencies fit their work. Instead, research plans and objectives are deter- mined largely by the individual agencies--often in accord with their programs in other countries. Although research policies and recommendations are discussed during annual meetings, there are few means of enforcement if agencies do not follow recommendations. This inability to guide agricultural research results from poorly defined agricultural development policy, inadequate national research institutions, lack of trained Voltaic scientists, and the preponderance of foreign financing. The creation of the IVRAZ, along with a larger cadre of Voltaic researchers, is meant to improve the research policy, but the reorganization has not yet had time to be effective. A resolution of the inherent organizational conflicts between the Ministries of Rural Develop- ment and Higher Education is essential to the development of a better, more coordinated research policy. 1.7.11 Research results can be divided into three categories: crop improve- ment, agronomy and farm management. In no category has there been much success. Despite several varieties of improved crops that have been approved by the CSRA, none are widely used (see Section 5). The fault, however, probably lies as much with the lack of adaptive research, poor seed multipli- cation, and inadequate distribution as with poor crop breeding research. Agronomic results have been useful in suggesting improved production methods, but farmers have not widely followed the recommendations because the results are almost entirely extrapolated from research stations. However, these results provide some of the theoretical basis for developing improved farming systems that are compatible with the country's resource constraints and with farmers' conditions--provided that continued applied research is carried out and there is more adaptive research on farms. The third area, farming systems, has been seriously ignored--so that by mid-1980 no significant socioeconomic study of farming practices in Upper Volta had been completed, which means that much of the crop improvement and agronomic research has not always been carried out with reference to farm-level constraints or feedback from exten- sion workers and producers expected to utilize the results. Consequently, findings are not yet sufficiently refined to develop technological packages that both raise productivity significantly and are attractive to the average farmer. Researchers often blame government pricing policies for the poor acceptance of recommendations, although the real problem is more likely that recommendations are not consistent with farmers' conditions. The enlarged research program is much improved in this regard, but there are unlikely to be major new packages in the near term. D. Conclusions 1.7.12 Voltaic agricultural research policy should address five elements. The first is to define a clear national research strategy that is consistent with resources (including foreign financing), needs (present and future production), constraints, and experience (research results that can be built upon). In elaborating a Voltaic research strategy, three factors must be borne in mind. The first is that the country will be unable to underwrite more than  - 117 - a modest research program; it is therefore important to guard against meager resources being spread too thin to be effective. Moreover, foreign resources must be committed for a long period, to avoid the degradation of the facilities and program. The second is that agricultural research in Upper Volta must be multi-faceted because any one technological improvement is unlikely to be sufficient in the face of difficult natural conditions. The search must be to find synergistic effects of several concurrent measures. The difficulty in disseminating these through an extension program and of demonstrating them to farmers points to the need for redoubled efforts to carry out research on farmers fields and to link extension and research more closely. The third is that adaptive research aiming simply to fine-tune existing technology will not be sufficient, although it is necessary and desirable. Applied research is still needed to improve the technological base, although such research should be guided more by needs and constraints of farmers. 1.7.13 In the short-term, new emphasis should be put on adapting existing agronomic results to farm conditions. The reason for focusing on agronomy and farm practices is the belief that husbandry improvements--when coupled with some new inputs--can compensate for both insufficient resources and unimproved genetic material. In addition to continuing on-station, applied research, there should be more off-station research sites, greater cooperation with farmers and extension agents, and more farm management research. It is within the scope of a fully Voltaic program and can build on information collected by monitoring and evaluation units in ongoing projects. Under the rubric of adaptive husbandry research, several priorities can be indicated: effects of using Kodjari rock phosphates, mechanization of tasks when labor is scarce (planting, weeding and perhaps harvesting), increased use of legumes in intercropping (requiring insect control), attractiveness to farmers of classic recommendations (including better soil preparation, early seeding, planting in rows, thinning, and additional weeding), and measures to reduce soil erosion and increase water conservation. In most instances, research should be carried out in the context of the farm household although supporting applied research will still be necessary. This program addresses the major constraints facing Voltaic agriculture including (a) the need to continue pluvial produc- tion--despite low and uncertain rainfall, (b) fragile, eroded, acidic soils deficient in phosphorous, (c) seasonal labor bottlenecks, (d) the need to raise yields because of growing land scarcity, and (e) the low returns to fertilizers--in part because of poor farming practices. Moreover, it offers the best likelihood of quickly yielding positive results that can then be widely disseminated by the extension service. 1.7.14 Crop breeding to develop new varieties that can perform better under the stress of Voltaic conditions is a vital component of both a long-term research program and agricultural growth. But such fundamental research probably requires means and manpower beyond the scope of a small country's research program, and the benefits--though they might eventually be quite dramatic--are likely to occur only over the long run. Therefore, in carrying out such research, the country should rely primarily on work conducted within the country and elsewhere by the international agricultural research insti- tutes, making crop breeding a secondary priority for the use of its own research resources. Moreover, breeding programs do not necessarily hold  - 118 - the best prospects for dealing with the major constraints on higher produc- tivity. 1/ Institutes under the CGIAR, the GERDAT, and the OAU already have major programs in the country for sorghum, millet, maize, cowpeas and ground- nuts. To benefit from these international efforts, however, two steps need to be taken: (a) Improve the coordination and direction within Upper Volta of the research being conducted by the international agencies, particu- larly that dealing with crop husbandry; and (b) Integrate varietal selection into farming systems research to assure that breeders follow criteria that are in line with major problems faced by farmers. Thus, the CGIAR can supplement but should not totally replace national crop breeding efforts. In particular, the national agencies must play the critical role of trying out new varieties in different situations and developing methods to disseminate those that show promise. It may also be necessary to define more clearly the type of genetic improvements to deal with major constraints; for example, the best approach needed to cope with moisture stress (e.g., better root development or shorter seasons). 1.7.15 However, given the difficulties in improving traditional Voltaic crops, there should perhaps be increased research on new crops, or on those neglected in the past, like sheanuts and hibiscus. In this way it may be possible to raise productivity within existing constraints. 1.7.16 Research on farm equipment perhaps should have third priority in the strategy, given the relatively low cost of labor and the existence of an adequate range of basic animal equipment. The one exception may be to develop a low-cost and reliable seeder that can be drawn by oxen or donkeys or that can be operated manually--like IITA's jab-planter. 1.7.17 The second element that policy should address is organization. It is clear that the national coordination of agricultural research needs to be further improved. Creation of the IVRAZ, continuing the shift of some authority from the Ministry of Rural Development to that of Higher Education and Scientific Research, was a partial step to solve this problem. It responded to the need to elevate responsibility for research to an office with higher status and to increase Voltaic control over research carried out by foreign agencies. The move is partial because it does not affect all agencies or infrastructure; thus a dual structure now exists that blurs 1/ For example, Donald Winkelmann, "On Improved Technologies and Agri- cultural Research, "Proceedings of the Agricultural Sector Symposia, World Bank, Washington, January 1980, pp. 333-336, notes that plant breeding offers the best chance of reducing stress caused by disease, but that improvements in husbandry and other inputs and investments may have the highest probability of dealing sucessfully with aridity, insects, fertility, and weeds.  - 119 - responsibility and authority. In the future, consideration needs to be given to putting all research institutions and facilities under the authority of one agency and to integrating the MRD directly into the national research structure. 1.7.18 The third element for policy to address is the linkage between research and extension services, including seed production. This issue is probably the key element explaining the difficulty of research in providing Voltaic agriculture with better production techniques. Extension of some form is necessary to disseminate research results, and feedback from farmers, partly via the extension service, is necessary to orient future research. And researchers must be involved in training extension personnel. At the present, this linkage is almost nonexistant, except for discussions during the annual CSRA meeting. Research agencies prefer to carry out on-farm trials outside the extension network, owing to institutional problems (e.g., need for salary premia and poor quality work by extension agents). Certain characteristics of current Voltaic research and extension impede better linkages; these include the separation of research authority from the Ministry of Rural Development, the proliferation in projects of tiny research components outside the sphere of the major research agencies, different salary scales for researchers and extension agents, and extension personnel who are poorly trained in research methods. Some specific proposals to integrate research with extension through in-service training sessions, more use of Subject Matter Specialists, and the creation of trial sites are discussed in Chapter 2. It might also be possible to envisage some interchangeable staff in research programs who could move from research into testing and then into the extension service as the tech- nology is developed and refined. 1.7.19 The fourth element of policy concerns research personnel. It is important to train additional scientists to carry out and administer research activities, thus reducing Upper Volta's dependence on expatriate skills and management. It is also critical to train additional technicians in order to raise the productivity of research scientists; the ratio of technicians to scientists in Upper Volta, which is average compared to other less developed countries, probably ought to be doubled. The incentive structure in the country also appears to be biased against researchers in two ways: salaries are lower than for comparable skills in ORDs that benefit from development aid; and amenities are usually lacking in research stations that are not near major cities. Thus, the government may have to consider increasing incentives to agricultural researchers and technicians. 1.7.20 The last policy element to be considered concerns research facili- ties, the shortage and poor quality of which is considered by many Voltaics to be more serious constraints than shortage and poor quality of personnel. There are three issues: additional major stations, substations, and logisti- cal support. The proposal has been made to open a sixth crops research station near Ouagadougou. Although motivated by the desire to create a national center as well as by the need to provide Voltaic researchers with urban amenities, the station would not only be redundant with Kamboinse, Gampela and Saria but also do nothing to redress the geographic imbalance that leaves uncovered the northern and eastern third of the country whose ecological  - 120 - conditions and farm systems are different. Second, in response to the need to increase farm-level research, several substations called PAPEM 1/ have been established in the ORDs. They are small in size (10-15 ha), managed by an ORD technician rather than by scientists from research agencies, and serve as the intermediate link between research stations and farmers. In order for these substations to be effective, they require good management by ORDs and suitably trained staff. Failure to provide the PAPEM with adequate support could merely further fragment research efforts into competing entities responsible to different authorities and thus complicate efforts to coordinate national research to make more effective use of scarce resources. But if properly run, the PAPEM may facilitate greater field level work by major research agencies in conjunction with on-going extention work. Third, in order to expand geographic coverage and increase adaptive research, it will be necessary to increase funding for transport facilities, supervisory technicians, and perhaps a major research station near Fada and/or Ouahigouya. 1/ Point d'Appui de Pr'evulgarisation et d'Experimentation Multi-locales. This first is being established in Ouahigouya under FED funding.  - 121 - CHAPTER II: AGRICULTURAL INSTITUTIONS AND SERVICES 2.0.01 Chapter 1 of this report discusses the options for development of agricultural production in Upper Volta in view of the physical constraints on the sector and the adequacy of the available technological packages. Chapter 2 analyzes the institutions and services in the sector-extension, marketing, input supply and credit--which permit the physical production possibilities to be realized. The development of these institutions and services is constrained both by human, or administrative capacity; by inadequate infrastructure (poor roads and channels of communication); and by limited financial resources. The latter constraint will be addressed in Chapter 3. 2.0.02 The major issue in the development of agricultural services in Upper Volta concerns the appropriate mix between private and public sector channels of delivery. To the extent that the country relies on the public sector for these services--specifically, through publicly-financed exten- sion workers, a parastatal organization of marketing, credit delivery, and input supply--the development of these institutions may be constrained by limitations of trained manpower, managerial ability, and by political or bureaucratic pressures which can impede an efficient and streamlined operation (by making it difficult for the public entities to keep overhead costs, for example, of personnel, under control). Of course, in a country which suffers an absolute shortage of trained and experienced human resources, the private sector is likely to be ineffective and undeveloped in many areas of activity as well. Regardless of what combination of public and private sector involve- ment in the delivery of services is preferred, major efforts will be needed to strengthen the resources of manpower, infrastructure, and finance on which these services depend. The question remains whether, in the near and medium term, the agricultural community can be better served (or serve itself) by relying on private channels, however imperfect, or on public institutions which may only be able to acquire the resources to meet their managerial and financial requirements over the very long run. The issue remains particularly pertinent for Upper Volta, since it has permitted both public and private channels for the delivery of agricultural services to appear, and both are at early stages of their development. 2.0.03 The sections below present a more detailed analysis of the condi- tions needed to promote more effective extension, marketing, and input/credit supply in the context of sectoral objectives and constraints, and of existing Voltaic institutions. 2.1 EXTENSION AND THE ORDS A. Introduction 2.1.01 The present section examines the institutional system of promoting agricultural change, namely, the extension service as organized within the  - 122 - ORDs. 1/ The extension service has become an issue in Upper Volta because, outside of the cotton zones, the results of the extension effort have not been very impressive, particularly in light of the significant commitment of manpower and expenditure which it entails. Of course, the extension function cannot be judged in isolation from the technological messages which it is intended to convey, and the limitations of these messages are outlined in the previous chapter. Farmers' economic incentives to follow extension advice may also be inadequate, because of numerous constraints on the farming system which extension currently does not address. Even apart from these technical shortcomings, however, the extension effort presently carried out in Upper Volta exhibits certain weaknesses which render it relatively ineffective and unproductive. 2.1.02 The essential role of extension is threefold: a) to assist farmers to adopt improved production practices; b) to provide constant feedback and interaction between the farmer and the research and planning authorities, and c) to p-romote the organization of farmers so that they can accomplish as a group what they cannot achieve as individuals. The third objective is temporary and is fulfilled when farmers' groups or cooperatives are effectively constituted throughout the country. The first two functions are continuing, since new information of increasing complexity will have to be relayed to producers over time. These functions do not always have to be served by the same means, however. Simple technical messages which are part of the overall extension program can be conveyed by rural radio or, as literacy increases, by print media. Promotion of farmer groups can be carried out either by the regular extension agents or, where staff resources permit, by specialized animateurs. As the farmers' groups become more sophisticated, they can undertake much of the information reporting themselves and seek out advice from the research network as they need it. 2.1.03 The strategy for the development of extension in Upper Volta should be focussed on realizing the three objectives noted above, in the near and medium term, by improving the effectiveness and efficiency of the present extension staff. The extension function should be viewed as evolving towards a reduced role for field staff at the present extension agent level, as farmers become more organized and capable of seeking out information and hence require perhaps fewer, but technically more qualified, agents to advise them. Although this goal may appear very distant given the current state of affairs, it is necessary to establish the target so that inter- mediate reforms can be devised which will lead in the right direction. 2.1.04 The following sections examine the issues and constraints of the extension service and the ORDs under four headings: organization, exten- sion-farmer contacts, manpower and training, and incentives. The concluding section proposes measures to improve the effectiveness of extension while permitting the system to evolve along the lines described above. 1/ It should be noted that the extension activities of the AVV and of the Rural Development Fund are not addressed in this analysis.  - 123 - B. Background 2.1.05 The ORDs (Organismes Regionaux de D'eveloppement) were created in 1966 to permit a devolution of authority for agricultural development to the departmental (prefecture) level. In the early stages, the ORDs focussed on the technical and economic aspects of rural development rather than on the social aspects. Substantial technical assistance was made available to the ORDs and training was begun for both low and middle level technicians at the Matourkou Agricultural Training School. 2.1.06 In the mid-1970s, the Government adopted the notion of inte- grated rural development as its strategy for the rural sector. The ORDs were appointed as implementing agencies for multi-sectoral functions at the regional level--promotion of agriculture, development of physical infrastruc- ture, literacy training, input and credit delivery, marketing. etc.--and its field personnel, the extension workers, were expected to become "polyvalent" agents who would perform all of these tasks. 2.1.07 The Government has recognized for some time that the ORDs have become overextended in their role as executors of integrated rural develop- ment, and that the crucial function of promoting agricultural production was suffering as a result. Therefore, a Commission was appointed in 1979 to reevaluate the mandate of the ORDs. This body has recommended that the ORDs should focus only on functions directly related to agricultural production, thus reversing earlier policy revisions. In practice, this proposal means that the ORDs would be divested of marketing (which has already been discon- tinued in most ORDs), functional literacy training, and civil works other than those pertaining to water control. 2.1.08 In analyzing the current issues and constraints, the following sections take account of the prospective changes proposed by the ORD reform commission. C. The Present Situation Organization 2.1.09 Internal Structure of the ORD. The internal organization of an ORD consists of an area structure and a headquarters staff of supporting technical services. In many respects, the organizational structure is a model of how an extension service should be organized. (The organization chart of the ORD of Ouagadougou, which is typical of other ORDs, is given in the Appendix). Each ORD is sub-divided into clearly recognizable geographical boundaries, with a single line of command and with a satisfactory supervisor/field agent ratio. Typically, an ORD would have 4-6 geographical sectors; each sector with 5-7 sub-sectors; each sub-sector with 6-8 extension cells. An extension cell usually consists of several villages. The responsibilities of each level of extension hierarchy are fairly well defined (see section on staffing). 2.1.10 An ORD attempts to provide its own support services for all the functions in which field agents are engaged. Hence, each ORD has several service departments, depending on the availability of staff and regional  - 124 - requirements. Typically an ORD would have a department for crop production, animal production, physical works, community development, economics, statis- tics and planning, credit and finance, and administration. Because of the lack of qualified degree level personnel, several of these are often conso- lidated and are headed by middle-level technicians. A service function which is omitted in all ORDs outside of Bobo-Dioulasso, Bougouriba, and Degougou is extension and training. Some training is given in a few ORDs but no mention is made of extension (vulgarisation) in any of the organizational charts of the ORDs, reflecting the fact that the extension function as defined in the introduction is not given sufficient importance in the work of the ORDs. The thrust of ORD activity to date has been on community development, credit delivery and marketing. 2.1.11 Coordination between sector chiefs and chiefs of the services (who may be regarded as subject matter specialists) is generally poor. At present, sector chiefs as well as service chiefs report to the ORD director and coordination is executed by the director himself. But as the ORD director is overloaded with administrative responsibility, the work of ORDs tends to suffer considerably. ORD directors in many cases do not have qualified deputies who could assist them in this task, nor is there a forum in which technical issues are discussed and harmonized before they are presented to the ORD director. 2.1.12 The ORD reform commission has proposed that the organizational structure of the ORD should be modified so that the technical services (includ- ing the offices of planning and statistics, crop and animal production, physi- cal works, and a new bureau of extension and professional training) would be incorporated under one deputy director, while the financial and administrative services (including accounting and agricultural credit) would form another sub-directorate. The extension hierarchy, based upon the area structure, would be unchanged. This reform would simplify the managerial demands on the director and put a stronger emphasis on the extension and training function; the modification does not necessarily address the communication problems between the sector chiefs and subject matter specialists, however, unless it leads to better coordination through the deputy director of technical services. 2.1.13 Linkages Between the ORD and the Ministry of Rural Development. Although the Ministry of Rural Development is the counterpart to the ORD at the national level and should provide technical guidance to it, the linkage between the technical services of the Ministry and those of the ORD has been weak in the past, although recent efforts have been made to improve it. The Ministry of Rural Development appoints the Director of each ORD, assigns high and middle level agricultural technicians, and makes annual budgetary appro- priation to ORDs. Within these constraints an ORD is a fully autonomous body. 2.1.14 Formally, the Secretary-General coordinates the activities of the ORDs with the technical departments of the Ministry. The most important of these is the Department of Agricultural Services. (The former and current organization charts of the Ministry are given in the Appendix). The former and revised Agricultural Training School of Matourkou also reports directly to the Secretary General. To date, the ORDs have not receive adequate support from the technical departments of the Ministry, although these departments are  - 125 - represented on the administrative advisory council of each ORD. The Ministry departments do not make much practical use of the annual reports which the ORDs prepare on the basis of production data gathered by ORD enumerators (enqueteurs) and extension workers. It is significant to note that recent organizational changes in the Ministry have addressed the lack of support from the center for the key functions of extension, training and research through the creation of a Service of Extension and a Service of Experimentation and Applied Research. 2.1.15 So far as the coordination of research at the national level is concerned, the situation is complicated by the conflicting responsibilities of the Ministry of Rural Development and the Ministry of Higher Education, as described in Chapter 1. The quality of research conducted in the four main research stations of Upper Volta is considered of good quality but is not always pertinent to farmers' needs. A program of adaptive research is required to provide a two-way link between the results of research stations and what actually happens in farmers' fields. In Upper Volta, this essential link is virtually non-existent. Without adaptive research, suitable technological packages cannot be generated with the country; what is equally important, a necessary vehicle for the training of extension workers, which is one of the critical gaps in the extension system of Upper Volta, is neglected. 2.1.16 Since the extension service has few direct ties with research, the impact of research for the farmer has been felt largely through the supply of improved seeds. However, this, too, has been beset by a number of problems (see Section 2.4) and only a few farmers have benefitted. The seed service department of the Ministry has trained eleven technicians to oversee seed multiplication by the ORDs or by their contract farmers. However, most of the ORDs do not have the administrative capability to operate seed farms or exert effective control of seed quality. 2.1.17 The Coordination of Rural Development. In their role as agencies of integrated rural development, the ORDs were expected to execute multi-sec- toral functions as well as coordinate the activities of national departments and Ministries other than Rural Development within their regional jurisdic- tion. The ORDs were assisted in this coordinating role by the Prefect, who is the civilian governor at the departmental level and participates in the ORD's administrative council. 2.1.18 In reevaluating the role of the ORDs, the Government has indicated that the integrated approach to rural development is to be retained, but by separate agencies or services working within the regions in a coordinated way rather than by one institution (the ORD) physically implementing the various functions. The ORD then becomes only the departmental presence of the Ministry of Rural Development, with no more authority than the regional office of any other Ministry. The ORD Commission has proposed that an Economic and Social Coordinating Committee be set up at the departmental level, headed by the Prefect, to ensure consistency among the activities of various agencies in the regions and of the ORDs. However, it is not clear that this proposal has assured support within the Government.  - 126 - 2.1.19 The coordination of rural development activities at the national level was carried out until 1974 by the Interministerial Coordinating Committee for Rural Development (CCDR). This oversight is supposed to be provided currently by the Secretary General of the Ministry of Rural Development, and the ORD Commission did not propose reviving the CCDR or a like entity to assist in this coordination. 2.1.20 The problem of coordinating development activities from various sectors - agriculture, feeder roads, education, health, and water supply - at the departmental level and at the center remains an unresolved issue. The ORD Commission's notion that the ORDs should manage or coordinate but not execute integrated rural development is a good one; however, if the Depart- mental Coordinating Committee is not created, it is unlikely that the ORD alone can integrate development activities over which it has no authority. At the national level, the capability of the Secretariat-General to exercise this coordination is also questionable, particularly since it does not even exert control over the technical services in the regions which fall directly within the jurisdiction of the rural development ministry. The lack of coordination of rural development is of particular importance to the extension service because, if unresolved, this issue may prevent the ORDs from refocusing their role on agricultural production, and because a poor integration of regional development programs may inhibit the impact of improved extension. Extension - Farmer Contacts 2.1.21 A major constraint on the ability of most extension workers to effectively relay technical advice and obtain feedback from farmers is the lack of a programmed work plan or regular contact with producers in their zone. Two organization models of extension have been tried in Upper Volta: one in the ORDs of Bobo-Dioulasso and Dedougou, and the other in the ORD of Ouagadougou. The former, the Training and Visit (T and V) approach, has been in operation for a couple of years. The system in Bobo-Dioulasso consists of regular visits by the extension workers to "contact farmers" who are selected as average farmers in their area. Each agent has 18 contact farmers and each contact farmer has at least five farmers who follow his practice. The extension worker visits each contact farmer and his followers twice a month. In the initial stages of implementation, criticisms were voiced against this system on the grounds that the concept of the group and the pre-eminence of village chiefs so important in Voltaic society had not been exploited for the extension model. The system has been modified, there- fore, since its introduction by incorporating a "contact group" rather than individual contact farmer. Along with organizing the extension worker's visits to farmers, the system structures the work program by determining a single message to be conveyed on each occasion and sets formal procedures for data collection by the field agent. Preliminary results of the T and V experiment appear encouraging, and the system will undergo a further review in the context of appraisal of the proposed Second West Volta Agricultural Development Project.  - 127 - 2.1.22 An alternative model is the system applied in the Ouagadougou ORD. The field level worker is assigned to a block of villages which he visits once a week or fortnight, depending on the coverage he needs to make, on a designated day of the week. The Chief of the village or the President of a group of farmers becomes the focal point for the gathering of villagers to discuss the various themes the extension worker has for the day. Unlike the system introduced in Bobo-Dioulasso ORD, this system is based on customary groupings and traditional leadership. On a regular basis, the agents meet with their subsector chief to learn the theme to be presented to the farmers; and their supervisors also meet regularly to determine the sequence of tech- nical messages to be relayed. Unfortunately, the ORD of Ouagadougou does not receive major external aid and the program outlined here exists largely on paper. Apart from these two models for the organization of extension workers' contacts with the farmers, there is no structured work program for field agents in the remaining ORDs. The differences between the two systems are not great, and a combination of the two, whereby traditional leaders are consulted in the creation of contact groups, could be easily envisioned. 2.1.23 An essential function of the extension worker is to promote the organization of farmers, not only to disseminate information more readily, but also to enable them to pursue their own development objectives more effectively as a group rather than as individuals. The ORDs, through their Community Development Service, have focused much of their efforts on promoting the groupement villageois, a precooperative form of farmer organization. Both Ministry officials and ORD staff concur that the groupement as a grass roots organization is a vital counterpart to the ORD and must assume much of the final distribution of input supplies and credit, thereby lessening the demands on the ORD agents. Although the number of village groups listed under each ORD is large, those groups that have achieved a permanent membership are in fact very few. The groupements seem to develop most rapidly where members have already adopted an improved technology or produce. a cash crop which gives the farmers a clear focus for organization, as well as a cash surplus which can be used for community investments. Consequently, farmers' groups are most active in the cotton zones and among fruit and vegetable producers. In fact, when the extension workers went on strike recently, the groupements villageois effectively took over their functions of collecting the cotton crop and distributing inputs. 2.1.24 The Ministry of Rural Development has established an office of rural institutions which is currently preparing draft legislation to forma- lize the status of the groupements villageois and enable them to assume legal responsibility for credit, marketing, and input delivery. A small revolving fund has also been provided by the Swiss to extend loans to groups wishing to carry out special projects (e.g. construction of a well, pharmacy, grain bank, etc.). Manpower and Training 2.1.25 The Extension Hierarchy. The extension service of Upper Volta is based on a pyramid of agricultural technicians, with the field level agents  - 128 - at the base. The first four categories of agricultural technicians corres- pond to levels A-D of the civil service. Both their educational levels and job responsibilities are well defined. Appendix Table 2.1 summarizes the level of training and function of each category of extension personnel. 2.1.26 Category A. At the top of the hierarchy are the degree level agricultural technicians who, depending on their precise training, are termed Ingenieur Agronome, Ingenieur de Developpement Rural, or Ingenieur de Travaux Agricoles. They hold a position of either an ORD director or department service chief at ORD headquarters. 2.1.27 All agricultural personnel presently in Category A were trained abroad either in Mali or France. In 1975, a department of agriculture was opened at the University of Ouagadougou which trains Ingenieurs de Developpe- ment Rural and is expected to produce at the rate of 22 graduates yearly. Additionally, there are 15 graduates returning from abroad each year which gives an annual supply of 30 to 40 university graduates for Upper Volta, only a few of whom are assigned to the ORDs. 2.1.28 Category B. The second level of agricultural personnel, Category B, is the Conducteur de Travaux Agricoles Sp4cialise (CTAS) who is typically a sector chief in the ORD system. CTAS who joined the service before 1976 were trained outside Upper Volta, principally in Mali. Candidates who have completed two years of secondary school now may enter the conducteur program at Matourkou, where they receive 3 years of training. The curriculum consists of a two year core course in agricultural science, followed by specialization in crop farming, home economics, forestry, or animal husbandry. Students wishing to specialize in forestry and animal husbandry proceed to the tech- nical schools in Bobo-Dioulasso and Ouagadougou, respectively, to finish their courses. So far, Matourkou has only produced three streams of 25 CTAS per year. 2.1.29 Category C and D. The remaining categories of agricultural tech- nicians ranked within the civil service are the Agent Technique Agricole Specialise (ATAS) and the Agent Technique Agricole (ATA). 1/ These staff are trained to serve as subsector chiefs of the ORD; since the number of ATAS are insufficient, however, many subsectors are still headed by encadreurs. 2.1.30 The ATAS is trained at the Matourkou Agricultural Training School and should have at least completed elementary school before being admitted to the program. At Matourkou he follows a lower-level version of the CTAS training program, but with one extra year of specialization. 2.1.31 The Extension Worker. The encadreur, or field level extension worker, is not a civil servant. Encadreurs are a mixed group varying in age, initial training, and experience. The majority are between 25-35 years 1/ The ATA (level D) has not completed the cycle of specialized training and so is less qualified than the ATAS. ATA staff are relatively rare in the ORDs.  - 129 - of age and have at least six years of schooling. Before the establishment of the ORD, the extension agents were recruited by specialized agencies such as CFDT and given short term training of 2-4 months duration. The extension workers recruited by the ORDs before 1976 have obtained the primary school certificate (CEPE) and attended a nine-month training course in agriculture at Matourkou. Unlike their predecessors, these encadreurs were trained as multi-purpose workers. They form around 50% of the total field staff. After 1976, the Matourkou training program for extension workers was terminated and the ORDs began to train their own field agents. Because of the financial difficulties of the ORDs, the numbers in this category have been kept small and the standards of training vary considerably among ORDs. 2.1.32 Matourkou. A special note must be added about Matourkou, which is virtually the only agricultural training school for middle-level technicians in Upper Volta. UNDP budgetary support and technical assistance, which had been provided to the school since 1968, was terminated in 1976, after which time the 22 foreign instructors departed. An obvious illustration of the Government's recurrent financing problems is that Matourkou now has only one full-time (Voltaic) professor. The school recruits part-time instructors, the majority of whom are employees of the Bobo-Dioulasso ORD or of the IRAT/ Cerci Research Station at Farako-ba. Classrooms are inadequate, and the teacher/pupil ratio is 1:60. Other essential building facilities have also been a serious problem. The critical situation of Matourkou has been recognized by both FAO and USAID, and latter has agreed to provide funds to finance the upgrading of Matourkou's physical infrastructure, including a water supply system, two dormitories, and four staff houses. 2.1.33 The basic problem of Matourkou is that the school has not been given the recognition by Government of its essential role as the specialized agricultural training school comparable to the forestry and veterinary schools. The instructors of the school are given no guarantees of job security or pro- motional incentives, and there has not been an increase for sometime in their remuneration. These factors have made it almost impossible to retain a permanent staff for the school. Since the sharp decline in the quality of staff and facilities at Matourkou dates from 1976, when the CTAS and ATAS programs were initiated at the school, it is obvious that the constraint of qualified personnel at these levels in the ORDs cannot have improved greatly in the past four years despite the numbers who have left the college.  - 130 - 2.1.34 Manpower Gap. Table 1 gives the actual staffing position of the ORDs. As can readily be seen from the table, the number of A and B level pers6nnel assigned to ORDs is small relative to the total staff. Table 1: ORD STAFF BY CATEGORIES - 1979 Present Staffing ORD ING.AGR. ITA CTAS ATAS ATA Encadreurs (A) (A) (B) (C) (D) 1. Ouagadougou 1 - 6 16 2 144 2. Koudougou 4 - 6 20 - 170 3. Koupela 1 - 4 18 - 70 4. Kaya 1 - 4 12 - 96 5. Fada N'Gourma 5 1 5 23 1 171 6. Yatenga 1 - 4 20 1 65 7. Bougouriba 3 - 4 21 - 187 8. Bobo-Dioulasso 4 1 7 30 1 158 9. Banfora 1 - 7 26 - 52 10. Dedougou 1 1 6 26 - 206 11. Sahel - - 3 10 - 36 Total 22 4 56 220 5 1,355 Source: Ministry of Rural Development 2.1.35 Two questions are relevant to an evaluation of the adequacy of manpower in the extension service of Upper Volta: (1) Is the number and quality of high and middle level staff adequate for an effective extension service? (2) Is the farming population adequately covered by field level extension agents, or in other words, is the base of the pyramid too narrow? Concerning the first question, the table below indicates for a sample of five ORDs (Fada, Koupela, Kaya, Bobo-Dioulasso, and Dedougou) the position which various categories of personnel presently hold in the extension hierarchy. Since the ORDs of Fada, Bobo, and Dedougou are recipients of external financing and technical assistance, the table portrays a more favorable staffing picture than the average.  - 131 - Table 2: POSITION OF EXTENSION STAFF Level of Staff Total Position in ORD Ingenieur CTAS ATAS Encadreur Positions (A) (B) (C-D) (E) Service 15 9 30 9 63 Sector 1 15 32 7 55 Sub-sector - - 31 91 122 Extension Cell - - 3 518 521 Total 16 24 96 625 2.1.36 Employing the Government's own standards of personnel qualifica- tions as outlined in paras. 2.1.28-31, it can be seen that the shortage of supervisory personnel is acute at all levels. The minimum requirements for degree level personnel in each ORD is estimated to be between 7 to 10, including the Director and each service Chief. Assuming, therefore, that a minimum of 35 degree level staff are needed in the 5 ORDs, one can read from this table that only 15, or somewhat less than half, of the requirements are presently met. Among all eleven ORDs, only 26 of a minimum of 77 positions for degree level staff are properly filled (34%). There are 28 positions for sector chiefs in the five ORDs sampled, of which 16 (57%) are occupied by CTAS staff or above. At the subsector level, only one fourth of the requirements for ATAS are satisfied. The table illustrates that the short- age of qualified supervisory staff is particularly severe at the service chief and subsector chief level, even in this biased sample of ORDs. It is interesting to note that when the ORDs were first established, they were staffed by French experts averaging ten per ORD. Today, the technical assistance received by seven of the eleven ORDs is negligible, the excep- tions being the ORDs of Bobo-Doulasso, Dedougou, Fada, and Bougouriba. 2.1.37 To answer the second question, appendix table 2-2 was prepared showing the farmer/extension agent ratios in all ORDs. As the table shows, the number of farmers per extension agent ranges widely from 200 to 1100. It is not obvious what norm should be used to determine which ratios are acceptable, since the number of farmers who can actually be reached by the extension agents depends on the density of settlements, the type of cropping patterns, and how the agents organize their time and contacts with the farmers. One approach is to compare the ORD averages with those assumed in the World Bank projects. In the Second Bougouriba project, the ratio of farmers in the ORD to extension workers by the end of the project period is assumed to be 300:1, while in the Second West Volta Project, the more advanced development of the farmers justifies a ratio of 5-600:1. On the central plateau, a larger number of farm families per extension worker could be considered acceptable at the present time since a suitable technical package for the region still needs to be developed before it is widely replicated, whereas better research recommendations already exist for the southwestern ORDs, justifying denser farmer coverage.  - 132 - 2.1.38 ORD staff also confirmed that many villages were not covered by encadreurs, and that in this regard, the situation has worsened as compared with the early 1970s. This is not surprising, since the rural population in all ORDs has increased despite migration and the total number of extension workers in many ORDs has at best remained the same. The extension staff of the ORDs on the central plateau, most of which have not received significant donor finance, have experienced a clear decline; this is illustrated for two of these ORDs in the following table. For reasons that are discussed below, this trend is not likely to be reversed. On the contrary, the attrition rate should be expected to increase, and the base of the extension pyramid would become too narrow to cover all Voltaic farmers. Table 3: DECLINE IN NUMBER OF ENCADREURS ORD 1972 1973 1974 1975 1976 1977 1978 1979 1980 Ouagadougou 202 167 158 40 132 145 131 na na Kaya na na 112 116 99 93 na 85 84 2.1.39 Nonetheless, it is safe to conclude from the above analysis that, first, the number of field level extension staff is not a serious constraint if the existing personnel are given an organized work program, such as the Training and Visit system, which can increase their productivity and effi- ciency in reaching farmers. Second, the real manpower issue in the exten- sion service is the shortage of supervisory personnel, particularly middle level technicians. Staff Incentives 2.1.40 Extension personnel in Upper Volta fall into two distinct catego- ries with regard to conditions of service: statutory and contractual personnel. Statutory personnel include the technicians in Categories A-D. Their duties and responsibilities, salaries, allowances, and promotional prospects are governed by the civil service regulations, and they enjoy full job security. 2.1.41 In contrast to the civil servants, encadreurs are hired directly by the ORDs as contractual employees. In 1979, their union launched a major campaign to increase their salaries, as well as travel and housing allowances, on the grounds that their wages had lagged seriously behind the cost of living. The encadreurs finally succeeded in securing an upward revision of the salary scale which raised the minimum wage from CFAF 24,204 to 29,650/month and improved the level of allowances. At the time this salary increase was negotiated, over three fourths of the extension workers in most ORDs were receiving a monthly salary below the revised minimum wage.  - 133 - 2.1.42 Although the ORD Directors and Ministry representatives agreed to the salary increase, the ORDs were not given any additional financial support from the national budget to implement it. 1/ As a result, many extension agents did not receive the promised increase even by mid-1980, which resulted in a nationwide sympathy strike by the encadreurs supported by some ORD supervisory personnel. Those ORDs which did carry out the increase did so at the expense of other operating charges, such as for in-service training. 2.1.43 The salary structure of the extension agents is further complicated by donor finance. Encadreurs' salaries vary considerably among ORDs, in the first place, because of differences in the latters' financial resources; these inequities are exacerbated when the donors finance salary premiums for project personnel without regard to other staff in the same category. Although it is not clear whether the special salary premiums in donor-financed projects have served their original purpose--namely, to attract and hold the more qualified staff--the allowances have unmistakeably become a source of contention between Government and the non-project staff and threaten to pose additional financial burdens on Government when donor aid to these projects terminates. 2.1.44 To further improve their conditions of service, the extension workers have demanded to be incorporated into the civil service, and they are supported in this claim by the ORD reform commission. The main rationale for this demand is apparently a desire for financial security, which the extension workers have not received as employees of the ORDs, since the latter experience a chronic shortage of funds. The Government is therefore considering a measure to guarantee ORD operating expenditures through the national budget. However, it does not appear that there is much support within the Government for extending civil servant status to the encadreurs. D. Recommendations to improve the extension service in Upper Volta 2.1.45 As indicated earlier, the ORD Reform Commission has proposed some reforms to redress the weaknesses of the extension service, notably by stream- lining the functions of the ORDs. In ORDs which benefit from donor projects, improvements are underway though the introduction of a modified Training and Visit system; in-service training of extension workers; assignment of credit and input delivery to staff other than extension workers; strengthening of the supervisory ranks through technical assistance; and budgetary support to ensure minimal financial security for field staff and to provide them with the means to carry out their job effectively, for example through loans for the purchase of mobylettes. 2.1.46 However, these reforms do not go far enough, have not yet been introduced on a countrywide basis, and cannot be successful in isolation. Since the objective of extension is to improve production and farmer incomes, staff must have a viable message to impart, calling for stronger links with research which itself has to address the farmers' problems to supply 1/ The financial situation of the ORDs is detailed in Chapter 3.  - 134 - meaningful recommendations. Better trained staff are essential to carry out the program effectively, particularly specialist staff, and middle level supervisory staff. Improved inputs, (seed, pesticides and fertilizer as well as implements), have to be available to the farmer. Without these complemen- tary inputs, extension advice quickly loses credibility. 2.1.47 The numbers of extension staff should reflect Governments' develop- ment priorities within the framework of available resources, rather than the present system of ad hoc additions of extension staff to various ORDs paid for by different donors under regional or national projects. The constraint of financial resources and of manpower enhances the need to increase the effectiveness of individual workers through the development of farmer groups, both to maximize the extension impact and to take over part of the functions of input and credit delivery from the ORD. 2.1.48 Improvements to the extension service are outlined below under the following headings: (a) The role of the Ministry of Rural Development; (b) Research-extension linkages; (c) Formal and in-service training; (d) Development of farmer organizations; (e) Incentives for staff; and (f) Monitoring and evaluating the impact of extension programs. Recommendations concerning seed production and input supply are discussed in Section 2-4. The Role of the Ministry of Rural Development 2.1.49 The Ministry of Rural Development needs to review priorities for development in the main ecological zones of the country, and draw up national production targets with which the ORD development programs can be integrated. This will mean providing more guidance to ORDs with regard to development planning and the budgeting of development programs, implying the need also to coordinate donor activities. At the same time, the Ministry must exert more technical guidance over the ORDs to ensure that programs are implemented at regional level. Only through increased planning and support by the Ministry can the limited resources of the ORDs be deployed to capitalize on development opportunities. The basic model of decentralization which the ORDs represent is appropriate and should be retained, however. The newly created Service of Extension under the Ministry's Department of Agriculture should coordinate the work of the various specialist services within the Ministry, and give support to the regional extension and training services which must be created in each ORD. 2.1.50 Better statistics on production, yields and price movements in the ORDs are needed, which in the first instance will require some improvements in the statistical service in each ORD. The Service of Documentation, Statistics and Programming in the Ministry should thus collate this information to provide an input into the improved planning process discussed above.  - 135 - 2.1.51 These recommendations are an essential prerequisite to obtaining more benefits from improved extension. It should be noted that the improved planning process would indicate where efforts should be concentrated; and it is quite likely that it would justify higher ratios of extension staff to farmers in the high potential areas where improved packages for farmers are available, and less dense coverage in the Central Plateau, where fewer farmers would be reached by extension staff pending development of an appropriate package of interventions that is more widely replicable. 2.1.52 To further define the requirements of staffing, training, and tech- nical assistance that may be implied by these recommendations, a study must be made of the present coordinating and technical functions of each service of the Ministry, with particular attention to the role of the Secretariat-General. Research/Extension Linkages 2.1.53 Section 1.7 on research has indicated the need for improved research coordination and for adaptive research to verify the applicability of improved varieties and agronomic practices in different areas. It is also vital that researchers become more responsive to farmers' problems, and more aware of the actual constraints the farmer faces. The extension service has to provide this linkage between the findings of research and the realities on the farm. 2.1.54 An adaptive research program must include both experiments on outstations--as is being done by CERCI for the Niena Dionkele Rice Project, and is proposed by GTZ at Reo and Pella in the Koudougou Project--as well as trials and demonstrations on farmers' fields. To establish an organic connection between research and the extension system, the ORD service chiefs (subject matter specialists) should regularly meet with researchers at their main stations and work alongside them at outstations. The Training and Visit system of extension as presently employed in some ORDs also uses the informa- tion from adaptive trials to run demonstrations on farmers' fields, and enables field level workers to provide rapid feedback to subject matter specialists and research. Research workers should be required to make a specific input into the T and V system by jointly planning seasonal extension themes and assisting in training of the subject matter specialists. Since research is organized on a crop basis in different organizations, this will require collaboration of each ORD with several research bodies for the key crops in its area. 2.1.55 The ability of the research and extension staff to collaborate effectively in a program of adaptive research is more important than over- ambitious coverage in the number of sites. Consequently, it is recommended that an adaptive trials outstation, and possibly a seed farm, should be developed in each of the four major ecological zones with linkages to the technical services of nearby ORDs, as an initial objective. These regional sites would provide excellent centres for field days or holding short training courses for ORD staff at various levels as well as establishing constant extension/ research contact.  - 136 - Formal and In-Service Staff Training 2.1.56 To improve the calibre of lower and middle level technicians, better initial training, as well as more rigorous in-service training, is essential. It is vital that the Matourkou agriculture school be upgraded and that civil service posts be established for staff to attract competent instructors. Besides the USAID project already underway to improve the school's facilities, technical assistance is needed to review the curriculum and train staff. 2.1.57 It is not feasible nor desirable for all ORDs to train their own encadreurs, who would also benefit from a more uniform standard of training. Matourkou and possibly an additional college in the eastern region could be developed to train extension workers. However, at present the most urgent requirement is for better trained middle-level staff, so the rehabilitation of Matourkou for this purpose is the main priority. A doubling of the ATAS output in the crop farming specialization would appear to be justifiable. A manpower study, for which terms of reference have already been proposed by FAO, is needed to assess the future needs for formal training of agricultural technicians and field level agents in light of the technical messages which are available for them to convey, and the Government's likely ability to fund new positions. The study should also assess the priorities for assigning A-level agricultural staff, who are already being trained in sufficient numbers, to the ORDs as opposed to other sectoral institutions. 2.1.58 In-service training should be provided in connection with the introduction of a structured work program, such as the Training and Visit system, in all ORDs. The value of having a service unit for extension and training at ORD headquarters has been well demonstrated under ongoing projects in Bougouriba, Bobo-Dioulasso and Dedougou, and should be estab- lished in all the ORDs. The present structure under these projects, which consists of sector chiefs with deputy extension coordinators, subsector chiefs and encadreurs, provides a suitable disposition of staff for training purposes. The in-service training program should be developed through courses for sector level staff prior to the crop season, to fully brief them on ongoing research activities; the sector staff would then carry out fortnightly training of subsector chiefs and extension agents as part of the Training and Visit (or similar) system. The latter groups should be trained together (2 subsector chiefs and 6-16 encadreurs) at these sessions to ensure that the extension program is well understood, to prevent distortion of messages before they reach the farmer, and to provide faster feedback from the farmer. 2.1.59 In developing a program of in-service training and a structured extension system, it is essential to more closely integrate the service chiefs, or subject matter specialists, at the ORD headquarters with the work of line, or supervisory, staff (sector and subsector chiefs). The line staff should receive their technical support from these service heads, who would regularly collaborate with research personnel on outstations and instruct the extension supervisors and encadreurs on the findings of adap- tive research and the conduct of trials and demonstrations with farmers.  - 137 - Development of Farmer Organizations 2.1.60 With Upper Volta's limited financial and manpower resources, it is vital that farmers become more self-reliant and that agricultural services be provided to them as groups rather than as individuals. The groupements villageois, headed by traditional leaders, have an essential role to play in carrying out the lowest level of input and credit distribution, organizing extension contact groups, and providing feedback to the extension and research services. However, whereas the support of the groupement leaders is important in disseminating extension messages, few would be the key contact farmers, (in terms of the Training and Visit system), as they are rarely fulltime farmers. Each groupement villageois is likely to have two or three farmer groups for extension purposes, and the farmers themselves should select the contact farmer or group, which might change from season to season. 2.1.61 There is obviously a need for training of farmer groups to enable them to fulfill their potential as the counterparts to the ORD and a means for promoting more general community development. Training of group leaders in simple accounting, record keeping, and collection of production statistics is necessary. The Ministry's Department of Rural Institutions is attempting some simple training on a trial basis. To expand the opportunities further, in-service training of ORD staff - either of specialized ammateurs, where resources permit, or regular extension agents - should help them develop these simple skills which can be passed on to farmers' groups. Functional literacy training, which the Government recognizes is best left to the Ministry of Education rather than to the ORDs, is a prerequisite to any significant advancement of the farmers' groups, and should be coordinated with other train- ing efforts. Likewise, an appropriate supply of credit for group endeavors, such as the construction of village facilities (whether social or production- oriented), provides an added incentive for organization and ensuring group cohesion. Incentives 2.1.62 To enhance the performance of extension staff, their morale and hence their motivation must be improved. This does not imply that the field agents should be incorporated into the civil service. A significant increase in staff incentives can be gained by the following measures: (a) assuring payment of the wage increases promised in 1979; (b) removing the discrepancies in salaries and allowances provided to staff with the same qualifications in different projects and ORDs; (c) providing good performers with opportunities for promotion to higher grades following further training at Matourkou; (d) developing an agreed work program and regular training schedule which improves the agents' understanding of what they have to communicate and gives them clear targets of performance; and (e) providing the necessary means of physical mobility for field staff (e.g., credit to purchase a mobylette).  - 138 - Monitoring and Evaluation of Extension Impact 2.1.63 As Upper Volta needs to concentrate its extension efforts where good returns can be obtained, monitoring and evaluation of the extension effort is important. In the structured extension programs like the T and V system, field workers develop the capability to record the adoption of improved practices and the performance of their contact farmers. The SAFGRAD/Purdue team is at present analyzing some of this data from Bobo-Dioulasso ORD, and will make recommendations for improving the record keeping without adding further burdens on the encadreur. This regularly collected data, as well as occasional surveys which could be undertaken by ORD statistical units, must then be used by the technical staff of the Ministry to plan for the develop- ment of the agricultural sector and to provide a strong technical guidance of the ORD programs as discussed in para. 2.1.51. 2.2 CEREALS MARKETING Marketing of Coarse Grains A. Introduction 2.2.01 It is often argued by Government officials and by donors that the lack of an assured marketing system constitutes one of the major constraints to an increase in the production of cereals in Upper Volta. At the same time, the claim is usually made that only an enhanced role for Government will resolve the issue of grain marketing. The following section evaluates this latter proposition and concludes that while a role for Government can be envisioned which may meet its objectives in the marketing sector, the require- ments for implementing the program are severe and less ambitious interventions should be considered. The paper first reviews the Government's intervention in cereals marketing as it has evolved since 1970; second, the conditions which justify a public role in grain marketing are discussed, and OFNACER's performance is evaluated in light of these conditions; third, the options for public intervention in the grain trade, representing varying degrees of Government control and financial commitment, are outlined. B. Government Intervention in Cereals Marketing OFNACER's Objectives and Operations 2.2.02 The Government's major effort to intervene in the marketing of coarse grains began in 1970 with the creation of OFNACER, the Office National des Cereales. The organization was established as a financially autonomous entity with the objectives of stabilizing grain prices, protecting consumers and producers from presumed exploitation by traders, and smoothing out regional grain imbalances through the management of stocks. 2.2.03 As indicated by Table 2-3, OFNACER's local purchases from 1971/ 72 to 1973/74 averaged only about 2000 tons while most of its sales (some  - 139 - 30,000 tons) were derived from imported food aid. 1/ In 1974, the Govern- ment declared that the ORDs and traders licensed by OFNACER would there- after exercise a monopoly of cereal purchases from farmers and that OFNACER, purchasing stocks from the ORDs, would monopolize cereal sales to consumers. Cereals marketing by the ORDs never got off the ground, however, because of their inability to obtain prefinancing to purchase the crop and because they lacked sufficient transport, stocking capacity and personnel to manage the collection. By 1978/79, most ORDs ceased to engage in any marketing of cereals. As presented in Table 2-3, OFNACER's local purchases from 1974/75-1978/79 have shown only fitful growth and remain dominated by the distribution of imported grain. 2.2.04 In view of OFNACER's and the ORDs' insignificant role in cereals marketing, in 1978 the Government made several changes in OFNACER's mandate: (a) the official monopoly of grain purchases and sales which had existed in theory only was formally abolished. Local acquisition of grain by OFNACER was thereafter to be under- taken through direct purchase from farmers by the agency's own purchasing agents or through licensed merchants and groupements villageois as intermediaries; (b) two bodies which had been established in the early 1970's to manage emergency distribution of food aid during the drought - the Sous-Comite de Lutte contre la Secheresse and the Comite National pour la Constitution des Stocks de Cereales de Reserve - were merged into OFNACER, bringing it additional stock facilities; (c) OFNACER was transferred to the jurisdiction of the Ministry of Rural Development from the Ministry of Commerce in an attempt to orient it more explicitly to the interests of producers. 2.2.05 With these changes, the Government defined its marketing strategy as an attempt to: (i) guarantee a just price to producers; (ii) permit liberal private trade; (iii) promote overall cereal production in keeping with the national objective of food self-sufficiency. 2/ 1/ Note that Government purchases of local rice are not included in OFNACER's account prior to 1974/75 or in 1979/80. 2/ "Rapport de la delegation voltaique au Colloque sur la Politique C6realiere, Commercialisation, Politique des Prix et Stockage", OFNACER, July, 1979.  - 140 - OFNACER has further defined its strategy as that of attempting to assure farmers an alternative outlet for their surplus at the official price and, at the same time, to participate in the local purchase and sale of grain in quantities sufficent to effect a floor price for producers and ceiling for consumers in private trade. The agency has set as its eventual objective the purchase and resale of roughly 40% of the marketed cereals in a given year, or about 60,000 tons annually at the current volume of trade, in order to achieve the desired effects on private prices. 2.2.06 Accordingly, for the 1978/79 marketing campaign, OFNACER expanded its network of regional purchase centers and set a target of 30,000 tons of grain to be acquired, two-thirds of which from licensed merchants. The actual purchases achieved in the 1978/79 campaign, by source and region, are given below: Table 4: OFNACER GRAIN PURCHASES, 1978-79 (metric tons) OFNACER Village Unlicensed Licensed Region agents groups traders traders Total Fada N'Gourma 913 - 301 - 1,214 Koupela 1,387 87 23 - 1,497 Kaya 1 21 - - 22 Ouagadougou 1,831 1,513 609 305 4,258 Koudougou 361 - 66 150 577 Ouahigouya 72 128 3 61 264 Dedougou 2,265 - 640 365 3,270 Bobo-Dioulasso 128 2,217 1,175 357 3,877 Dori 113 126 52 15 306 Total 7,071 4,092 2,869 1,253 15,285 Percent 46 27 19 8 100 Source: OFNACER The table indicates that the agency's own staff and farmers' groups proved more reliable sources than the traders, apparently because the latter found the official margin unattractive. 1/ In its more recent campaigns, OFNACER has placed more emphasis on collaboration with farmers' groups in purchasing grain, with continued success. The large unplanned purchases from the Ouagadougou region, a chronically deficitary area, was explained by OFNACER to consist of unofficial imports of maize from Ghana and Togo (some 5,000 tons). 2.2.07 The 1978/79 campaign was considered a success by OFNACER despite the shortfall in actual purchases, because the agency managed for the first time to acquire local grain through its own organization without depending 1/ For an illustration, see footnote to paragraph 2.2.17.  - 141 - on the ORDs. One reason given for the failure to approach the planned quanti- ties was that OFNACER did not manage to equip its agents in the field until December, nearly two months after the harvest began, by which time private producer prices largely exceeded the official price. The agency incurred an overall loss from its 1978/79 marketing campaign of CFAF 26.3 million, on total sales of CFAF 920.8 million (See Table 2-8). 2.2.08 In 1979/80, OFNACER again prepared to purchase 30,000 tons of cereals through its regional centers. The agency reported to have acquired only 10,000 tons by May 1980 because of insufficient funds to finance the purchases, and because the official producer price and/or the official margin was unattractive to the farmers' groups and private traders. 2.2.09 Late in 1979, a technical advisory commission composed of represen- tatives of the Ministries of Rural Development, Commerce, Planning, Interior, Finance and unions of farmers and merchants was established to set the official producer and consumer prices to be employed by OFNACER and to advise on its general operations. The Commission is charged with setting the producer price before the planting season, beginning in June 1980, in order to incite farmers to increase production, and the consumer price after the official buying campaign has ended (around April 15) so that a margin can be determined which will cover OFNACER's actual collection costs. Prior to the creation of this commission, official producer and consumer prices were both set around the time of the harvest. The Commission has also been given the authority to decide the dates for the purchasing campaign (now set for November I-March 30) and to propose measures necessary for the adequate provision of stabilization and security stocks by local purchases and by food aid. 2.2.10 Besides its efforts of price stabilization, OFNACER has held as one of its main objectives since 1978 the constitution of security stocks to be used in the event of a serious production shortfall. The volume of security stocks to be achieved has been set at 30,000 tons, 1/ or roughly three months' worth of marketed cereals, which will hold the country until food imports can be acquired. Although this security stock is apparently being constituted with food aid at present, it is important to note that the Government intends by its official goal of foodgrain "self-sufficiency" to reach the level of production which will be adequate to meet the consumption needs of the population in an average year and permit sufficient surplus to build up this security stock, which will serve the country temporarily in the event of shortfall. 2.2.11 No information is available from OFNACER on its sales by region of local or imported grain or on the distribution of its stocks. Data on the total stocks held by OFNACER each year, reported on Table 2-3 as a residual, are also highly tentative. OFNACER published financial accounts for the 1/ This figure was reported to the mission by OFNACER representatives on several occasions, although in a June 26, 1980 issue of l'Observateur, the Director of OFNACER cites 75,000 Mt. as the objective for the security stock.  - 142 - first time in 1978/79, and only covering the marketing of locally-purchased grain (Table 2-8). Although it is impossible to determine therefore the extent of OFNACER's efforts to meet regional grain imbalances and to in- fluence consumer prices, it is clear that the supplies, at its disposal have comprised largely food aid (the latter averaging 30,000 MT/year) and, except for 1977/78, the quantity placed in the local market has exceeded that retained as stocks. Food aid is mainly sold at official consumer prices, although OFNACER distributes a small quantity (2,000 MT in 1978/79) free to the needy. The pattern of grain acquisition and distribution suggests that OFNACER's main effect on the market to date has been more to lower consumer prices than to support the producer price. 2.2.12 As indicated in the Appendix Table 2-5, total supplies of food aid accorded to Upper Volta exceed the quantities reported by OFNACER because some concessional imports are distributed by private relief agencies (e.g. CATHWELL). All food aid provided to the country is required officially to be recorded by OFNACER, however. Requirements of food aid are determined by the Direction des Services Agricoles (DSA) each year after an assessment of the adequacy of the harvest in relation to estimated consumption and avail- able stocks. Even when the DSA determines that local production is sufficient (as in 1976 and 1977), food aid has entered the country because of prior commitments, for example of PL480 supplies, some of which provide counterpart local funds to help finance investment projects. In early 1980, for example, some 55,000 MT of food aid was reported to be in the pipeline from bilateral donors, private relief agencies and the EEC. Government had requested large additional supplies of food aid after the harvest in late 1979 because it initially estimated a food shortfall of 140,000 MT; 1/ however, by May 1980, the Government revised its estimates, reporting that the past harvest was adequate for the annual needs although serious imbalances in supply existed between the Southwest and Sahelian zones. In this instance, the poor record- ing of local food production and OFNACER's evident inability to respond to regional food shortages resulted in an inflow of food aid which substantially exceeded the national cereals shortfall. 2.2.13 OFNACER's infrastructural and managerial capacity to implement its price stabilization and security stock objectives has been given consider- able support through projects already in execution or under preparation by West Germany, USAID and the FAO. These projects will nearly double OFNA- CER's permanent storage facilities and improve the dispersion of small warehouses, which are currently lacking in the smaller towns outside of the Sahel region (Table 2-4). The Swiss have assisted OFNACER in the build-up and maintenance of its transport infrastructure, which to some extent substitutes for storage sites in remote areas. The projects also provide considerable training and technical assistance in accounting, management, and collection and analysis of market data. 1/ Ministry of Rural Development, "Bilan Provisoire de la Campagne Ce- realiere 1979/80".  - 143 - C. Evaluation of Government Marketing Policy 2.2.14 OFNACER's mandate to intervene in cereals marketing to assure producer incentives, stabilize fluctuations in consumer prices, and reduce regional grain imbalances while achieving financial autonomy is a formidable task. In light of OFNACER's performance to date, it is worth asking whether the Government should be attempting to intervene in cereals marketing. Two reasons would justify this intervention: (a) if the private sector, left to its own devices, proves inefficient and exploitative; Government's entering the market would only make sense on these grounds, however, if it were capable of avoiding the shortcomings of private trade; (b) if structural factors in the cereals economy prevent even a rela- tively efficient and competitive private marketing network from achieving certain social goals, such as assuring a desired level of cereal output, redistributing income from wealthier areas to poorer, maintaining the real incomes of certain groups, (e.g. the urban population), or protecting import-substituting production (notably of rice). Government intervention on these terms inevitably involves a substantial financial cost, however. 2.2.15 The following analysis addresses the conditions for OFNACER's intervention in cereals marketing and determines whether the agency has the present or potential capability to meet these conditions. Shortcomings of private trade 2.2.16 Although data on the private cereals trade are obviously very limited, evidence compiled by the mission during market visits in February- March 1980, as well as preliminary findings reported by market researchers in the country, suggest that "exploitation" by the private traders--in terms of price increases over space and time which far exceed the costs of trans- port and storage--is much exaggerated. However, private trade in some instances may be less than optimal, resulting from (a) farmers' cash short- ages during the soudure, 1/ which require them on occasion to sell their crop in the field rather than after harvest to the highest bidder; (b) poor transport linkages, which limit competition among traders who do gain access to remote villages; (c) the low effective demand for marketed food in very poor regions, which implies that despite potential high prices, private traders may not find it profitable to ship the relatively small quantities demanded to these areas; and (d) the intermittent nature of surpluses available in some areas, which makes it more difficult for traders to plan their interventions, while the small size of surpluses scattered over wide areas makes collection financially unattractive. 1/ The pre-harvest period of relative food scarcity.  - 144 - 2.2.17 It is unlikely that OFNACER's current operations address these marketing insufficiencies and, in fact, it may create new problems. OFNACER's marketing costs are at least as high as those of the private traders and would surely rise if the agency focused its distribution on areas which presently lack all-weather roads. 1/ Even if OFNACER begins purchasing grain on November 1, it has not been accorded the flexibility to buy sooner in areas with earlier harvests or to extend credit to farmers. In this respect, the ability of traders to purchase when farmers want to sell is not necessarily exploitation but a financial service which only the private sector, not Government, is prepared to offer. 2.2.18 OFNACER's buying and selling of local grain is intended to create an additional element of competition with the private sector, eliciting larger supplies of grain to be marketed and forcing producer prices up and consumer prices down. However, OFNACER's intervention cannot narrow the margin between producer and consumer prices over space and time below the actual costs of transport and storage, unless the agency plans to subsidize either or both prices. In that event, its "price stabilization" activity is not simply geared to perfecting an inefficient private market, and its interventions will in fact displace private merchants who cannot operate on the lower margins. If OFNACER subsidized transport costs in order to assure a reasonable price to producers and consumers in areas where private traders would not intervene anyway until markets reach a certain scale, "displacing" the private sector would not be an issue. However, it appears that OFNACER's purchases in remote areas have been minimal and its food aid sales have not been deliberately targetted to sites where private trade is infrequent. OFNACER may be disrupting the private marketing system when, by announcing official prices which it cannot enforce, the agency raises the expectations of farmers who then refuse to sell at lower prices offered by private traders. This may in fact have happened after the 1979/80 harvest in the Southwest, where farmers were reported to be stocking grain which they claimed they could not sell. 1/ The following is the typical marketing margin reported by private traders in interviews with the mission (for sorghum): CFAF/kg Transport by truck (CFAF 500/100-kg sack) over 100-200 km 5 Handling (CFAF 50/sack, charged twice) 1 Trader's margin (CFAF 100/17-kg tine)-includes return to capital, losses, risk, storage, bagging 6 Gross margin 12 OFNACER's official gross margin between producer and consumer prices of sorghum in 1979/80 was CFAF 17/kg. (Includes bagging, treatment, handling, transport, losses, and financial charges). Of this margin, the buying agents (farmers' groups or traders) were allowed CFAF 8/ kg to cover their costs from procurement to delivery at the OFNACER depot.  - 145 - The inability of private marketing alone to meet social goals 2.2.19 There are several structural features of the rural economy which make cereals marketing in Upper Volta particularly difficult and constrain the ability of public policy to deal with it: (a) because of wide variations in rainfall, grain production fluctuates substantially from year to year; (b) since most farmers produce for their own consumption and only market their surplus grain, a relatively small percentage change in total output will yield a much larger proportional charge in marketed quantities; (c) the wide swings in the quantities of cereals marketed yield more than proportional changes in producer and consumer prices because the demand for traditional grain is relatively price-inelastic; (d) most of the grain produced is harvested in a three-month period (October-December); (e) certain regions of the country (the Sahel, the north-central plateau) experience chronic deficits of cereal production relative to per capita needs, whereas other regions (the southwest and west) produce regular surpluses. Although the regional capitals are all linked by national roads which run through the major consuming areas (Ouagadougou and Bobo-Dioulasso), fewer all-weather roads exist connecting secondary towns and villages. This lack of transport infrastructure has a particularly negative effect on ease of marketing since the rainy season when dirt roads are least passable coincides with the soudure; (f) partly as a result of gaps in the domestic road network, the openness of frontiers, and the price policies in neighboring countries, grain moves freely between Upper Volta and Niger, Mali, and Ghana. 2.2.20 In an unregulated market, these structural factors lead to cycli- cal swings in marketed production, possibly even to a "cobweb" pattern, as farmers would plan to produce less grain in a year following a glut of output. These factors also lead to much higher consumer prices in deficit or remote areas than in surplus regions or those near sources of imported food; this implies inequalities of income to the extent that the population in regions with higher prices are not also producers (e.g. in urban Ouagadougou). 2.2.21 Government clearly finds these outcomes unacceptable. One of its major objectives is to achieve food self-sufficiency by planning the average level of annual production needed to satisfy annual consumption, with some surplus to constitute short-term security stocks. For farmers to perceive adequate incentives to meet this objective, the costs of storing food surpluses must be borne at a level above the farmer, or the stocks distri- buted to deficit areas. To illustrate, farmers in Bobo region were reported to have planted less than their usual acreage of grain in spring of 1979 because their granaries were still full from the previous year's harvest.  - 146 - This is entirely rational behavior to stabilize their private incomes, but it doe-s not serve the national goal of maintaining output at a high level. The prevalence of higher consumer prices in some areas than in others also runs counter to the Government's social objectives, as evidenced by the policy of uniform official grain pricing throughout the country. 2.2.22 If OFNACER's operations are justified, in principle, on grounds of welfare objectives and because of divergencies between the private and social benefits of increased production, the question remains whether the agency's interventions serve these purposes in practice. To incite farmers to produce more, OFNACER has begun to announce the official producer price in advance of planting. However, the agency has been given very limited working capital for crop purchases in the last year, even less than required to meet its target of 30,000 tons; moreover, it does not propose to buy grain if and when the target is reached. Under these circumstances, farmers may perceive little valid assurance of a marketing outlet in OFNACER, especially if they have to compete with supplies offered from neighboring countries. 2.2.23 Since OFNACER has been more active to date in selling grain (local and imported) than in purchasing the domestic supplies, it has probably had a more positive impact on the welfare of consumers in the deficit regions than of producers in surplus zones, at the possible expense of production goals. If OFNACER redistributes only locally produced grain, however, the objectives of stimulating production in the south and improving the welfare of consumers are less likely to conflict. 2.2.24 An additional problem with OFNACER's current operations is that the fixing of uniform producer and consumer prices for all regions poses a severe financial constraint on the agency. A simple fixed margin is fea- sible if it represents a weighted average of the agency's marketing costs; that is, if operations in lower cost zones (e.g. near Ouagadougou) provide enough profit to subsidize operations where transport costs are higher. However, between the food surplus area of Bobo and Ouagadougou, for example, the intense private sector competition and good roads may make OFNACER's official margin higher than that of the private sector -- the producer and consumer prices offered by the private traders in this circuit are likely to be more attractive, therefore, than the official prices. At the same time, OFNACER's prices are more appealing to farmers and consumers in remote areas. The agency cannot focus its operations in these regions without a source of subsidy, however. It is at this point that the agency's mandate of financial autonomy and its welfare objectives conflict. The dependence on food aid to generate counterpart funds which can meet some of OFNACER's marketing costs is therefore a very tempting and almost inevitable course for OFNACER to follow. 1/ 1/ In fact, OFNACER retains less than 10% of the counterpart funds generated by most sales of food aid to finance its own operating costs, with the remainder going to the Treasury for general purposes. As a result, the major function of food aid for OFNACER is to enable the agency to meet its target of grain sales to consumers, rather than providing a means of subsidizing the high marketing costs of local purchases from remote areas.  - 147 - D. Redefining the role of OFNACER 2.2.25 The previous section has suggested that public intervention in marketing may be justified (a) because of certain structural weaknesses of private trade which is otherwise fairly efficient and competitive; and (b) because of the Government's welfare objectives, i.e. maintenance of a stable level of output to assure self-sufficiency in normal years, equitable distribution of consumption, and protection of the real incomes of farmers and consumers. 2.2.26 OFNACER's present operation does not greatly undermine welfare goals or private marketing efficiency, but it does not really serve them either. The program is based on the assumption that OFNACER can determine, in advance of the harvest, a given quantity of grain which it can both purchase and sell at fixed prices in a single marketing campaign so as to influence private prices and still maintain financial solvency in each fiscal year. However, in a season of grain surplus, OFNACER will be able to purchase its quota (although not necessarily all the grain farmers wish to sell) at the official price, but it will have difficulty selling the same amount because it will be undersold by private traders. In a year of production shortfall, OFNACER will not find anyone willing to sell grain at the official price and will therefore not have supplies to sell later to enforce the consumer ceiling price. As a result of this inherent catch, OFNACER will probably continue to depend on food aid (as well as direct budget subsidies) to cover its costs and enable it to exercise a significant share of the consumer trade. 2.2.27 There is nothing surprising about an operation which is essentially welfare-oriented requiring some subsidy, and in fact the notion that OFNACER can be as financially autonomous as any purely commercial enterprise is a fiction which obscures the social objectives of the present public marketing intervention. What may be expected of OFNACER is not that it function pro- fitably like any private trader, but that it play a unique role with social objectives and do this effectively. Such a role for OFNACER may be defined with some modification to its present program which could enable it to en- courage production while pursuing social objectives, complement the private sector where it is inadequate, and avoid an excessive financial burden to Government. 2.2.28 In this approach, OFNACER's plan to purchase and sell a single, predetermined quantity of grain in the same crop year would be abandoned, because it is impossible to set a target in advance which will have the appropriate price effects. Rather, OFNACER would aim to intervene with grain purchases based upon a reference producer price to be worked out each year. This reference price would reflect an estimation of the return which the better farmers in the more productive zones (i.e., the Southwest) need to cover their cash costs, assuming they use an appropriate level of inputs, and still obtain a return which provides them with an incentive to use these inputs. The prices would be set differently for maize, sorghum, and millet, and also reflect an adjustment for quality, to take account of the variable yields of these grains in response to inputs and to avoid sales to OFNACER of substandard grain.  - 148 - 2.2.29 If the price were set at harvest when average yields are known, the "break-even" price could be raised in bad years to compensate farmers for poor output, and reduced after a bumper crop in recognition of their lower average costs. If the break-even price were set at planting, it could only be based on a predicted average yield--to protect farmers in the event of a disastrous campaign, the Government would therefore be pressured at planting to choose a relatively low estimate of yields. When the price should be set depends in part on whether farmers obtain more incentive from security of income or from stability of the price itself. The timing issue also has implications for the Government's financial ability to purchase whatever quantities of grain may be forthcoming at the official price. The financial risk of a guaranteed floor pricing policy is obviously least if the price is set after the harvest and adjusted accordingly. 2.2.30 The Government's purchasing interventions would have the objective of providing farmers throughout the country with an assured outlet for their surplus at the reference price. If the price were correctly based on the unit costs of the most efficient group of farmers, it would only be attractive as a last resort (a) in well-endowed areas where producers can achieve comparable productivity (e.g. the Southwest), and (b) areas where farmers can cover their costs at the reference price, but are normally not able to obtain it because they are penalized by poor roads and long distances from markets (e.g. the Eastern region). The agency's purchasing interventions would also aim to serve regions where private marketing does not effectively exist because surpluses are infrequent and scattered and the costs of entry by private traders make collection unprofitable--areas where a public market alternative is most needed. In summary, the purchasing policy would have the effect of providing most incentive to regions which have at least a potential compara- tive advantage in the production of surplus grain through the efficient use of improved technology. The reference price would provide market "insurance"--a guarantee that input-using farmers can sell their surplus at a price which will enable them at least to pay back seasonal credit. 2.2.31 To encourage on-farm or village level storage of grain from bumper harvests, the Government's selective purchasing policy could be combined with credit for storage. Government would pay individuals or groups of farmers to hold surpluses in traditional granaries, with some physical improvements such as plastic liners and use of storage chemicals, and so partially offset the capital cost to farmers of not selling during a given campaign. Farmers would be free to sell privately as soon as the market price became attractive, or sell to OFNACER at the reference price. This provision would give farmers more freedom in playing the market and reduce some of the potential demand on Government of transporting surpluses and using larger but higher cost storage infrastructure. The Government has indicated that it intends to promote farm-level storage. 2.2.32 On the side of grain sales, rather than aiming to sell a fixed quantity each year to influence consumer prices (even using food imports when the target of local purchases is not achieved), sales by OFNACER should be triggered by price rises during the year or in particular regions. Sales would have the objective of permitting consumer prices overall to rise in line with producer prices, subject to a price ceiling which would be  - 149 - based on a calculation of the purchasing power of low income residents at the major point of consumption (i.e., Ouagadougou). To avoid depressing producer incentives excessively, OFNACER would not sell from long term stocks except in time of serious shortfall, and any food aid obtained during a period when local supply is adequate would be stocked rather than placed on the market. Sales or free distribution of donated food in normal years would be focused on the most poverty-stricken areas where there is low effective demand for commercial food purchases, and on special target groups such as nursing mothers, children, and emergency victims. 2.2.33 The extent of OFNACER's operations in any one year would of course be planned at the start of each campaign by an envelope of working capital, available stocks, and food aid (if appropriate given local supply conditions). However, if circumstances during the campaign make it apparent that additional working capital is needed to enable the agency to meet its objectives, there should be provision for OFNACER to petition the Government for an increase in its financial resources. The agency s revenues would be viewed therefore as a means of defraying the costs of its operations, in some years permitting it to avoid major budget subsidies from the central government and on occasion, providing a net revenue with which to reimburse the Treasury. The agency would not be required to become financially self-supporting, however. 2.2.34 To illustrate the potential implications of this program to actual prices, a calculation has been made in Table 2-9 of the minimum price needed by producers in the Southwest region to cover their costs in 1980, assuming that they achieved average yields for improved cultivation and paid the full costs for fertilizer and insecticides. 1/ These break-even prices for sorghum and maize are summarized below: Sorghum Maize Break-even prices, improved technique, Southwest region (1980) 47 44 Actual market producer prices, Southwest region (1980) 46 55 Official producer price, all regions (1980) 40 40 1/ Based upon farm budgets and economic prices developed for the present study (See Annexes I and 2). In the calculation of this price in Table 2-9, the "break even" price is chosen as that price which covers the cash costs of inputs (primarily fertilizer) and leaves net income per manday commensurate with the local opportunity cost of labor (here taken to be the high estimate of CFAF 350/day). An alternative, more refined approach would be to choose a reference producer price which makes the value of incremental production induced by fertilizer equal to twice the cost of the fertilizer. This 2:1 benefit:cost ratio would be expected to com- pensate the farmer for the added risks of using inputs. It should be noted that if higher estimates of physical returns to fertilizer are used than the conservative levels of Table 2-9, or if a lower opportunity cost of labor is assumed, the reference producer price needed would be correspondingly lower.  - 150 - The calculation indicates that if Government had offered to purchase at the break-even prices in 1980 (following the relatively good harvest in 1979), rather than at the official price of CFAF 40/kg, the effect on the market price of maize would probably have been minimal. The market producer price for sorghum, which at CFAF 46/kg reflects the effect of actual Government purchases and food aid sales at relatively low official prices, would probably have experienced some significant upward pressure. The maximum price for coarse grains which consumers could pay in 1980 is estimated as CFAF 75/kg. 1/ The actual consumer prices for sorghum and maize observed by the mission in Ouagadougou in February-March 1980 were CFAF 71/kg and 69/kg, respectively. Hence, if the Government had been observing a consumer ceiling price policy as defined here in 1980, it would probably not have been necessary to intervene to maintain the ceiling price for either sorghum or maize. 2.2.35 It should be noted that the gap between the reference producer price and consumer ceiling price would not be based on either OFNACER's nor the private traders' marketing costs. The differential between the official intervention prices should normally be greater than or equal to the margin required by private merchants for the trade between the major commercial points (e.g., the Southwest and Ouagadougou). If this is not the case, OFNACER will be left as the sole trader in the marketplace and have to sub- sidize either producers or-consumers, which would obviously be extremely costly. As it is, the setting of a reference producer price and consumer ceiling price according to the criteria described above may still leave OFNACER the only trader in some regions where high transport costs make the official price differential less than a private trader's margin. It is therefore essential that the official price margin be set as wide as possible, in order to minimize the extent to which the agency substitutes for private traders. 2.2.36 There may still be considerable difficulties and risks in imple- menting this program. First, if the break-even price is not set according to the production costs of the most efficient group of input users, the floor pricing policy will imply price support at substantial cost to Government and consumers, and incentives for an uneconomic allocation of productive resources. Second, to permit consumers to absorb higher prices could require raising urban wages, which may add to inflationary pressures. Third, the program could involve OFNACER in accumulating stocks after several bumper crops which it cannot sell locally or export without slashing prices. Once Government established the precedent of guaranteeing producer prices regardless of the supplies available, and of offering consumers artificialy low prices, the policy would become very difficult to suppress. 1/ Virtually no data are presently available concerning the distribution of income and consumption in the country. It can be estimated that for households in which: (a) there is one full time wage earner for each dependent; (b) each wage earner obtains a wage of CFAF 300/day; (c) each household member consumes 180 kg/year, or 0.5 kg/day of grain, and (d) a maximum of 25% of household income may be spent on course grain, the family can afford a consumer price not exceeding CFAF 75/kg. There is no basis for estimating how many urban families have a tighter budget constraint than that described here, however.  - 151 - 2.2.37 A further complication of the revised program for OFNACER as out- lined above is that its implementation would require considerable administra- tive judgement, since the criteria for intervention would not be fixed. The potential for political, rather than economic, criteria to determine the break-even price and maximum allowable consumer prices would be very great. The marketing agency would have to vastly improve its capacity to monitor and analyze data on prices, output levels, privately-held stocks, production costs, and consumer incomes by region and at frequent intervals, as a basis for determining appropriate intervention. The program would also require a significant source of working capital to finance purchases and stocks apart from the selling operations, since the agency's costs and revenues could be highly disparate in any given year. 2.2.38 The obviously formidable requirements for implementing the market- ing program just outlined make a strong case in favor of an alternative approach of public marketing activity which would be less demanding admin- istratively and financially than attempting to meet the social objectives of assuring production incentives, protecting consumer income, and promoting regional equity. Government could choose a more modest role, for example, by providing grain to specific regions hard hit by drought, with food aid or local purchases made solely to acquire the supplies needed for very limited resale. Managing security stocks for emergency relief is likewise a resi- dual role of moderate financial cost and complexity that the Government can play to serve a single welfare objective without entering into marketing in a significant way. Which of these alternatives Government may choose depends on its degree of commitment to the social objectives which are implicit in its present operation. If the Government holds to all three of these objectives, a subsidy for the operation is inevitably required; questions which then remain are how much subsidy, who is to finance it, and how sophisticated an intervention Government can manage. The Government's present position is that it does intend OFNACER to meet these social objectives despite the likelihood that the operation will remain deficitary. 2.2.39 Even if OFNACER continues to attempt direct intervention in the marketplace, measures should be taken to improve and facilitate the function- ing of the private sector. An improvement in rural roads is one prerequisite to more efficient marketing. Better availability of seasonal credit for crop purchase and storage may be warranted. Training of private traders may also facilitate their activity. Accurate and timely market information would be a boon to both farmers and merchants. Besides Government assistance in collecting such information, weekly broadcasts during key periods of the marketing season would be extremely useful. The aim of all these measures would be to expand the network within which private merchants can operate efficiently, from the well-worn circuit of major markets to encompass new or intermittent surplus areas. 2.2.40 Another measure which should be considered to assist the private sector is the promotion of village grain banks. A few groupements villageois have already established these grain banks with donor financing. The role of these banks is to pay farmers for their grain at the time of harvest, store the grain communally until the soudure or the following year, and resell it to the same villagers at a price which covers storage costs. If properly managed, the grain banks have the benefit of pooling local capital, storing  - 152 - surplus grain on site where it is needed, and thus avoiding transport costs and delays in redistribution. With modest inputs of capital to feed the revolving funds and to improve local storage infrastructure, and possibly with some technical assistance to improve farmers' managerial ability, grain banks could enable producers to exercise a larger role in the marketing of their own grain. An evaluation of the country's experience with grain banks to date is needed before a broad program of promotion and support is initiated, however. E. The special case of rice marketing 2.2.41 Most of the rice produced in Upper Volta currently is grown in traditional unimproved lowlands scattered throughout the central, eastern and southern regions of the country. This rice is produced largely as a cash crop and enters the private marketing circuit where it is sold to urban consumers. Marketing of this unorganized production is no more problematic than for the coarse grains. However, roughly 16% of the annual domestic production of paddy is produced under full irrigation on large perimeters, namely at Kou and Banzo; an additional 8% is produced on improved lowlands or on floodplains which have received some investment. 2.2.42 Much of the production of rice in Upper Volta differs from that of coarse grains, therefore, because of the large concentrations of irrigated rice cultivation, the substantial investment which has been devoted to its development, and the fact that imports rather than local production are the predominant source of supply to the large urban market. These factors do not themselves necessitate public marketing intervention, but they lead to particular pressures for government guarantees of the marketing system. 2.2.43 From 1974/75 to 1978/79, purchases and sales of rice were carried out mainly by the ORDs and OFNACER as the officially sanctioned channels of trade. Purchase of paddy by the ORDs was in fact very limited because of financial constraints, and producers in the Kou Valley were reported to receive higher prices from the "illegal" private traders in 1976 than the official price for paddy of 35 F/kg. In 1977, the Government permitted a much higher level of rice imports than was warranted by the shortfall in domestic production. When the official paddy price was raised in 1978 to 63 CFAF/kg (125 CFAF/kg for rice) at the same time imported rice was selling at 110 CFAF/kg, the marketing of the domestic crop was completely disrupted. In 1979, SOVOLCOM took over responsibility for the marketing of Kou Valley rice from OFNACER and suspended its own rice imports. The company reports that in 1979/80 its rice marketing at the official prices (CFAF 63-125) yielded a loss in the fact of competition from cheaper imports. The mission was not able to determine how much of the local rice SOVOLCOM actually purchased in that year. Farmers in the Kou scheme were reported to have been unable to find a buyer for their entire 1979/80 crop at the official price. 2.2.44 Most of the problem of rice marketing which existed in Upper Volta in 1978 and 1979 was apparently a result of official prices set too high in relation to imports, while the Government had neither the intention nor the desire to protect local production. The official rice price is set by the  - 153 - Ministry of Commerce after negotiation with traders, organized producers, and workers' unions. Production costs are taken into account only generally, and it does not appear that Government fixes the prevailing prices with any objective of taxing or subsidizing local production. Commercial imports of rice are handled by large private importing agents who deal in several com- modities. Importers are subject to licensing restrictions by the Ministry of Commerce and an import fee of 5,000 CFAF/ton is nominally in force, but in practice little quantitative control is imposed on rice imports. The Army also imports large quantities of rice without regulation or payment of the tariff. Sales of donated rice by OFNACER at the official consumer price appear to follow prearranged donor contracts for the use of food aid to generate counterpart financial resources. 2.2.45 Until 1980, rice marketing policy resulted somehow by accident in lowered incentives to producers, an effective tax on consumers in some areas which was enforced by Government rice sales at the official price, and sub- stantial uncontrolled profits for private importers. However, it is not clear that the same situation prevailed in 1980. According to the mission's calculations, the import parity price of rice at the retail level was about CFAF 137/kg in Ouagadougou and CFAF 131/kg in Bobo in 1980. These prices correspond to those observed by the mission during market visits in March, 1980. The official prices remained unchanged in 1979/80. If farmers were willing to sell their paddy at least at the official price of CFAF 63/kg and the import equivalent price at Bobo was CFAF 76/kg (according to the mission's calculations), why should private trade not have absorbed the local rice? 2.2.46 One possibility is that the costs to private traders of milling local rice exceed the margins which the Government (or the mission's own calculations) allow; by this event, traders would be willing to purchase paddy at 63 CFAF/kg only if they can sell it for more than CFAF 125/kg. Apart from the fact that the official consumer price is only loosely enforced, the milling charge in the official price calculation (6.5 CFAF/kg paddy) is in line with costs reported in other countries for mills of comparable size, and milling costs of small private hullers are even lower. However, the Kou Valley rice mill and the two mills near Bobo operate well below capacity at present as a result of poor equipment; the actual milling costs at these installations may well exceed the rates cited by Government, which would raise the real costs to middlemen of marketing local rice. There is no reason why marketing costs other than milling should be any greater for rice than for the coarse grains. 2.2.47 Another possible explanation for the failure of local grain to sell is that producers on the irrigated schemes experience such high costs that even an import parity price of CFAF 76/kg does not attract them. However, this is unlikely, according to the mission's estimates of farm budgets, and if it were true, the producers would not be able to refrain for very long from selling even at unprofitable prices or cutting back production. 2.2.48 It is sometimes argued that even on non-economic grounds, the private marketing circuit cannot be depended upon to purchase the output of irrigated production. The major reasons cited for Government intervention  - 154 - are: (a) that local rice is less desired by consumers because of its higher percentage of brokens; (b) that producers on the large perimeters need assura'nces in advance of planting that their crop will be purchased; (c) that the concentration of output on these perimeters exceeds the capacity of small private traders; and (d) that the long cycle from the purchase of paddy to milling and retailing of rice requires a large organization with substantial infrastructural and capital resources. 2.2.49 Consumer preference for imported over local rice appears to be a temporary phenomenon and will probably decline as local milling infrastruc- ture is improved. It may be true that rice farmers on the irrigated peri- meters are more risk-averse than ordinary cereal producers, especially if they depend on rice as their only source of income. The large quantity produced and the processing requirements do not necessitate a large scale marketing operation, since the trade can easily be broken up into small shares and stages. However, the Kou Valley producers do attempt to act as a cooperative, which raises the price expectations of all the members and possibly implies that their output must be purchased in mass by one or a few large buyers. 2.2.50 It is important to stress that the observed problems of local marketing of rice have applied only to the irrigated perimeters where, granted, the lack of an assured outlet poses the most serious political and economic problems. The anomalous marketing problems experienced in 1980 may simply reflect a transition from a period when the official price exceeded the import parity price and imported stocks were large, to a period when imported rice has become more expensive than the local variety priced at the official level. 2.2.51 If, for whatever reason, buyers for the irrigated rice are not forthcoming at the official price, then Government might be justified in intervening, either through OFNACER or SOVOLCOM, to guarantee the purchase of this rice. However, this intervention may create more political problems in the long run if Government only guarantees the purchase of irrigated and not of rainfed rice. The problem should resolve itself with an official price set no higher than import parity and a Government assurance of purchasing the crop if private traders prove unable to handle the quantities involved. It is also essential that inflows of donated rice not be permitted to flood the local market. If the cost price of irrigated rice rises, however, so that protection is required, then the Government's marketing assurances should be reevaluated in light of the importance of rice production to food security and the balance of payments, and the likelihood that the costs of producing irrigated rice will fall in the future. Further information needed to assess the rice marketing sector may be expected from the rice policy study being financed under the pilot Niena Dionkele project.  - 155 - 2.3 MARKETING OF FRUITS AND VEGETABLES 1/ 2.3.01 Chapter 1 discussed the potential for increased production of fruits and vegetables as high-value cash crops. The present section examines the existing conditions and constraints of marketing fruits and vegetables and proposes measures to further the development of this marketing subsector. A. The role of UVOCAM 2.3.02 Fruits and vegetables have been assuming increasing importance in recent years as an element in the local diet and as cash crops for the urban and export markets. Although total production and consumption data are virtually nonexistent, Table 2-6 gives an indication of the growth of supplies furnished by producers to UVOCAM (The Union Voltaique des Coopera- tives Maraicheres) from 1969/70 to 1977/78. The volume of green beans, most of which are marketed through UVOCAM, has grown from a negligible 8 tons to 1350 tons over the nine-year period, while total vegetables and fruits purchased by the union expanded over ten times up to 1976/77. 2.3.03 Although most fruits and vegetables (apart from green beans) are produced in small family gardens for household consumption or are marketed informally in nearby towns, the vegetable subsector is unique in Upper Volta in that it has fostered a relatively large number of officially-constituted producers- cooperatives. These groups, estimated to number about 30 with a membership of 1200 farmers, are linked within regional unions around the main production centers of Ouagadougou, Bobo, Yatenga, Koudougou, and Kongoussi. 2/ UVOCAM was created by these unions as a private commercial entity with the following objectives: (a) to carry out the functions of input supply and marketing for the cooperatives; (b) to plan and program the production and marketing by the coopera- tives and to assure the quality of output to be exported; (c) to ensure that studies are made of the potential for improved products, development of production perimeters, and processing of the output; (d) to carry out processing of vegetables and fruits on a pilot basis. 1/ This section draws largely from "Perspectives du Developpement du Maraichage en Haute-Volta," CCCE, June 1978. 2/ "Rapport de Mission sur le Cre'dit Agricole en Haute-Volta". G. Pince, CCCE. January 1980, p. 11.  - 156 - 2.3.04 UVOCAM has devoted its major efforts to promoting the cultivation of green beans and developing an export market in France. France is by far the largest importer of green beans in the European Common Market, receiving 49% (20,000 tons) of the supplies imported by the member countries in 1976. French imports of green beans from countries outside the EEC have grown most rapidly (8% annually from 1970-76) during the months of November to May. Spain dominates the French off-season market until December, but recently, African states have assumed some 20% of the trade from January to April. The market is particularly attractive for these countries since it coincides with their slack (dry) season, and the peak prices offered by France during this period lessen the disadvantage of distance. For Upper Volta, which held only 6% of the trade in 1976/77, the stiffest competitors are Senegal and Kenya because of their particularly high quality product. 2.3.05 To maintain the strictest quality control of the Voltaic green beans, UVOCAM meets with the cooperatives each year to plan the acreage to be planted and manages its own seed farm. Inputs are procured by UVOCAM but delivered to the farmers by the cooperatives, who also organize with the agency the delivery of green beans to UVOCAM's cold storage facilities at Bobo and Ouagadougou. Air transport, which must be carefully timed to deliver to the French markets between Monday and Thursday, is handled by UTA and Air Afrique planes on their regular commercial runs. 2.3.06 The union-s marketing services for vegetables other than green beans and mangoes (which it also exports to Europe) are very limited. UVOCAM attempts to allocate production of the other vegetables among the cooperatives to avoid glutting the local market; provides cold storage for supplies shipped by the cooperatives to Bobo and Ouagadougou; and undertakes a very modest level of purchases and sales of local produce in the two cities, in an effort to even out the prices in these markets. UVOCAM exports some vegetables by refrigerated truck to the Ivory Coast and Togo, but purely on an ad hoc basis, as the union has had difficulty obtaining contracts with importers in the coastal countries. The union also runs a processing factory in Ouagadougou which functions intermittently, mainly to can green beans which cannot be exported on schedule or to test potential products for the local market (such as pickles, jams and tomato concentrate). 2.3.07 UVOCAM has achieved a rapid initial success in its export marketing of green beans, a highly perishable product which requires careful husbandry and a rapid, assured outlet. Although the union has obviously benefited from the interest and entrepreneurship of the member cooperatives, UVOCAM has no effective means of influencing their production. Technical advice to the producers is provided by ORD extension workers, who, at least nominally, are guided by the DSA and IRAT research center. The UVOCAM management is not able, through this extension network, to undertake the quality control which has preoccupied UVOCAM in its strive for foreign markets. Consequently, the union exerts its influence most directly on the cooperatives through a strict selection and grading of produce delivered to the warehouses. UVOCAM  - 157 - also focuses its planning efforts on the organized producers whose output is easier to predict, rather than on independent producers who may still market through the agency. UVOCAM officials noted that they experience difficulty in enforcing schedules of delivery even by the cooperatives, which hinders the timely evacuation of perishable supplies. Partly as a reflection of these practical constraints, UVOCAM-s planned marketing has consistently exceeded its actual operations, as is illustrated in Table 2-6. Because of these concerns of UVOCAM, the mission heard the view expressed by some producers' representatives at Kongoussi that UVOCAM is mainly interested in the most organized farmers, and more in organizing the marketing of green beans than of other vegetables. 2.3.08 UVOCAM does not publish any financial accounts, for reasons which are unclear. Officials indicated to the mission that the agency has so far avoided overall losses. UVOCAM's largest direct cost of exporting is air freight, which is monopolized by UTA and Air Afrique. The airline charges a normal rate (higher for green beans than for peppers or mangoes) even though the aircraft return to Europe prepaid and with little other cargo. The price which UVOCAM pays to cooperatives is set at the end of the marketing campaign, after all fixed and variable costs of exporting are deducted. The member cooperatives, which receive an additional CFAF 5/kg over the price paid to producers who are not members of UVOCAM, further deduct costs of inputs and transport provided to members. The price structure for green beans in 1977/78 is illustrated below: CFAF/kg % Purchase price to cooperative (ex-Ouagadougou) 115 31 plus: packaging 24 6 cold storage 8 2 treatment, handling, losses 18 5 airport and statistical tax 3 1 amortization of warehouse 10 3 Price FOB 178 48 plus: air freight 150 40 transit charges, France 23 6 importer's commission 22 6 Price in-warehouse, Paris 371 100 2.3.09 The price structure indicates the large importance of air freight and packaging in the export charges. To illustrate the additional charges between the cooperative and producers, the 1978/79 account is summarized below for one cooperative, COOMABO, which markets through UVOCAM although it is not a member. 1/ 1/ "Rapport d'Activite Campaign Maraichere 78-79", Cooperative Maraichere de Bourzanga.  - 158 - CFAF/kg % Price received from UVOCAM 113 100 less: direct marketing costs (transport) 14 12 administration (including indemnities for extension workers) 3 3 inputs purchases, credit 22 19 Price paid to producers 74 65 The cooperative-s account indicates that it charged producers a margin of 16% over the producer price for marketing services, excluding the provision of inputs. This margin appears reasonable for an efficient marketing organization. 2.3.10 Overall, UVOCAM does not receive recurrent subsidies other than the salaries of some headquarters staff who are paid by the Government. Likewise, the cooperatives pay the full marketing and input costs passed on to them by UVOCAM and receive indirect subsidies only on urea supplied by the DSA. UVOCAM-s processing plant is subsidized by the general operations. The union's marketing of fruits and vegetables for local consumption probably does not involve any significant tax or subsidy since the services are minimal and prices are determined by the private market. UVOCAM reports that it charges a full cost price for the use of its cold storage facilities. B. Further potential for development of vegetable marketing 2.3.11 Upper Volta-s ability to expand its share of the off-season market for green beans in France (estimated at 11,000 tons in 1980) will depend on an improvement in the quality produced and on a reduction of costs (notably air freight), since the competition for this market is not likely to lessen in the years ahead. Given that a large degree of organization of marketing and discipline among producers is required to exploit the export potential for vegetables and fruits, UVOCAM has been well advised to focus its efforts on this activity. Moreover, it should be noted that UVOCAM was created by cooperatives focusing on this production, not as a government agency to assist vegetable producers at large. The organization should, however, widen its sights to exploit more the possibilities for export of products other than green beans, and to develop stronger markets in the coastal countries. To carry out this role, the following measures appear to be warranted: (a) UVOCAM needs to study systematically the potential for export of fruits and vegetables. A CCCE-financed study in 1978 suggested that there is unrealized potential for dry-season exports by Upper Volta of peppers, asparagus, and mangoes to Europe. The same study noted that the Ivory Coast and Togo present consistent potential in the future, both for "Euro- pean" type vegetables, (green beans, peppers, melons) as well as for certain "African" vegetables (e.g., potatoes and onions) to which the Voltaic climate is particularly well suited. Besides studying these markets, UVOCAM  - 159 - might benefit by developing marketing representation at least in the Ivory Coast and, initially on a part-time basis, in Europe to pursue Voltaic interests. (b) Adoption of formal accounting procedures by UVOCAM would be useful, making a clear distinction between the export activities, marketing of local produce, and operation of the processing plant. An analytical accounting would enable UVOCAM to control the costs of export more explicitly and to evaluate the feasibility of its processing trials. Technical assistance may be required to achieve this reform. (c) Following the adoption of improved accounting, UVOCAM could develop a price policy for export goods which would enable it to adapt price to quality and possibly develop a stabilization fund to counter fluctuations in the export price. (d) Government should assist UVOCAM in negotiating with UTA and Air Afrique for reduced freight rates. Since the airline controls even charters operating out of Upper Volta, it is not likely that the country can obtain an independent means of air transport until the volume to be exported increases drastically, however. (e) The processing plant operated by UVOCAM at Ouagadougou, as well as the plant built and operated by the Dutch at Bobo-Dioulasso, are function- ing at a low level of capacity in part because of difficulties experienced in obtaining a regular source of the raw produce to be treated. The factory at Ouagadougou is supposed to be economically justified in part because it prevents losses of produce which cannot be exported. However, in 1977/78, the value of these losses avoided was estimated at CFAF 9 million, while the estimated operating deficit of the plant amounted to CFAF 10 million. 1/ The problem of both plants are to some degree technical (unsuitable equip- ment), managerial,and organizational (lack of planning of supply, short producing season). Study needs to be made of the potential for the plants to operate on a more economic scale to serve the local market for tomato concentrate, which is imported in large quantities, and for jams and fruit juices. The experience of other West African countries with canning indus- tries suggests that reaching a scale of production to compete with imported canned goods may be diffficult without considerable protection, however. UVOCAM would be well advised to avoid large scale processing activities which are better left to an industrial rather than marketing organization. (f) Although UVOCAM, working with extension staff at the ORDs, pro- vides a suitable organizational structure to promote production and mar- keting at the present levels of exploitation, consideration should be given to the creation of a more vertically-integrated organization for vegetable exports in the future, comparable to SOFITEX in the export of cotton. A vertically integrated structure would have the advantage of providing more follow-up of the cooperatives, as well as of unorganized producers, than 1/ "Perspectives du Developpement du Maraichage en Haute-Volta," CCCE, p. 6.  - 160 - either the ORDs or UVOCAM achieves at present. Such a structure could also permit a more organized provision of the treatment plants and assure that an economic scale is achieved for the provision of inputs, use of cold storage facilities and transport infrastructure. A vertically integrated structure, which would still function in cooperation with the ORDs for the extension activity and with existing research institutions, might best be developed in line with a large irrigation perimeter such as Sourou or Bagre, which will require substantial organization of new producers to get vegetable production underway. (g) Production of fruits and vegetables for the local market requires less organization than for export. Farmers who produce for both markets do benefit from the extension and marketing services which are directed to export production. Provision of cold storage facilities in the major market towns, rental of refrigerated trucks, and promotion of prodticers' coopera- tives may be the best measures to assist the domestic marketing of fruits and vegetables, since they enable producers to regulate marketed supplies and even out prices over the season. Cold storage facilities may already be adequate in Bobo-Dioulasso and Ouagadougou to serve the local demand, at least at the present level of usage for export produce. Study should be made of the potential demand for cold storage and transport, to be rented at cost, to service other local markets. However, it would be wise for UVOCAM to refrain from infrastructural investments which might overextend its management capabilities, burden it with excess capacity, and distract it from its essential marketing function. 2.3.12 Finally, the potential role of SOVOLCOM is important to mention in the context of additional marketing services to fruit and vegetable producers. SOVOLCOM is a public commercial institution which carries out wholesale and retail trade, both of imported and local goods. Since 1970, SOVOLCOM has marketed, at a modest profit, investment goods (e.g. cement) and processed foods, including rice. SOVOLCOM has recently begun to study the feasibility of engaging in local purchases and sales of food products other than rice at its 36 retail outlets around the country. Although the institution has thus far indicated an interest in expanding its purchase of cereals, a stronger case can be made for SOVOLCOM to participate in the marketing of fruits and vegetables (including yams) on the local market, because of the greater perishability of these products and the need for a fairly organized transport and storage infrastructure. 2.4 INPUT DELIVERY AND CREDIT A. Introduction 2.4.01 The delivery of inputs and credit to producers has arisen as an issue in the agricultural sector because the financial subsidies, both explicit and implicit, in the existing delivery system and the extent of  - 161 - government involvement have posed questions of efficiency and cost recovery. The following section examines the present arrangements for input and credit delivery with special attention to the roles of the public and private sectors, the degree of cost recovery, and the administrative constraints on the system. An evaluation is then made of some alternative procedures for input and credit delivery. B. Input Delivery: Existing Systems of Procurement and Distribution Fertilizer and Insecticides 2.4.02 The chemical fertilizers and insecticides currently in use in Upper Volta are imported, with the sole exception of rock phosphates. Virtually the entire supply of compound fertilizer (14-23-14), which is the main chemical nutrient used on cotton and cereals, is procured by SOFITEX. This item represents 70-80% of all chemical fertilizers consumed in Upper Volta (See appendix table 1-14). The DSA imports most of the urea - some 2000 tons, or 8% of total fertilizer used - and groundnut fertilizer (super phosphates). The sugar plantation at Banfora, UVOCAM, AVV, and some of the vegetable-growing cooperatives import at least part of their own supplies of nutrients directly (urea, ammonium sulfate, ammonium phosphate and potassium sulfate). A small, unquantifiable amount of compound fertilizer crosses the border from Ghana and is sold by private merchants in the central region, mainly for vegetable gardening. Rock phosphates are pre- sently being mined in Arly, near the eastern border, in a pilot project funded by the Federal Republic of Germany. 2.4.03 Insecticides enter the country by the same channels, although private merchants play a much larger role in this trade than in the pro- curement of fertilizers. Private commerce in pesticides flourishes because they are easy to handle, having less bulk than fertilizers, and because private traders carry those pesticides which the official suppliers do not sell at subsidized prices and for which demand is high. SOFITEX is by far the major importer of insecticides used on cotton and other crops for seed treatment and plant protection: nuvacron and peprothion, which require minimal water, and thioral are the most popular varieties. The private traders deal mainly in insecticides used to protect grain stored after the harvest-actellic and gammagraine-as well as thioral. 2.4.04 The primary distribution of chemical inputs (i.e., from import to regional warehouse) by official channels receives a substantial subsidy. In the case of cotton fertilizer, the wholesale price ex-Ouagadougou amounted to CFAF 80/kg in 1979/80, while the input was delivered to the ORDs at CFAF 35/kg. Nuvacron cost SOFITEX CFAF 1106/liter at Bobo, but the ORDs received it at CFAF 340/liter. The issue of financing this subsidy which, for fertilizer, has been shared until recently by SOFITEX and the CSPPA, will be discussed in detail in Chapter 3. Likewise, the DSA subsidized the import and primary distribution of urea at CFAF 35/kg, while the delivered cost in Ouagadougou was over CFAF 90/Kg in 1979/80.  - 162 - 2.4.05 The secondary distribution of chemical inputs (from warehouse to user) follows a much more variable pattern. Within the cotton regions, SOFITEX undertakes the physical distribution of fertilizer and insecticides at the same time it collects the harvested crop. Based upon the extension workers' survey of farmers' input requirements, SOFITEX delivers the materials to the farmers' groups at the local collection sites for the account of individual producers. The ORD is supposed to prefinance the purchase of all the inputs delivered by SOFITEX within its borders; in practice, most of the ORDs do not pay SOFITEX for the inputs even after the farmers reimburse their seasonal credit because the ORDs use these liquid funds for other operating expenses (see Chapter 3). For the cotton producers, the costs of delivering inputs to the collection sites (in some cases, virtually to the farmgate) are paid out of revenues from cotton marketing. For the producers who use the inputs on other crops, the costs of secondary distribution are also borne by the cotton producers, since SOFITEX does not levy any specific charges for local delivery. 2.4.06 Outside of the areas served by SOFITEX, the ORDs obtain chemical inputs from SOFITEX or the DSA at the subsidized price and, according to official policy, do not add any margin to defray the costs of delivering from the warehouse in Bobo or Ouagadougou to the farmgate. In practice, the ORDs have curtailed this secondary-level subsidy in line with their financing constraints and actual transport costs. Table 2-7 illustrates that despite the Government's official policy of charging uniform prices to producers for inputs, considerable variations do occur. Looking at the prices for cash sales alone, it is clear that over and above the officially subsidized price of cotton fertilizer, the ORDs of Bobo and Koudougou added CFAF 5/Kg and Yatenga ORD added CFAF 10/kg-increases of 12-29%. Comparing this mark-up to the marketing margin which was reported to the mission by private cereals merchants (CFAF 12/KG) 1/ suggests that these ORDs were charging a significant share of the actual costs for secondary distribution. In Ouagadougou ORD, the farmers- groups frequently pay the transport charges directly to have inputs delivered from Ouagadougou to the village. In the case of some insecticides, two of the ORDs without major donor financing to date, Kaya and Koudougou, reported to charge a significant mark-up (6-29%) over the wholesale price. These ORDs also sell the insecticides which they obtain from private suppliers (e.g. actellic, acricide and thioral) at the financial price determined by the private market. 2.4.07 The physical means of input distribution from warehouse to farm- gate outside of the cotton zones also varies by ORD. In principle, the ORD provides transport to collect the inputs from the depots in Bobo, Koudougou or Ouagadougou, stocks them at the ORD headquarters, and delivers them to groups of farmers at the village sites. Under present arrangements each extension workers is responsible for overseeing the distribution of inputs within his zone, which includes surveying needs and stocking the supplies in I/ Including transport by truck over 100-200 km, handling, and commercial charges.  - 163 - his own home if necessary. How well this system of secondary distribution works depends on the ORDs' capacity of transport, subregional storage facilities, stock management and accounting; the conflicting demands on the extension worker's time; and the degree of organization among farmers themselves for the purposes of receiving and redistributing inputs. Improved Seeds 2.4.08 The provision of improved seeds for millet, sorghum, maize, rice, cowpeas, sesame, and groundnuts is the responsibility of the Service National des Semences (SNS) of the DSA. This service is charged with: (a) selecting the improved varieties to be reproduced; (b) overseeing the production of the improved foundation seeds (RI) by the research stations; (c) providing tech- nical advice concerning the multiplication of the (R2) seeds by the ORDs or their contract farmers; (d) ensuring the genetic quality of the reproduced seeds and (e) advising the extension staff in the use of the improved varie- ties. 2.4.09 The main impetus to the operation of the SNS has been the USAID Seed Multiplication Project, which began in 1975. Under the terms of this project, foundation seeds were to be produced at five Centres Nationaux de Production des Semences (CNPS) linked to various research stations. The SNS was supposed to determine the requirements of basic seeds to be produced at these centers, certify them, and sell them to the Centres Regionaux de Produc- tion des Semences (CRPS), only one of which became operational in the ORI) of Bobo Dioulasso. Bobo ORD and the AVV contracted with certain producers or operated their own seed farms to multiply the foundation seeds on the basis of an annual survey by extension workers of farmers requirements. The reproduced seeds were then sold to the remaining ORDs, who delivered them to the farmers directly in the same way they distribute the chemical inputs. 2.4.10 This system for seed production has encountered numerous problems. The SNS- control of the genetic caliber of both the RI and R2 seeds has been haphazard. The resulting poor quality of many of the seeds and the unsuitability of the new varieties to local conditions has led to a distrust of government seed on the part of many farmers and an erratic rate of adoption. The quantity of foundation seeds produced by the CNPS has vastly exceeded the level required to maintain an appropriate ratio between these and the R2 seeds, because of poor planning of requirements by the SNS and the ORDS; in 1978, for example, the SNS ordered 122 Mt of RI seeds from the research stations, while only 14 Mt were actually needed to produce the quantity of R2 seeds requested by the ORDs. 1/ As a result, the majority of foundation seeds produced in some years have been sold to OFNACER or private buyers for con- sumption as food. Bobo ORD has on occasion lacked the necessary funds to purchase all of the R2 seeds produced by the contract farmers. In turn, the client ORDs have had difficulty financing the purchase of improved seeds from 1/ "Rapport d'Evaluation du Projet de Multiplication des Semences en Haute Volta" USAID, May, 1978.  - 164 - Bobo ORD. Because of the ORD's inability to purchase seeds, in 1979 the Government proposed that each ORD should reproduce R2 seeds, either on its own farms or through contract farmers, from foundation seed supplied by the SNS. This approach obviously leaves unresolved the basic financial constraints of the ORDs, however. 2.4.11 The seed distribution system has been handicapped at all levels by the Governments policy regarding pricing of the improved seeds, which has fostered a parallel market in both Rl and R2 seeds as food grains and has posed an additional obstacle to the financial viability of the production centers. The official sale prices of R2 seeds to users have, until recently, averaged 30% above the official consumer prices, although well below the market prices for grains in the planting season (around May). In 1978/79, Government set the price to contract farmers at about 200% of the official producer price for maize, sorghum and cowpeas, (72% above the official consumer price). An additional margin of CFAF 4-10/Kg was added to the seed price before distribution to defray the costs of collection and treatment control. This price structure has probably still not been sufficient to discourage the use of improved seeds as food, however, since the average market consumer prices for maize and sorghum in 1978 and 1979 exceeded the retail seed price. 1/ 2.4.12 USAID has recently reached an agreement with Government to maintain the R2 price for contract farmers at a level two to three times the official producer price, and to treat the improved seeds with thioral and an identifying dye to preclude their use as food. This pricing guideline may be conservative -- a seed price which is set as a multiple of the average market producer price might provide a more effective deterrent to contract farmers to sell their seeds privately as food grains before they are treated. 2.4.13 Although accounting data are not available on the costs of seed production and conditioning by Bobo ORD, a comparative study of seed produc- tion in Upper Volta and several neighboring countries has indicated that a margin of about CFAF 40/Kg is required to cover the costs of seed condition- ing, grading, and bagging, over and above the production costs. 2/ If the improved sorghum seed was purchased from the contract farmer at twice the market producer price for sorghum (or CFAF 92/Kg according to the mission-s estimate of the 1980 private farmgate price in the Southwest Region), the additional CFAF 40/Kg to cover the ORD's expenses would bring the price to the seed user to CFAF 132/Kg (excluding costs of delivery from the producing ORD to the user's farmgate). This figure compares to an official price of CFAF 108/Kg which Bobo ORD charged for its seeds in 1980. Since the present seed price includes a mark-up for the ORD of only CFAF 4-10/Kg, it is likely that the ORD, and the Seed Service to the extent that it carries out the quality control, are losing money on the multiplication of improved seeds. 1/ Based on Ouagadougou market prices reported by the Institut de Statis- tiques. See Table 1-8. 2/ See footnote to Table 1-12.  - 165 - 2.4.14 The remaining types of seeds supplied officially are those for cotton and vegetables. SOFITEX collects the seeds from the milled cotton and sells them after treatment at the same time chemical inputs are deli- vered to farmers. The price charged to producers for cotton seeds (about 15 CFAF/KG) is approximately the same price which CITEC pays for the seeds it processes, and is roughly at par with their export value. As noted in Section 2-3, UVOCAM operates a multiplication farm for green beans and onion seeds, financed by a rolling fund provided initially by the FED. The remainder of fruit and vegetable seeds are imported by UVOCAM and distributed by the ORDs or by producers' cooperatives at cost. Equipment 2.4.15 The manual equipment used for spraying insecticides is imported mainly by SOFITEX along with the chemical inputs. The ULV sprayers were introduced in 1977/78 with a subsidy financed by SOFITEX to promote their use. These sprayers along with the classic, water-type sprayers are to be sold to the ORDs as of the 1980/81 campaign at full cost. Only Koudougou ORD is reported to charge farmers a mark-up of 7% for stocking and secondary distribution of the ULV sprayers. 2.4.16 Animal traction equipment is both imported and produced locally. The foreign equipment is procured by the ORDs and individual farmers from private suppliers. There is no significant tariff on these materials except for the ox carts. Animal traction equipment is fabricated locally from imported raw materials at three ARCOMAS (Atelier Regional de Construction de Materiel Agricole) in Ouagadougou, Bobo-Dioulasso and Tenkodogo, and is assembled at COREMMAs (Comperative Regionale de Materiel) located at ORD level. Both types of institutions are constituted as public, self-financing entities. In theory, the COREMMAs keep accounts separate from those of the ORDs, although the ORDs are financially responsible for the workshops under present arrange- ments. The ARCOMAs benefit from considerable external financing from the Conseil de l'Entente, the Swiss, and the CEAO. The subsidy on current opera- tions takes the form of technical assistance and concessional loans for working capital. Although the mission was not able to learn the financial situations of the ARCOMAs, it appears that they could not remain solvent without the current subsidies unless they raised their prices, which are currently competitive with prices of imported equipment. 2.4.17 The management of the ARCOMAs considers their current output to be sufficient to meet the effective demand for traction equipment. The research centers contacted by the mission expressed satisfaction with the quality of ARCOMA's production in terms of its suitability to local farming conditions. One shortcoming of the present productive capability is the absence of a seeder, which would enable farmers to use traction to allay the significant labor constraints at the time of planting. Although a locally- purchased seeder would potentially increase the profitability and utility of draft animals, ARCOMA does not have plans at present to expand its product line. The local equipment workshops are also reportedly inadequate in the provision and distribution of spare parts and of repair services to users.  - 166 - C. Issues and recommendations regarding input delivery 2.4.18 To function effectively, the input supply system in Upper Volta must meet several logistical, administrative, and financial conditions. These are best understood by viewing the supply process in its two stages. Primary distribution 2.4.19 There is a case for centralization in the initial procurement or production of inputs because of the vast quantity and bulk of the inputs (particularly fertilizers) and the potential economies to be gained by large scale handling and transport; the need for advance orders and timely delivery; and for standardization and quality control (notably of seeds and equipment). These factors also imply that the requirements for prefinancing the import or production of inputs are substantial; in the case of workshops for farm equipment, the short selling season in relation to the year-round production period implies a more than usual demand for working capital. Some central control of input procurement also permits the Government to more easily use input supply as an instrument of agricultural policy, by controlling prices and ensuring the overall adequacy of supplies. 2.4.20 Recommendations. In the case of fertilizers, insecticides, and spraying equipment, the present arrangements of primary distribution by SOFITEX adequately meet the requirements noted above. The system is particu- larly efficient since it maximizes the use of storage and transport infra- structure which is needed for crop collection. However, the agency is only interested at present in importing inputs which are used in cotton production; urea, groundnut fertilizer, and some of the general-use chemicals (actellic, thioral) are procured much less reliably at present by the DSA. Independent private traders can be counted on to continue to import modest quantities of these inputs as long as they are profitable relative to other goods, and as long as they do not have to compete with subsidized prices from official suppliers. To ensure an adequate and timely supply, however, it is recom- mended that either SOFITEX import these additional fertilizers and insecti- cides or that the Government contract with large private importers to carry out the primary distribution of the non-cotton inputs, with the Government assisting in planning the quantities to be procured, providing any direct subsidy which is retained on the import price, and ensuring that adequate prefinancing is available from the CNCA. For the phosphates mined locally, primary distribution may best be managed by a separate project entity or by the DSA during the initial pilot phase, but the difficult logistics of transporting this very heavy material will require special arrangements with an agency which is well equipped with transport and storage infrastructure as use of the fertilizer develops. 2.4.21 The local production of improved R2 seeds, which has recently been devolved to all of the ORDs, should be more centralized for reasons of quality control rather than logistics. Only Bobo ORD among the four origi- nal seed multiplication centers set up under the USAID project has achieved some semblance of financial accounting for the activity and certification by  - 167 - the NSS; the remaining ORDs are even less equipped to control the quality of seed production, whether this is carried out on ORD farms or by contract farmers. Monitoring and certifying seeds produced by each of the ORDs would even further tax the limited capabilities of the NSS. Moreover, since seed multiplication should be run as a financially autonomous operation, assigning this activity to each of the ORDs is not consistent with the recommendation of the ORD reform commission to free the ORDs as much as possible from commercial type functions. Therefore, it is recommended that seed multiplication should revert to a few ORDs which are designated as regional production centers. These ORDs must receive adequate revolving funds to produce the seeds on their own fields or to purchase the output of contract farmers; the centers must obtain close technical supervision by the NSS; and they must adopt separate financial accounting of costs on which an appropriate price policy can be based. 2.4.22 Seed pricing policy is complicated by its multiple and conflicting objectives: to enable seed production and treatment to be self financing, to prevent alternative consumption of improved seeds, and to encourage farmers to use the seeds as part of an improved technology. As noted earlier, the first two objectives may be served if the price paid to seed farmers is at least twice the average market producer price in the region, and if the producing ORDs charge a margin which adequately covers the cost of strict grading, treatment, and quality control. Although an increase in the price of improved seeds may deter adoption by some farmers, if they can be assured that the so-called improved seeds are truly superior to the local varieties and that their purity and effectiveness have been maintained through proper multiplica- tion and control, then the farmers may be more willing to pay a price which reflects the economic advantages to them of using the new seed. 2.4.23 The local production of traction equipment is already centralized in terms of common product designs. Some regionalization of assembly is appropriate given the potentially high costs of storing and moving large stocks of completed equipment. The Ministry of Rural Development has recently decided to consolidate the system of ARCOMAs and COREMMAs to create a finan- cially viable, commercially oriented organization which is independent of the ORDs. It is unclear whether this restructuring will be mainly administrative or whether production will be physically centralized to a greater degree than at present. An analysis of the managerial shortcomings of the existing institutions and an assessment of their requirements for financial viability are needed before the Government's proposal to consolidate equipment produc- tion can be evaluated. Any modification of the present system should ensure an adequate service of spare parts and equipment repair. 2.4.24 Finally, on the matter of primary input distribution, the Govern- ment has been considering a proposal to create a National Center for the Supply and Promotion of Agricultural Inputs. This public organization, which would be financially autonomous, would manage the procurement or pro- duction of all agricultural inputs and would be equipped with the necessary storage and transport infrastructure to carry out delivery to the ORD level. Although the proposal would serve the objectives mentioned in para. 2.14.19, if the above recommendations were accepted, there should be no need for a new institution to be created for primary input supply.  - 168 - Secondary distribution 2.4.25 The distribution of inputs from warehouse or production site to the farmgate faces the same economies of scale and requirements of timely delivery that affect primary distribution. Logistical constraints are enhanced at the lower level because the recipient farmers are widely dis- persed over bad roads. The system for delivery to the farmer must incor- porate credit for input purchases, if the credit is provided in kind, with all of the implied financial accounting and controls. To ensure that an adequate supply of inputs reaches the farmer and to avoid excessive storage requirements, the system should include a survey of farmers' effective demand for inputs on which orders can be based. Finally, given the low level of knowledge of inputs on the part of many farmers, it is desirable that the secondary distribution system be linked in some way to channels of information about input use. 2.4.26 Alternatives. The comments below pertain to the physical and administrative arrangements for input supply apart from those for agricul- tural credit, which will be discussed in the following section. 2.4.27 As indicated earlier, in the cotton zones, the practice by SOFITEX of delivering certain inputs to the village at the time of crop collection is reliable and minimizes delivery costs. In the long run, cooperatives and/or private traders are the most cost effective channel for the final distribution of inputs for crops other than cotton. The private sector already functions quite effectively in the delivery of certain inputs for which demand is great, such as thioral, but its activity is obviously contingent on effective demand for the inputs (including availability of credit). 2.4.28 The Second Bougouriba Agricultural Development Project plans to establish an input supply service at ORD level. The service would function with an administration separate from that of the extension service, and would consist of village or subsector-level storage/office buildings through which ORD supply agents would collect orders for inputs and manage the delivery to farmers' groups. The arrangement departs from present practice by assigning the supply function to individuals other than the extension agents; providing infrastructure for input storage at a sub-regional level; and separating the financial accounting for the input service from other ORD activities. The project also proposes to add a 15% mark-up to the unsubsidized wholesale price of inputs to cover the operating costs of the input supply service (transport, salaries of supply agents, field supervisors and accountants, maintenance of stores, etc.). The salaries of watchmen and construction of the warehouses are to be financed by the village groups. 2.4.29 This proposed system of Farmer Service Centers meets the criteria for primary input supply noted in para. 2.4.26 by preserving some economies of scale and by making an explicit link with credit supply and the extension message. The supply service is supposed to evolve into a self-financing, commercial operation run by farmers' groups, or by independent entrepreneurs.  - 169 - At that stage, farmers would be sufficiently knowledgeable to assess their own input requirements and seek advice from the extension workers as needed. One reservation could be noted about the proposed system which might preclude its eventual takeover by farmers, however. The supply service includes storekeepers, field supervisors, and accountants whose salaries are to be paid by the mark-up on inputs sold. Although this administrative infrastruc- ture may be required to manage input distribution in the early stages of adoption, the fixed personnel costs may exceed those of a purely private, commercial operation as input use becomes more widespread. Moreover, the supply centers are intended to double as offices for extension agents. An issue could arise if a more streamlined supply channel would be less costly to farmers, yet the Government would perceive pressures against allowing a changeover to private management which would entail cutbacks in staff, or a loss in facilities. 2.4.30 An alternative to the Farmer Service Centers which should be con- sidered by other ORDs in the near term is the use of licensed merchants to handle input delivery at the subregional level. The merchants could be monitored by the ORD so that their inventories would reflect the volume and type of inputs needed by farmers and recommended by the extension workers, and to ensure timely availability of the inputs. Credit could still be administered by ORD staff, and credit in kind provided to the farmers through financial arrangements between the ORD and the traders. Storehouses could still be built by the ORD and rented at cost to the merchants. The advantage of this system over the Farmer Service Centers, even if the latter succeed in covering their operating costs, is that it would keep an essentially commercial function outside of government channels, where the costs of administration may tend to exceed the necessary levels. D. Credit Offical Sources of Agricultural Credit 2.4.31 Most of the agricultural credit for input purchases in the past several years has been provided through the ORDs or the Rural Development Fund, with financing by the BND (Banque Nationale de Developpement) and external donors (mainly IDA, USAID, Conseil de l'Entente, and the FED). The BND's lending to the ORDs for short term input purchases has declined from CFAF 2.7 billion in 1975-76 to CFAF 618 million in 1977-78, primarily because the ORDs have failed to repay previous loans and rather have used farmers' credit reimbursements for operating expenditures. The externally-financed credit programs of the ORDs and RDF have been allocated mainly to animal traction equipment, with a much smaller volume of loans made available for the creation of cereal banks, other village infrastructures, and land improve- ments. 2.4.32 Although the repayment rates are poorly documented by the ORDs, recovery of short term credits in the cotton zones, where reimbursements for inputs purchases are exacted at the time of cotton collection, is  - 170 - reported to average 90%. 1/ Outside of the cotton areas, the poorer recovery by the financing agency appears to result from the ORD's own financial pro- blems at least as much as from the farmers' inability or unwillingness to meet their obligations. For this reason, Table 2-7 indicates that in 1979-80, short term credit was effectively unavailable to farmers outside of the cotton zones. Repayment of medium term credits is reported close to 82% throughout the country, although the recovery rate worsens from the first to the fifth year of the repayment period. 2/ 2.4.33 The on-lending of credit by the ORDs is managed by the credit service in the headquarters of each ORD and in most cases is carried out in the field by the extension workers along with their other functions of animation and input supply. Credit is usually allocated to farmers' groups but for the account of individual farmers; the group assists in the distribu- tion of available credit among members and provides a moral pressure on recipients to repay. The present system for delivery of credit demonstrates several major weaknesses, namely, a lack of proper accounting at the ORD level; the inability of field staff to apply standards of eligibility for credit; conflicts between the extension workers' role as animator and agent of credit recuperation; and the absence in many cases of permanently-consti- tuted groups of farmers who are capable of taking over some of the admini- stration of credit at the local level. The Caisse Nationale de Credit Agricole (CNCA) 2.4.34 The Government established the Caisse Nationale de Credit Agricole in 1980. Subscribed capital to the CNCA has been set at CFAF 1.3 billion, with CFAF 650 million paid during the first year. The Government and other public institutions (e.g. CNDI, CSPPA) hold 54% of the equity, with the remaining 46% owned by the French Caisse Centrale de Cooperation Economique (CCCE), the Central Bank of West African States (BCEAO), and the West African Development Bank (BOAD). Planned lending by the CNCA in 1981-82 amounts to CFAF 2,700 million, allocated as follows: CFAF million % Short term - input provision 200 7 - crop purchase 1900 70 Medium term - animal traction equipment 600 23 2,700 100 1/ "Etude de Factibilite pour la Creation de la Caisse Nationale de Credit Agricole (CNCA)", Ministere des Finances, Ministere du Developpement Rural, Decembre 1978. 2/ "Rapport de Mission sur le Credit Agricole en Haute-Volta," G. Pince, CCCE, January 1980.  - 171 - 2.4.35 Most of the credit for crop marketing and input purchase (short term) is to be extended to SOFITEX, which also obtains prefinancing from a consortium of local commercial banks. The CNCA replaces the BND's former participation in the marketing activity. Short term credit from the CNCA for seasonal inputs will be provided only for the initial importation of these inputs by SOFITEX, which will then provide credit to the farmers using the inputs on cotton. 2.4.36 The ORDs continue to have operational responsibility for managing the short and medium-term credit on-lent to them by the CNCA. The Government is considering a number of organizational reforms to enable the ORDs to accomplish this task more effectively, and to permit the CNCA to play a role of guidance and control. One proposal is to assign the delivery and recovery of inputs and credit to ORD field staff who are distinct from the extension workers, thus separating the latter from a financial role. The ORD would still administer credit through a special office in the ORD headquarters, consisting of supervisors and accountants who report to the ORD director and who maintain accounts for the credit service. In its appraisal of the proposal to establish the CNCA, CCCE has recommended that the CNCA employ accountant/management advisors who would be attached to each of the ORDs as financial controller and technical advisor to the credit accountants. 2.4.37 To ensure that uniform credit practices are applied by the ORDs, the CCCE has further recommended that the CNCA should specify explicitly a series of protocols or strict guidelines to be followed by the ORDs at every stage in the administration of credit, from the determination of eligibility to the modalities for recovering the credit and applying sanctions for nonpay- ment. The CNCA-financed controllers in each of the ORDs would be responsible for enforcing these protocols. A center for the training of credit staff in the ORD headquarters and eventually of credit agents in the field has already begun to function with a grant received from the FED. A major role of the CNCA will be to assure the continued training of ORD credit personnel through this institute and any technical assistance it may provide to the ORDs. 2.4.38 To further strengthen the administrative framework for the delivery of credit, the Government is considering a measure to formalize the legal status of farmers' groups, which it views as the basic structure for delivery of credit to the farmer. In particular, the proposed legal reform of the code pertaining to cooperatives and precooperatives would require members of groupements to establish their adherance to the group through payment of a subscription fee, and the group to identify a precise work program to be accomplished during the first year of its existence (e.g. a given target of communal production, marketing, input supply, or saving, etc.) in order to become legally constituted as a precooperative and eligible for credit. 2.4.39 The precise nature of the ORDs' financial responsibility for credit not recovered, and the means of sharing operating expenditures for the credit service between the ORDs and the CNCA, have yet to be defined. The feasibility study for the CNCA proposes that a fonds de garantie be established by the Government to cover 20% of the outstanding loans and  - 172 - reimburse the CNCA in the events of defaults. It has not been proposed to require the ORDs to cover such defaults; their role in guaranteeing credits appears to consist of conscientiously following up credit recipients and promoting the development of groupements to provide a certain social pres- sure on members. 2.4.40 The CNCA is considering reimbursing the ORDs some part of the rediscount on credit to defray the operating costs of the credit field service. The ORDs may also charge for the physical delivery of agricultural inputs, as described in the previous section but, according to the CNCA, they will not be permitted to add to the interest rate charged by the CNCA a further margin to pay for credit administration. The Second Bougouriba project proposes that the operating costs of the credit unit be financed out of the 15% mark-up on agricultural inputs. This approach is administratively simple and is intended to assure that the credit and input services become self-financing after several years, but it implies that even farmers who purchase inputs for cash will be paying the costs of credit administration. 2.4.41 The interest rate to be charged by the CNCA is determined in part by the rediscount provisions of the BCEAO, which sets lending conditions for member countries and will be providing a significant proportion of the CNCA's capital. The CNCA is permitted to charge up to 15.5% to large borrowers (which includes the ORDs who on-lend animal traction credit to small farmers) and 11% to small borrowers. The Government has decided to apply an 11% rate to both types of borrowers as of 1981/82. Comments on the proposed credit reforms 2.4.42 The proposal to establish the CNCA as a means of centralizing programs of credit distribution is sound, provided the institution under- takes the role of guidance and control as is apparently envisaged by Govern- ment, rather than the actual delivery of credit in the field. The idea of using credit agents and a credit administration in the ORD distinct from the extension service is also appropriate at the present juncture. It is essential that in setting up this revised arrangement, the objective is kept in view of facilitating a transfer of credit administration to farmers groups in the future (a delay perhaps varying from five to fifteen years, depending on the state of development of precooperatives in each particular region). The Second Bougouriba Project takes due account of this objective by requiring that groupements share in the retail margin of credit delivered through SOFITEX. Every effort must be made in the remaining ORDs where a separate input/credit supply service is established to avoid a permanent, publicly-paid staff (i.e., civil servants) which might preclude the takeover of this activity by private farmer groups or agents whom they choose to employ. 2.4.43 As a further measure to set the credit service on a financially viable footing and to avoid excessive subsidies which would hinder the transition to private management, interest rates should reflect as near as possible the real cost of capital within the limits permitted by the BCEAO.  - 173 - A rise in interest rates for medium term credit to 11% is a first step in this direction. However, rather than charge farmers who purchase inputs for cash (and thus assume the private financial charges for working capital) the administrative costs of credit delivery through an across-the-board 15% mark-up, it may be preferable for the ORD credit service to add some margin to the interest rate charged by the CNCA in order to require credit recipients to meet these administrative costs. This arrangement would permit a more precise accounting of the credit services capacity of cost recovery, remove an additional implicit subsidy of credit recipients, and not overly encourage farmers to go into debt by making them pay the same charges regardless of whether they borrow. Alternatively, if the interest margin which the CNCA charges on its funds is adequate to meet both the CNCA's administrative costs as well as those of the field service, an appropriate revenue-sharing arrange- ment will have to be worked out between the organizations to finance the ORD's credit infrastructure.  - 174 - CHAPTER III: PUBLIC FINANCE ISSUES IN THE AGRICULTURAL SECTOR 3.1 - INTRODUCTION 3.1.01 The present chapter analyzes the major public finance issues which are significant to the development of the agricultural sector. At the outset it is important to note that the Government's apparent problem of recurrent cost financing as such has not been taken as a focal point of this analysis, for the following reasons: (a) The Government's ability to shoulder the burden of recurrent costs arising out of investment projects is not a fundamental issue for the economy as long as the investments are productive. A positive rate of return implies that the value of the project's output will exceed its input costs; from the economy's viewpoint, therefore, there should be no problem paying these costs. If the projects are not productive, then they create a drain on domestic resources overall, not just on the Government budget. Whether the tec-hnical packages and extension infrastructure which constitute rural development projects are productive is a question which is discussed in previous chapters of this report, and is not a concern of the present section. (b) The definition of "recurrent" or "non-incremental operating" costs as opposed to "investment" or "development" costs is a distinction which has little practical meaning apart from a specific project case where items of expenditure can be arbitrarily classified for particular analytical purposes. It is virtually impossible to make such distinctions in aggregate financial data, no matter how well they are reported; more over, an attempt to do so is not relevant to an analysis of the Government's long term financial commitments, since most expenditures which constitute investments in the agricultural sector comprise items of a recurring nature (salaries, consumable materials and services) which remain at the charge of Government after the "development" phase of the project terminates. 3.1.02 These comments aside, and accepting that "recurrent financing requirements" is a theoretical notion, the nonpayment of expenditures which are needed to maintain a given level of benefits remains an important issue of financial management and planning. Such nonpayment (or under-financing) may occur for several reasons: (a) the incremental benefits of an investment have not been realized, as a result of project failure or a lag in the achievement of project benefits - that is, the investment proves relatively unproductive; (b) it is not possible for Government or the financing entity to capture revenues from the project which can then be used to meet expenditures, either because benefits are non-monetary  - 175 - and/or they are not amenable to taxation. In other words, the capability of cost recovery from investments is weak; (c) the expenditures needed to maintain benefits are not financed because "unnecessary" expenditures take over - for example, an over-hiring of personnel or padding of salaries. 3.1.03 Apart from these factors which refer generally to the level and timing of fiscal revenues and expenditures arising out of a particular set of investments (the "cash flow" perspective), nonpayment of recurrent expenditures may be viewed in terms of the Governments' allocation of available fiscal revenues among competing uses. Although any one project or service may not become self-financing, Government obviously has the ability to transfer fiscal revenues from sectors of surplus to those in need. Even a project which is fully cost covering may suffer from nonpayment of parti- cular recurrent expenditure because its fiscal revenues are reassigned to other areas of demand. This suggests that an apparent recurrent financing problem may reside in the Government's political priorities, or in the arrangements for financing expenditures incurred by one institution or level of Government through revenue transfers from another. In such a case the financing constraint may be the result of structural weaknesses in budgeting and financial management, or in the "flow of funds" built into the financial relationships among institutions. 3.1.04 Whether the expenditures needed to maintain the output of a project should be financed is not always evident and is a separate question from whether the Government can arrange to do so. The nonpayment of these expenditures is not necessarily an economic problem--that is, an outcome which lowers overall output and causes disinvestment. Nonpayment of recur- rent costs may be justified even on economic grounds in the following cases: a) if at the time these expenditures are to be incurred other expen- ditures (either capital or recurrent) have a higher economic productivity; for example, if oil were suddenly discovered in the Sahel, diverting expenditure from feeder road maintenance to well-drilling might properly reflect economic priorities; b) if the investment has created irreversible development in learning and institution building which can be maintained even in the absence of what were initially viewed as necessary recurrent expenditures. An example is that once farmers learn the advant- ages of an improved technical package, their continued use of it may be a function of appropriate price incentives and marketing outlets rather than the availability of extension advice. This reasoning does not apply to infrastructure projects where lack of maintenance inevitably results in physical degradation and loss of benefits. Even in this case, however, the decision to "disinvest" by not maintaining the infrastructure may be economically justi- fied from the country's point of view if external investment funds are inexpensive and only made available for projects of capital formation.  - 176 - In the present state of knowledge about development in Upper Volta, it is not possible to determine with certainty whether a given infrastructure or service will merit a high priority claim on scarce domestic resources in the future, or what expenditure is required to maintain a certain flow of incremental benefits. 3.1.05 This chapter departs from the premise that what is of importance to the agricultural sector is not the Government's willingness or ability to finance recurrent expenditures in particular, but its overall capability of managing public finances - controlling expenditures, generating revenues, and allocating them according to economic priorities. If Government has this capability, and the investments it undertakes are productive and efficient, the recurrent financing constraint can be overcome, although the Government's choice of expenditures may not always agree with the outsiders- projection of what are the appropriate or necessary use of resources. 3.1.06 The previous chapters of this report have examined the present state of development of agricultural production and institutional services in the agricultural sector and proposed directions of investment and policy reform to improve performance. The present chapter analyzes the current state of public finances in the sector 1/ in order to identify the con- straints, weaknesses, and potential for improvements in financial perfor- mance. Since a financially strong agricultural sector is not an end in itself but only a means to ensure that output objectives are achieved, the options for public finance reforms are examined in light of the policy recommendations made in the earlier sections of this report. 3.1.07 Most of the following study is concerned with the extent to which public recurrent expenditure (defined broadly) on the rural sector is financed by revenues which accrue from the sector itself--that is, the extent of cost recovery from the sector. What this level of cost recovery should be is a very complex question, especially for Upper Volta. The Government's need for a revenue surplus which it can use to reinvest is evident, given the nearly zero rate of public savings in the country--by this reasoning, full cost recovery from the rural sector of public recurrent expenditures, for example, by a flow of tax revenue which at least equals and preferably exceeds these expenditures, is desirable. Moreover, the Government of Upper Volta has been generally prudent in its expenditures, which again suggests that return of revenues to the Government is to be promoted. However, incomplete cost recovery from the rural sector would be appropriate if (a) redistribution of income to rural recipients below a 1/ Throughout this chapter, the terms "rural sector" and "agricultural sector" are used synonomously. The analysis of public expenditure and revenue in the sector subsumes the livestock subsector and the young farmer training program (CFJA) since they are included in the financial data available. Public expenditure on general services to the rural population which are not related to crop or livestock production (e.g. maintenance of rural roads, health services, formal education) is not included in the financial analysis. Some expenditure on water resources by the Ministry of Rural Development does involve rural water supplies for household consumption, however.  - 177 - certain income level is a major objective; (b) if non-cost recovery is a means of channelling resources to the rural private sector which invests more productively than other sectors; or (c) if the benefits from public expenditures on the rural sector accrue to others besides the rural popula- tion--for example, urban consumers benefit from greater efficiency in food production, and so perhaps should help finance expenditures which improve this productivity. 3.1.08 In Upper Volta, the extent of cost recovery which should be required from the rural sector is further complicated by the fact that the Government's price and marketing policies result in an implicit tax of the producers of most crops, as was demonstrated in Chapter 1. While most of this tax accrues to consumers rather than to Government, the latter may compensate for it by providing a net transfer of public revenue back to the rural sector. In theory, this transfer may be financed by the consumers who receive the benefits of lowered food prices. However, since the Govern- ment's collection of indirect taxes from consumers through income and import taxes is generally weak, much of this transfer must be financed by donor aid, either in the way of external funding of investments or of recurrent costs which relieves the rural sector from financing these expenditures. Elence, donor aid enables the Government to balance out some of the implicit taxa- tion on the rural sector which occurs because of marketing policies. 3.1.09 The present paper does not present an overall judgement as to whether the rural sector should receive a net transfer of public revenues (i.e., that recovery of public expenditures should be incomplete) or not. 1/ The paper does examine what the direction of net public revenue flows between the rural sector and other sectors (via the Government) is at the present time. If the data indicate that the rural sector receives an overall public finance subsidy, then the continuation of this subsidy will obviously require a persistent flow of donor aid, since it is not likely to be financed by non-agricultural sectors alone. Secondly, the paper does identify particular items of public expenditure which can be subject to a relatively direct cost recovery--e.g., fertilizer and its delivery costs-- whereas for other expenditures on administration, extension, erosion works, etc. the appropriateness of cost recovery even from the rural sector as a whole is more problematic, since benefits from these expenditures are realized only in the long term and perhaps only after various structural constraints are removed; and because the benefits may accrue to non-agricul- tural recipients as well. 3.1.10 The study is presented in two parts: a) the financial structure of the sector; this discussion covers i) the macroeconomic context of 1/ However, the analysis from Chapter 1 does suggest that the economic productivity of certain public expenditures, e.g. on extension and fertilizer subsidies is limited at the present time and that channelling resources to private rural investment, for example in livestock or small water pumps for vegetable gardens, may be more efficient.  - 178 - agricultural revenue and expenditure, ii) the financial role of the ORDs, and the relationships between the regional and central levels of Government in the financing of agricultural expenditure; b) the scope for improvements in the level of public expenditures and revenues which pertain to the agri- cutural sector and in the management of sectoral finances. 3.2 - THE FINANCIAL STRUCTURE OF THE RURAL SECTOR A. The Macroeconomic Context The Management of Public Finance 3.2.01 To understand the constraints under which the domestic financing of rural development is carried out, it is necessary to have a perspective of overall public financial management in Upper Volta. Although the Govern- ment exercised conservative fiscal policies and tight control of spending throughout the 1960s and early 1970s, the vast inflow of external capital funds which followed the drought at mid-decade and the more recent pressures for expanded current expenditure on defense, personnel and administration have compounded the weaknesses of the existing procedures of financial management. The most serious shortcomings of the present situation are the absence of an annual programming of investments and inadequate review of requests for budgetary expenditure. The government has under consideration the creation of a mechanism to strengthen the programming of development expenditures, and has been in consultation with the IMF concerning the consolidation of extra budgetary accounts at the treasury and improvement in tax recovery. 3.2.02 The general trend of lax financial management in Upper Volta in the last several years implies, first, that the available data on revenues and expenditures pertaining to rural development or any other sector are crude and incomplete, which greatly limits the analysis which can be made of them. Second, at least until reforms in the procedures for programming investment and current expenditure take effect through the operation of the FNIP, there can be no guarantee that any sectoral policies aimed at generating fiscal revenues or assuring the financing of expenditures can be implemented, since the allocation of revenues among competing uses in the present macro-economic context is not subject to firm oversight and control. Rural Revenue and Expenditure in the Macro-economic Context 3.2.03 What is of interest to the present study is the de facto financial situation of the agricultural sector, both in terms of domestic public revenue and expenditure, in relation to other sectors. If tax revenue has been as buoyant as might be expected in relation to general revenues and income in the primary sector, and if the sector does not receive a disproportionate share of domestic public expenditure yet still requires an overall financial subsidy from the Government, the obvious question which remains is how to develop some other structural support of the sector's finances.  - 179 - 3.2.04 Revenue. The available data on fiscal revenue permit a rough comparison of the rural sector's directly identifiable contribution to Government revenues relative to other sectors and to the value of its own output. Appendix Table 3-1 presents the series of estimated revenues of the national budget from 1976-80, and actual receipts up to 1979. Agriculture, including livestock, directly accounts for 98% of export tax revenues, but only 3-4% of total estimated and realized budget revenues. 3.2.05 The Table indicates that budget estimates diverge substantially from realized receipts, particularly for livestock and agricultural taxes. Although this results in part from the difficulty of predicting exports, the Government's own recording of export receipts for livestock is very hapha- zard. 1/ Comparing the annual variation in actual receipts from rural taxation with general tax receipts in 1976-79 is somewhat inconclusive, since the period is so brief. Whereas total tax receipts increased 14% for each of the three years, actual revenues from the rural sector remained almost constant or declined, except for the service charges and transit taxes which expanded markedly from a very low base. Consequently, tax receipts from agriculture and livestock declined from 5.1% of total realized revenues in 1976 to 3.7% in 1979. 3.2.06 The direct contribution of the rural sector to fiscal revenues also appears weak in relation to the change in GDP in agriculture and livestock, which may roughly represent the taxable income base of the sector. Current GDP from crops and livestock increased almost 16% per year between 1976-78, which implies a declining tax burden on the two sectors combined since tax receipts stagnated during the period. 3.2.07 One category of tax revenues from rural development has been omitted from Table 3-1. Indirect tax revenues, such as from sales of consumer goods, and direct tax revenues which originate from rural incomes, as well as taxes on fuel and capital goods which are used in agriculture and livestock activities are not identifiable from the Government's revenue reporting. These revenues could be estimated roughly on the assumption that the primary sector's share of national income (about 40%) approximates its share of revenues from taxes on incomes, profits, sales and imports. This method would assume, however, that every sector faces the same elasticity of taxation with respect to income, which is very unlikely. Since the primary sector's share of GDP has been declining over the past several years, it is probably safe to assume that its contribution to indirect tax revenues relative to other sectors has also fallen. 3.2.08 The last group of fiscal revenues which is noted in Table 3-1 as a memorandum item concerns the revenues which flow to the public sector (though not to the national budget) from the Government's share in the export of cotton and oilseeds. Expenditures by SOFITEX (formerly AP/CFDT) 1/ See discussion of tax receipts in Upper Volta: Livestock Subsector Review (IBRD Report No. 3306-UV), April 1981.  - 180 - and CSPPA which are merely transfers of surpluses within the public sector have not been deducted from these revenues, with the exception of export taxes to avoid double counting. These revenues, net of direct marketing costs, have declined notably over the past three to four years. As illu- strated in the table below, the decline in CSPPA's net revenues has been about equal to the fall in the gross value of marketed oilseeds at world prices. For cotton, however, the performance of net fiscal revenues is much worse than the trend of export value, even though expenditure by SOFITEX on input subsidies has not been deducted from its revenues. The sharp decline in net marketing receipts from cotton over the 1976-79 period is explained by a near-doubling of operating expenditures (including the cost of crop pur- chases). Further issues concerning the scope for improving net revenues of SOFITEX and CSPPA will be considered in a later section. 3.2.09 To summarize, public revenues from the rural sector do not appear to have been very buoyant during the past few years as measured by the growth of sectoral in relation to general budget revenues, or to the increase in the value of agricultural output. Table 1: COMPARISON OF NET EXPORT REVENUES AND VALUE OF MARKETED OUTPUT (CFAF Million) 1976 1977 1978 1979 % Average Growth Value of cotton lint output (FOB price) a/ 4,892 8,495 4,298 7,176 14 % Growth in net SOFITEX revenues b/ -19 Value of marketed oilseeds output (average FOB price) c/ - Groundnuts .. 450 260 108 - Sheanuts .. 1,760 3,135 420 - Sesame .. 210 220 460 - Total .. 2,420 3,615 988 -36 % growth in net CSPPA revenues b/ -35 a/ From bottom of Table 3-3. b/ From Memo item on Table 3-1. c/ Based on actual export prices received by CSPPA, or average FOB price as recorded by CSPPA. Includes quantities marketed by CSPPA and CITEC.  - 181 - 3.2.10 Expenditure. An analysis of expenditure reported in the national budget is a first step in determining whether the rural sector is out of line with other sectors in its claims on public revenues. Table 3-2 summarizes budget authorizations and actual expenditure, where available, in total and for rural development in particular. The figures for 1976 are not strictly comparable with those for later years, since the budget for the rural develop- ment ministry up to 1977 included some expenditure on other services. Budget authorizations approximate actual expenditures quite closely for Title II (operating expenditures), which constitutes about 70% of the total budget. The remaining titles of the budget (public debt, public interventions, equip- ment and investment) comprise largely expenditures of a recurring nature, although the nomenclature is misleading. In Title IV, for example, contribu- tions to ORDs and to the research programs are essentially operating grants for these institutions. 3.2.11 An examination of Title II indicates that whereas personnel absorbs about 78% of total authorized operating expenditures (and slightly more of actual expenditures), over 90% of the allocation to the Ministry of Rural Development (MRD) is devoted to personnel. The Ministry has consistently received 7-8% of the total personnel budget of the Government and only 2% of its materials budget. Comparing the growth of budget authorizations from 1977 to 1980 reveals that whereas total expenditures for personnel under Title II increased by 16% annually, MRD authorizations for this item grew by only 10%. 3.2.12 The inferences which may be drawn from these data are that although personnel dominates MRD operating expenditures more than is the case for the budget as a whole, this does not reflect a "padding" of the Ministry's budget, since the MRD has been disadvantaged in terms of the growth of its operating budget in relation to other sectors. In fact, the weight of personnel expendi- tures in the Ministry's budget is probably a reaction to the squeeze on its resources. The relative absence of materials expenditures means in practice that MRD personnel lack the means to leave headquarters, which obviously limits their awareness of conditions and problems in the field. If Ministry personnel are not given the means to carry out their jobs effectively, the question can obviously be posed as to whether the present staffing of the MRD reflects an efficient allocation of scarce human and financial resources within the rural sector. 3.2.13 A final point to be drawn from Table 3-2 is that total authorized budgetary expenditures on rural development comprised 7-8% in 1977 and 1978, the only years for which this figure can be calculated. This compares to an average share of 18% of budgetary expenditure for general administration, 23% for defense and 21% for education. These data suggest that the agricul- tural sector, far from receiving any "excessive" degree of current expendi- ture at least in terms of the national budget, obtains a modest share in relation to other sectors. 3.2.14 A second major category of current expenditure on rural develop- ment consists of Government subsidies of agricultural inputs - mainly fertilizer and insecticides. The amount of this subsidy which is financed  - 182 - by the central government, summarized in Table 3-5, has increased 30% a year from 1976-1980, a growth rate which exceeds that of any major expenditure item for rural development in the budget. 1/ These amounts exclude the portidn of the subsidy which farmers receive for the delivery of inputs from the warehouse to the farmgate; since at present most farmers do not pay a margin to cover these local commercial costs, the delivering agency (SOFITEX or the ORDs) finances this additional subsidy. The Net Fiscal Effect of Rural Development Revenue and Current Expenditure 3.2.15 Table 3-6 consolidates the data cited above concerning the fiscal revenues and recurrent expenditures of the rural sector which enter the account of the central government. Besides the expenditure items already discussed, the Table records expenditures made by SOFITEX and CSPPA in the form of grants to recipients outside the central government. 3.2.16 The Table reveals that in 1978 and 1979, the rural sector re- ceived considerably more in current expenditures from the central government than it provided as fiscal and marketing revenues. At this point, it is interesting to recall that the Livestock Subsector Review 2/ concluded that livestock producers are taxed on balance by the government. This implies that crop farming alone receives an even larger transfer of public revenues than is indicated by the above table, a portion of which is financed by livestock. 3.2.17 To complete the picture of overall fiscal flows between the rural development sector and the consolidated public sector, it is necessary to consider expenditures at regional level, through the ORDs. These will be discussed in the section below. Table 3-6 also does not include expendi- tures and revenues of the remaining parastatals in the sector (e.g. OFNACER, ONBI, ONERA) or institutions and project entities which have budgets inde- pendent of the Ministry or the ORDs (e.g. AVV, RDF, the Banfora feedlot, etc.). Although the Table does include budget grants and contributions made by the Ministry to these entities, their remaining expenditures are covered by donor funds or self-generated resources, and so including them in the Table would not affect its overall result. The purpose of Table 3-6 is not to catalogue exhaustively all the financial resources and expenditures which 1/ The backlog of subsidy payments for 1978, 1979, and 1980 owed to SOFITEX for the portion of compound fertilizer used on cereals has been financed through a STABEX grant. 2/ Upper Volta: Livestock Subsector Review, cited above.  - 183 - flow between rural recipients and the public sector, but merely to indicate whether the sector is presently taxed or subsidized by the Central Govern- ment in terms of domestically financed current expenditure. As suggested earlier, the analysis must define current expenditure very broadly to include expenditure for the operation of development services or projects (mainly consisting of salaries and consumable items), since capital expendi- tures in the strict sense (fixed capital formation) can in no way be sepa- rated out of the financial data available. 3.2.18 To conclude the above section on the macro-economic context of agricultural sector finances, it is apparent that current expenditures, at least from the viewpoint of the central government, do not appear to be disproportionately high for the rural sector except in the case of input subsidies. Direct fiscal revenues from the sector do not seem to have progressed as well as might have been expected, however. The net effect, an overall transfer of domestic resources to the rural sector by the central government, may be subject to some modification through increased revenue collection and reduced expenditures, as will be discussed in the final section of this report. The margin for curtailing the net revenue flow to the rural sector is very limited in the foreseeable future, however, which suggests that some other source of finance will be a built-in requirement for the country for some time to come. B. The Financial Situation of the ORDs 3.2.19 Since Government activity in the rural sector is highly decentra- lized through the system of the ORDs, their expenditure and the means by which they share in public revenues are very important features of the financial structure of the rural sector. It was stated in the introduction to this chapter that the current financing problem could be viewed in terms of the levels of available revenues and expenditures, or in terms of the flow of funds among institutions or operations of Government which capture fiscal revenues and those which incur expenditures. The financial problems of the ORDs can be understood in the first instance as an issue of resource allocation among levels of Government. A second issue which becomes appa- rent from a financial analysis of the ORDs is the interregional disparities in the allocation of public revenues to them, an inequality which tends to be reinforced by the patterns of donor aid. 3.2.20 As discussed in Chapter 2, the ORDs were instituted in the 1960s with the multiple mandate of providing an extension service, ensuring the marketing of crops and the delivery of agricultural inputs.and credit, and organizing the rural population. The ORDs were expected to become self-fi- nancing through their participation in marketing operations. Certain ORDs have, since their inception, had considerable budget and technical support from external donors -- e.g. FAC and CIDR, a Canadian nongovernmental organization, in the early years and IDA, US/AID, and FED more recently. 3.2.21 The extent of the Governments' (read central government's) finan- cial commitment to the ORDs - that is, whether the national budget stood to  - 184 - provide funds not forthcoming from marketing operations or external donors-- has always been rather ambiguous, however. In practice, the Government has not served as a financer of last resort and has not aimed to equalize the total financial resources available to ORDs according to any criterion such as relative size. A basic feature of the ORDs' financial circumstances to date is that they have had no assured source of income against which an operating budget can be maintained. According to present practice, the ORDs draw up budgets each year which are never reviewed or approved formally by the Ministries of Rural Development or Finance. The Government therefore allocates a budget subsidy to the ORDs which bears no relation to their stated or actual needs. As a result, ORD expenditures, both capital and recurrent (wiith the exception of personnel costs), tend to be incurred in relation to funds actually received from year to year. Personnel charges, of course, cannot as easily be dropped when actual receipts fail to meet budgeted levels, leading the ORDs into the indebtedness which many of them experience at the present time. 3.2.22 The funds which were supposed to enable the ORDs to become self- financing (fonds propres) were to derive mainly from the ORD's marketing operations, the share of profits which the cotton-producing ORDs received from AP/CFDT, and from the Cotton Development Fund (see para. 3.3.10). Marketing of food crops has been a financial drain rather than a benefit for most ORDs because the official producer and consumer prices which the ORDs were supposed to observe did not enable them to compete with private mer- chants or even to cover direct collection costs. Most ORDs as of 1979/80 abandoned marketing activities except to purchase food crops exclusively for their own personnel. Likewise, the delivery of agricultural inputs has created a financial loss in most cases, since the ORDs do not, as an offi- cial practice, charge any markup on the inputs which they pass on to farmers at subsidized prices. 3.2.23 The major contribution to fonds propres has come from the distri- bution of cotton marketing profits, but only for those ORDs which partici- pate in this enterprise. However, just as the subventions which ORDs receive from the National Budget bear no relation to their budgeted requests or actual requirements, their share of cotton marketing profits depends on the yearly status of the export market, totally exogenous to the ORDs' expenditure on promoting cotton production. The statute of SOFITEX appa- rently does not provide for the continuation of profit sharing with the ORDs, however. 3.2.24 Although all of the ORDs receive some funds from foreign donors, only 5 of the 11 ORDs (Yatenga, Dedougou, Bobo, Bougouriba and Fada N'Gourma) are currently direct recipients of project aid from the major multilateral and bilateral sources (namely, IDA, FED, US/AID, FAC, and UNDP). 1/ Aid from these donors also entails either a direct financial contribution by the 1/ Most of the remaining ORDs receive some indirect financial support through the IDA Education and Rural Development Fund projects, as well as from other donor projects which are non-ORD specific.  - 185 - Government to meet a share of the project costs, or an indirect contribution through the provision of land for buildings and demonstration plots, salaries of staff counterparts to foreign technical assistance, etc. Besides benefit- ing from the Government's project related contribution, which the ORD can count on in projecting budgetary inflows at least during the life of the project, the ORDs which receive donor finance enjoy other advantages over those without such assistance. To date, major donor support has been correlated with cotton-producing capability, implying that the ORDs of Dedougou, Bobo and Bougouriba also benefit from cotton profits as a source of revenue. In theory, at least, donor aid covers some of the costs of distributing inputs, reducing the losses which the ORDs would ordinarily incur on this account. The receipt of vehicles and other capital equipment by project funds also gives those ORDs a modest future source of income in the forms of rental and resale. 3.2.25 The relatively favorable financial situtation of the ORDs which are major recipients of foreign aid can be assessed from Table 3-7, which shows ORD financing and personnel expenditures by population size. The five above-mentioned ORDs with the greatest external financing had revenues (excluding the balance on marketing activities) from CFAF 233 to CFAF 1,146 per resident in 1977/78, while the other ORDs (except Banfora) received less than CFAF 200 per head. The donor-assisted ORDs plus Banfora also achieved much higher personnel expenditures per capita. 3.2.26 Table 3-8 illustrates the financial situation of the ORDs through a summary of their income statements for 1977-78, the most recent fiscal year for which complete data were available to the mission. The table shows the financial account for the commercial operations of the ORDs as distinct from that of the general activities (extension, training, etc.) and separates the former into marketing of inputs and of crops. Although the commercial accounts are not strictly comparable since several ORDs did not impute to them the administrative costs of marketing (personnel, transport and finan- cial charges), it is obvious from the table that the distribution of produc- tive inputs and crop marketing created a major financial drain for the ORDs. 3.2.27 On the debit side of the general activities account, personnel expenditures comprise salaries and allowances for ORD contractual staff (including most extension workers). The salaries of civil servants assigned to the ORDs are recorded in the Ministry budget, but their various allo- wances are paid by the ORDs. Except for a few cases, technical assistance wages are not reflected in the ORD budgets. Other operating expenditures include mainly consumable materials and maintenance costs of vehicles and equipment which may be used in investment type activities (e.g. well-digging). Although all of the ORDs make substantial provisions for amortization of physical assets in their income statement, the analysis of the financial accounts here excludes depreciation since the concern of this study is with actual income flows. 3.2.28 On the credit side, it is notable that grants and loans from both Government and foreign donors, rather than the fonds propres, provided nearly 90% of the total receipts for the ORDs. Project funds, including the Government's share of the investment, ranged from 8% of the total receipts  - 186 - of Ouagadougou ORD to 92% for Bougouriba. Funding by the Government through subventions from the national budget and the CSPPA was distinctly higher in absolute terms for the ORDs which do not receive major foreign aid than for those which do. When Government's total funding of the ORDs is considered, however, (including its counterpart contribution to donor investment projects), the ORDs of Fada and Bougouriba are seen to receive a greater amount of Government revenue than the ORDs of Koupela, Sahel and Kaya which do not have significant foreign support. This finding illustrates that donor aid, rather than evening-out the availability of revenues among regions, has tended to increase the concentration of funds in certain ORDs by drawing domestic revenues to them as well. It is also noteworthy that, although the CSPPA in theory should act to redistribute revenues from cotton marketing to non-cotton producing ORDs, in the financial year examined, the CSPPA played a very modest role in providing direct budget grants to them. 3.2.29 The contribution of AP/CFDT to the ORD fonds propres, including both the profit share and commission per ton, was relatively unimportant in FY77/78 for all ORDs except Dedougou and Bobo, for whom this income amounted to 48% and 64%, respectively, of general ORD financing. This outcome is particularly significant from the standpoint of ORD's self-financing capability since the 1977-78 campaign yielded relatively high profits for the agency. However, many of the ORDs did not actually see this income because it was credited by AP/CFDT against the ORD's unpaid balance of input purchases and other debts. 3.2.30 Taking the total operating expenditure of the eleven ORDs (CFAF 1.5 billion) from table 3-8 and deducting from it the amount of the ORD's own funds (CFAF 0.2 billion) and grants from the national budget (CFAF 0.3 billion) and CSPPA (CFAF 0.2 billion) 1/ (on the assumption that these grants comprise revenues which originate in the rural sector) yields the net revenue transfer which was channelled through the ORDs to the rural sector in 1977/78. This subsidy, CFAF 0.8 billion, or 53% of the total operating expenditure, was of course financed by foreign aid. 3.2.31 The effectiveness of the ORDs has undoubtedly been constrained by their inability to become self-financing and the unpredictable nature of the revenues allocated to them by various institutions of central government. In 1979, the Government appointed a special commission to study the finan- cial situation of the ORDs and to recommend reforms. The solution which the commission proposed in March 1980, apart from eliminating the marketing activity of the ORDs and making input delivery more cost-covering, was to incorporate the ORD expenditure budgets as an annex to the national budget. The central government would take responsibility, therefore, for allocating general revenues to the ORDs; the latter would lose the illusion of finan- cial autonomy but would retain managerial control of the resources allocated to them. In this way the Government would guarantee a basic level of ORD activity, and the ORDs would not be inclined as they are presently to permit operating expenditure to rise with sudden windfalls of revenue, such as from 1/ Total amount of annual operating grants reported to have been paid by the national budget and CSPPA to ORDs in 1977 and 1978.  - 187 - a year of good cotton prices, only to slide into debt when this revenue disappears. By removing the ORDs' status as autonomous institutions, the Government would also annul their debts vis-a-vis other government agencies and assume repayment of the ORD debts to private sector suppliers. The proposal is apparently not viewed by the Commission, however, as a means of equilibrating expenditure among regions by ensuring for all ORDs a level of funding commensurate with that provided to some by external donors. 3.2.32 The inclusion of ORD budgets as an annex to the national budget would go a long way towards solving the ORDs' problem of revenue allocation by making the central government's financial contribution to the ORDs more explicitly related to their budgetary requirements. The reform would not generate any additional revenues, however, and so the Government's problem of financing the ORDs remains unresolved. In the first instance it is necessary to have an appreciation of the additional expenditure requirements which would arise for the central government if the ORD budgets were added to its account. These requirements are not well known even to the Govern- ment, since the activities of the ORDs (in particular the employment and remuneration of extension workers) and their various sources of finance are not centrally coordinated by the Ministries of Rural Development or Finance. The past ORD financial accounts are not an accurate measure of the future requirements either, since many necessary ORD expenditures have been suppressed because of lack of funding. The major item of expenditure at the regional level which can be estimated, at least in terms of a minimum requirement, is the cost of agricultural personnel. 3.2.33 Table 3-9 summarizes the personnel charges for professional (agri- cultural) staff of the ORDs based on 1980 employment levels and pay scales. The estimate is conservative since it only includes those payments to which all staff are entitled, although the actual remuneration may be higher or lower in individual cases according to the availability of ORD finance and the provisions of donor aid. Allowances for responsibility and family dependents have been excluded since not all staff are eligible for them. The Table indicates, therefore, the minimum remuneration which the Government would have been paying to ORD staff in 1980 if all extension workers received the pay increase awarded to them in 1979, and if Government did not adopt generally the special allowances which some civil servants and contractuals presently receive under donor projects. Of the calculated total charges (CFAF 1.1 billion), CFAE 0.8 billion enters the account of the ORDs under present arrangements. If the Government had adopted the proposal to include the ORD operating costs as an annex to the national budget, this CFAF 0.8 billion would have become the direct responsibility of the central government to finance either through its tax and marketing revenues, or through acquired donor funds. The Government allocated CFAF 0.3 billion in the 1980 budget as a grant to the ORDs. The net increase in expenditure required of the national budget for the ORDs would therefore have been CFAF 0.5 billion, or one-third of the Ministry of Rural Development's budget allocation for personnel in 1980. This does not even include costs of nonprofessional ORD personnel (e.g. clerks, drivers) to be added to the national budget, or the materials and maintenance charges of the ORDs, which would be significant if the staff are to be given adequate means to work effectively.  - 188 - 3.2.34 If the recommendations for upgrading the level of extension staff put forward in Chapter 2 were adopted, the personnel charges which would accrue to Government would obviously be greater. In particular, the increase would come from a net expansion of B- and C-level staff who would replace lower-paid extension agents currently holding middle-management positions in the ORDs. 3.2.35 The conclusion to be drawn from the above is that whereas the central government already devotes considerably more current expenditure to the rural sector than it collects in revenues, if the ORD expenditures were added to the central government's account without any additional domestic revenues to be generated from the regions, the net expenditure requirement of the central government would be substantially increased. Simply shifting expenditure which has been carried by one institution (ORDs) to another (the national budget) is only an issue insofar as expenditure demands which have been suppressed at the regional level become more explicit, and there- fore more acute, when presented in the national budget, where inconsisten- cies in the remuneration of staff and inter-regional inequities in budget allocations, for example, may assume a political rather than financial significance. 3.2.36 To summarize, Part II of this Chapter has outlined the financial situation of the rural development sector both in its national and regional perspective. The sector clearly receives an overall financial subsidy from the general Government at present, requiring transfers of budget revenues from other sectors and budget support from abroad. The following section of this report analyzes the scope for modifying the public financial inflow to the sector by adjusting expenditures and fiscal revenues, as well as possibilities for improvements in financial management in the sector. 3.3 - POSSIBILITIES FOR IMPROVEMENT IN THE NET CONTRIBUTION OF THE RURAL SECTOR TO PUBLIC FINANCES A. Reduction of Input Subsidies and an Increase in Net Cotton Marketing Revenues 3.3.01 The feasibility of reducing input subsidies as a means to improve the Government's financial account depends on the impact of the change in input prices on the farm budgets, hence on private incentives to produce cotton or other crops with these inputs. The public financial savings from the removal of input subsidies must be weighed against the possible reduced revenue to Government if output of a taxed crop falls or a direct tax on the output is reduced to maintain farmer incentives. Estimating the effect of price changes on production incentives is necessarily speculative, since much depends on the assumptions regarding fertilizer responses, the value of labor, the trend in economic prices (which determine the limit of possible price adjustments), as well as the degree of financial return which farmers require to cover their risks and make a crop financially attractive. In the  - 189 - analysis below, fairly conservative estimates have been used for the returns to fertilizer and for projected world prices of cotton, sorghum, NP fertilizer and urea. This set of parameters selected suggests that it should be possible to phase out input subsidies over a five-year period. The precise path by which Government should reduce subsidies must be reviewed in light of ex- perience and new information on relevant prices, but the analysis here is intended to illustrate a possible approach and to show that such a reduction of the subsidies would have favorable public financial implications. 1/ 3.3.02 Tables 3-10 and 3-11 project the effect of alternative assumptions regarding input and output prices on the private profitability of cotton and sorghum production. Both tables indicate that private returns for improved cotton 2/ and sorghum production would be higher under a regime of economic prices than the present financial prices. This is true because cotton produc- tion is deliberately taxed on balance, despite the input subsidies, while for sorghum producers, an effective tax apparently results in part from the sale of food aid which depresses the market price of cereals. In the case of cotton, subjecting the farmer to a regime of economic prices, although it would remove the fiscal drain for input subsidies, would also preclude a valuable source of tax revenues. An intermediate set of price assumptions is therefore outlined on each table (item C). 3.3.03 Under this third alternative, price subsidies would be progres- sively phased out from 1981-85. The producer price of cotton would be set so as to maintain approximately the same ratio of financial to economic farmgate price which existed in 1980 (79%). For sorghum, it is assumed that the economic producer price is applied as of 1981, presumably by curtailing the sales of food aid. Since producer prices are allowed to rise along 1/ A revision of the projections in Table 3-10 and 3-11 to take into account more recent commodity price forecasts by the World Bank (November, 1980) and a higher actual exchange rate (CFAF 270=US$1.00) indicate that subsidies could still be phased out over 1982-86 and output prices to the farmer increased, while improving net returns per manday over their 1981 levels. If more optimistic estimates of the response of cotton and sorghum to fertilizer were used, as in the sensitivity analysis in Section 1.5, the projections would show that farmers could achieve given returns per manday with even lower output prices, or absorb a faster phasing-out of input subsidies. A third set of projections was also attempted, using the more recent price forecasts and more optimistic yield assumptions, which shows that a phasing-out of input subsidies over five years and increases in output prices are still possible while making the value of the incremental production induced by fertilizer equal to at least twice the cost of the fertilizer. A minimum benefit: cost ratio of 2:1 is thought to be necessary to compensate farmers for the added risks of using inputs, a hypothesis which should be tested as steps are taken to reduce the subsidy. 2/ Except in 1980.  - 190 - with input prices, it seems reasonable to assume that the use of inputs, and hence the yields of each crop per hectare, will remain constant over the period. The projection abstracts from any other possible sources of productivity increases. Alternative (C) reveals that under these assump- tions, private returns per manday for both cotton and sorghum would improve 6-7% annually over 1980-85. As illustrated below, the relative attractive- ness of cotton and sorghum production also would not change significantly by the end of the period, implying that farmers would not be inclined to shift markedly from cotton to cereals, or vice versa, because of a phasing out of input subsidies. Some initial subsitution of sorghum for cotton might be expected, however. 1980 1981 1982 1985 Ratio of Returns/manday Sorghum: Cotton (A) Existing financial prices 1.5 - - _ (C) Adjusted prices 1.5 1.8 1.8 1.6 3.3.04 The proposed farm budgets under (C) are only valid, of course, if the economic price projections on which they are based prove fairly accurate. On the hypothesis that the world cotton and sorghum prices do not increase as expected (or that sorghum producers are not able to receive the full economic price), a fourth set of farm budgets is presented. This set outlines, under a less favorable scenario, the minimum increase in producer prices which would permit 1980 real returns per manday to be maintained while input subsidies are phased out over five years. If the projected cotton and sorghum world prices do prove realistic, this alternative also suggests the lower bound of producer prices which would not worsen the farmers' situation or lead to a shift in the crop mix, yet allow Government to exact the largest possible tax from cotton producers. 3.3.05 Based upon these farm budgets, an estimate has been made in Table 3-12 of the projected impact of increased producer prices on the net marketing revenues of SOFITEX. On the conservative premise that cotton production would remain constant from 1980-85, the "high" estimate of producer price yields a deficit for SOFITEX of CFAF 1.0 billion in 1980/81, falling to CFAF 0.5 billion in 1984/85. If cotton production increases over the period through new acreage brought into cultivation, which is reasonably likely given the increasing profitability of improved cotton production under this price assumption, the net revenue impact to SOFITEX would be more favorable; if output of seed cotton increased a mere 15% over five years to 86,250 MT, for example, the SOFITEX deficit would fall to CFAF 0.2 billion in 1985. The deficit would be likely to turn into a surplus after 1985 if the assumed price trends continue and operating costs do not rise greatly in real terms. 3.3.06 Under the less favorable producer price assumption, by which producers are given the minimum price needed to maintain 1980 real returns, net SOFITEX revenue would move from CFAF -0.6 billion in 1980/81 to a surplus of CFAF 0.5 billion in 1984/85. These figures of course presuppose that SOFITEX is able to sell at the projected world prices.  - 191 - 3.3.07 Table 3-13 estimates the impact of phasing out input subsidies on Government expenditure. Although fertilizer use has been growing by about 30% a year for at least the last decade, it may be expected to level off in the future, particularly in reaction to the increased price. The Govern- ment's (including the ORDs') total expenditure for input subsidies in 1980, comprising the difference between the price to the user and the calculated economic farmgate price, amounted to CFAF 1.5 billion. With progressive phasing-out of the subsidies, the expenditure would fall to CFAF 1.0 billion in 1982 and to zero by 1985. 3.3.08 Finally, the table below summarizes the net revenue effect to Government of the proposed changes in input prices and in the producer price for cotton. If Government phases out subsidies over five years and offers producers the minimum output price needed to maintain 1980 real returns per manday, the Governments' financial account would pass from a deficit of CFAF 1.9 billion in 1980/81 1/ to a surplus of CFAF 0.5 billion by 1984/85. To evaluate this set of policies further, it is useful to compare their financial impact with the net financial effect to Government of maintaining its existing price policies over the next five years. Again, keeping all physical quanti- ties of inputs and production constant at their 1980 levels, if SOFITEX paid producers the present financial price (CFAF 53/kg seed cotton) in 1985, its overall balance of revenue would reach CFAF 1.9 billion. The total subsidy bill, assuming no change in the prices charged to producers, would amount to CFAF 1.8 billion in 1985. The net cash inflow by 1985 for Government in these circumstances (CFAF 0.1 billion) compared to the net revenue gain from phasing out input subsidies and modestly increasing producer prices (CFAF 0.5 billion) points clearly to the need to modify present price policies to strengthen the public financial situation. 1/ Corresponding to SOFITEX's financial year.  - 192 - Table 2: NET REVENUE EFFECT TO GOVERNMENT OF CHANGES IN INPUT PRICES AND COTTON PRODUCER PRICE (CFAF million) 1980/81 1981/82 1984/85 Proposed Input and Output Prices: Net revenue of SOFITEX under producer price assumption II -649.8 -51.8 511.8 Less total input subsidies -1,296.0 -1,028.0 - Net revenue effect to Government -1,945.8 -1,079.8 511.8 Present Input and Output Prices: Net revenue of SOFITEX if current producer price is unchanged 1,936.8 Less total input subsidies if input prices are unchanged -1,778.0 Net revenue effect to Government 158.8 Sources: Tables 3-12, 3-13. Note: Expenditure on inputs in 1981 is compared here to cotton marketing revenues from SOFITEX financial year 1980/81, and so on. 3.3.09 How much Government should raise producer prices for cotton while it phases out input subsidies is ultimately a difficult political question. If prices are only raised according to the "minimum" assumption outlined above, Government will enjoy the more favorable terms for itself but farmers' real incomes will not grow over five years. Which price policy is most appropriate is a decision which only Government can make; the above analysis suggests the bounds within which the available options may fall. B. Improvement of Oilseeds Marketing Revenues 3.3.10 The CSPPA holds an official monopoly of the export of oilseeds (sheanuts, groundnuts and sesame). Prior to 1978/79, the agency purchased oilseeds from licensed merchants and arranged sales to export firms in the coastal countries. In 1978/79, CSPPA began a system of permitting the licensed merchants themselves to export, after payment of a tax per ton to the Caisse. 3.3.11 In Part II, it was noted that the overall net profits of CSPPA have been positive, but declining, from 1976/77 to 1978/79. However, these profits include revenues which the Caisse receives from various operations  - 193 - (such as the sale of sacks to merchants) and financial returns on its invested capital. The net revenues from the export of oilseeds, which are its only "fordinary" revenues, have been much lower than its overall profits, and have been inadequate to cover the costs of the Caisse's own administrative overhead during the past three years (see Table 3-14). 3.3.12 The reason for the low returns on oilseeds marketing are also illustrated in Table 3-14. From 1976/77-78/79, the Caisse obtained tax revenue from groundnuts in the amount of CFAF 8,000/ton exported and from sesame, CFAF 5,000-12,000/ton. Both of these crops represent a very small share of the quantity exported by CSPPA, however (except for sesame in 1978/79). In the case of groundnuts, the low proportion of official exports in relation to total production is probably explained by the relatively high private price for groundnuts which, since about 1976, has reflected the country's increasingly deficitary position in edible oils. CSPPA's share of the total sesame production over 1976/77-78/79 has remained fairly constant at about 20% despite a lowering of the tax on exports. 3.3.13 For sheanuts, the Caisse's price policy, which is explained as a price stabilization scheme, has moved from a tax on exports of CFAF 3,000/ton in 1976/77 to an estimated subsidy in 1979/80 of CFAF 4,500/ton. The produc- tion, and likewise the export, of sheanuts is extremely variable from year to year but they tend to provide the bulk of the Caisse's exports. 3.3.14 Given the limited role which oilseeds are likely to play in total agricultural production in the foreseeable future, the margin for improving CSPPA's net export revenues is not very great. An even more basic issue is whether the Government should be attempting to tax the modest production of groundnuts, sesame, or any other marginal crop, rather than allowing producers the full market price and relying on indirect tax revenues from their resulting increased consumption. Direct taxation may even be counterproductive to the goals of promoting crop diversification and maintaining self-sufficiency in oils, except possibly in the case of sheanuts, whose output is a function of the tree cycle rather than deliberate cultivation. As long as the domestic price for groundnuts is so high, for whatever reason, taxing exports of this crop is not a viable alternative in any case. The Caisse lowered the tax from CFAF 8,000 to 5,000/ton in 1979/80; it may be preferable to suspend it entirely. Taxation of sesame, although currently an important factor in the CSPPA's account, does not have much potential to become a major source of public revenue, since sesame is a marginal item in total production which is grown largely as a condiment for local consumption. To encourage its role as a cash crop, it may be advisable to forego this tax as well, which was sharply increased in 1979/80 to CFAF 15,000/ton. 3.3.15 For sheanuts, the progressively increasing subsidy is a source of concern. As noted above, sheanuts are an uncultivated tree crop and the domestic market for sheanut butter is limited by demand for higher quality oils. Consequently, the incentive effect of a price subsidy, either on production or exports, is probably negligible. The subsidy may be needed at present to curtail unofficial exports to Mali, where the private price  - 194 - for sheanut butter exceeds that of Upper Volta, but this imbalance is probably a temporary phenomenon. Since Upper Volta can obtain foreign exchange readily from donors, paying a heavy price subsidy to ensure exports of sheanuts is also not an advisable policy. It is therefore recommended that the Government reconsider its price schedule for sheanuts in order to avoid subsidizing exports of this crop. C. Increasing Direct Fiscal Revenues from Agriculture and Livestock 3.3.16 As noted in Part II of this chapter, the recovery of direct and export tax revenues which enter the general budget is very weak. The costs of improving tax recovery, for example, by manning customs stations at closer intervals along the border, probably do not justify the additional revenues which might be gained in the foreseeable future. However, it would be very useful if a study could be made of the potential costs and benefits (including the effect on rural incomes and production) of improving the collection of fiscal revenues from the rural sector, or of instituting additional taxes. At the same time, a household expenditure survey is needed to determine what indirect tax revenues are or may be generated from rural incomes. D. Reducing Personnel Expenditures 3.3.17 In Part II, it was noted that personnel expenditures by the Ministry of Rural Development have not increased inordinately in recent years in relation to other departments of Government. For the ORD staff, section 2.1 pointed out that as long as that institutional system of information delivery to the farmer is used, the need to ensure a minimum level of effectiveness implies that salaries and allowances for extension workers must be brought to more attractive levels in real terms, and some upgrading of the supervisory structure is required. Field staff on the public payroll who are or will soon be put in charge of input and credit delivery should be financed through an adequate mark-up on the cost of the inputs (in line with the recommended phasing out of input subsidies discussed above); and, the input and credit services should be put under private management, either by commercial entre- preneurs or farmers groups, as soon as possible. Apart from this group of staff, there is little margin for savings on expenditures for field-level personnel. 3.3.18 One reform which could reduce Government's future expenditure burden would be an elimination of the special allowances which staff on donor funded projects receive. These allowances, which are intended to attract the most qualified staff to externally-aided projects, have created severe inequalities among the conditions of service of staff within identical grades of the civil service and contractual classifications. The allowances also pose a serious financial threat to Government which must face pressures from non-project staff for comparable renumeration, and from project staff to continue the generous allowances after donor aid terminates. Although discontinuation of these allowances would probably create at least a temporary disincentive to project staff, the measure should be viewed as a necessary step towards rationalizing the administration and personnel policies of the country and bringing the Government's financial commitments under control.  - 195 - E. Improvements in Financial Management Reforms at the National Level 3.3.19 Part II of this chapter noted some of the weaknesses of the general financial management of the Government. The Bank is already consulting with Government concerning measures to redress this situation and is preparing a technical assistance project to help implement them. These reforms are a necessary prerequisite to any substantial improvement in the financial manage- ment of rural development. The Government's proposal to include the ORDs as an annex to the national budget is a desirable measure in itself because it would require Government to begin to assess the aggregate burden of public expenditure in the rural sector. This reform would best be implemented along with measures to improve budgetary controls. Accounting and Financial Controls in the Rural Sector 3.3.20 There are several serious shortcomings of accounting and financial controls which pervade the administration of rural development projects and Government institutions in the sector. The most important shortcomings include: i) the absence of regulations on salary, travel and housing allowances for project staff, ii) the lack of proper budgets and accounts, and iii) ineffective financial supervision by the Ministry of Rural Develop- ment or Ministry of Finance. These problems are equally true of donor-aided projects in the sector as well as of the ORDs which are not financed by projects. For the latter, the illusion of financial autonomy to which they have been subjected has made financial regulations and budgets irrelevant, since the only control of expenditure which has had any meaning is the actual volume of revenue (a highly unpredictable variable) which they eventually receive. The Ministries of Rural Development, Finance, or Planning have to date not played a significant role in monitoring expenditure by rural develop- ment institutions and projects. 3.3.21 To correct this situation, Government needs, in the first instance, to develop the practice of expenditure controls at the center. The Ministry of Rural Development should become actively involved in the formulation of expenditure guidelines for the ORDs and should regularly monitor accounts of the ORDs and of sectoral projects. The recent creation of a Direction of Control in the Ministry of Rural Development is at least a partial step in this direction. This enhanced role for the Ministry, which will undoubtedly require technical assistance, should be viewed along with the recommendations made in Chapter Two to strengthen the Ministry's ability to set regional development priorities and support and coordinate the agricultural field services. 3.4 CONCLUSIONS 3.4.01 The present chapter has shown that the rural development sector, and in particular the crop subsector, receives a net inflow of public current revenue. The potential to modify this financial subsidy and eventually make  - 196 - agriculture a net provider of revenues to Government appears quite small at least in the foreseeable future. If Government undertakes the necessary adjustments which have been suggested, it can be judged to be making as great an effort as possible at this stage to make the sector financially self- supporting. 3.4.02 However, it is argued here that a net transfer of public revenues to the rural sector--in other words, incomplete recovery of public expendi- tures--may in fact be appropriate at the present time. The real issue is not whether the Government can collect more revenues from the sector or reduce public expenditures--which to some degree it can--but rather, whether these expenditures are productive and efficient in generating benefits or maintain- ing income. In Chapter 1, it is argued that much of the public (as well as private) expenditure on agricultural inputs and extension is not economically efficient or productive at present in many parts of the country, although their potential is not denied. Until this potential can be realized, however, which may involve yet additional adaptive research to relieve certain con- straints to economic productivity, it is not realistic to expect the rural sector to finance these expenditures. Therefore, external budgetary support to the Government for expenditures of a recurring nature can be justified while efforts are made to improve the economic profitability of existing technical approaches; while Government enhances its ability to generate fiscal revenues from the rural population as they realize greater benefits; and while publicly-financed services are shifted, where possible, to the private sector.  - 197 - STATISTICAL APPENDIX   'T'able 1-1 Agriculture in tle National Accounts-/ (billions of CFA francs, unless otherwise indicated) Year CNP GDP Crops Livestock Fishing and Forestr All Agriculture (billions of current (CFAF) (%)2/ (CFAF) (X) 2/ (CFAF) ( T (Z) CFAF) 1960 57.5 50.0 62 1965 71.8 61.7 59 196f 74.3 64.7 60 1967 17.3 70.0 53 1968 79.5 72.0 50 1969 86.7 78.4 51 1971) 89.4 79.3 48 1971 99.2 87.3 47 1972 103.6 89.8 24.9 28 11.6 13 5.1 6 46 1973 103.5 88.5 21.0 24 11.6 13 5.2 6 43 1 1974 122.1 104.5 27.8 27 12.5 12 6.3 6 45 H 1975 134.6 114.6 29.6 26 13.3 12 6.0 5 43 1976 146.9 122.4 27.7 23 14.3 12 6.2 5 39 1977 178.6 147.3 38.1 26 14.9 10 6.6 4 40 1978 199.4 165.2 40.1 24 16.1 10 7.1 4 38 1979 222.9 184.8 liii.5 3/ 21 26.0 3 II/ 11 31) 198() 2(7.7 3/ 50.3 3/ 2hi 3(.2 I)/ 15 39 1981L 236.0 3/ 56.3 3/ 21s 31,.7 3.W 15 39 Source: Figures for 1972-78 c -me from R11publique de llaute Volta, Ministere du Plan et de la Cooperatlon, Institut Nationial de la Stattstique et de la Demographie, Les Estimations des Aggregats de Comptes NatJonaux et Indicateurs Economlques de la hlaute Volta de 1970 a 1978, Ouagadougou, 1979. Figures for 1979 are taken from ItUF, "Upper Volta, Recent Iconomnique Developments," Washinigton, 1979. Figures for 1960-71 conie froum World Bank, World Tables, 2nd Edition, Washington, 1980. All Gi4iP figures are fromii the "Basic Data Slheet" prepared for the World Bank Atlas by the Econowic and Social Data Division, rconomic Analysis and Projections Department, Washington, 1980. 1/ Valutes are current factor costs, except GNP which is in current muarket prices. 2/ Pcercentages are of (GIW. 31 IVaF e%ijm"Le3 . 4/ Includes fishing and forestry.  Table 1-2 Evolution of Production of Selected Cropel/ Year - Cotton Groundnuts Sesame r. Sorghum Millet Maize Rice (Paddy) Area Output Yield Area Output Yield Area Output Yield Area Output Yield Area Output Yield Area Output Yield Area Output Yield (000 (000 (kg/ (000 (000 (kg/ (000 (000 (kg/ (000 (000 (kg/ (000 (000 (kg/ (boo (000 (kg/ (000 (000 (kg/ ha) mt) ha) ha) mt) ha) ha) mt) ha) ha) mt) ha) ha) mt) ha) ha) -mt) ha) ha) mt) ha) 1961 22.9 2.3 Ill ..Ii 5-2/ ..! i 2Z 1-2/ ..2/ 908 411 453 615 195 317 149a/ 75 502 54 30, 560 1962 36.0 6.6 180 227 113 500 15 5.7 380 1042 508 488 597 261 438 160