Trade, which is the buying and selling of goods, is the bedrock on which every business thrives and agribusiness is not exempted.
Agribusiness refers to the trade of agricultural produce, which includes crops, livestock, fishery, forestry products, and other farming activities. The main aim of this write-up is to consider agricultural trade, problems it faces and try to proffer solution to aid trade. As such, consumer preference is a very vital topic to explore.
No doubt, consumers play a very important role on how retailers and in this case, farmers, market their produce.
It has been noticed that consumer preferences can greatly control the demand and supply of any business. Demand of the people determines what to supply by farmers and it would, hence be unwise to keep producing what the people have no need for and would not buy because this would bring about great loss on the part of farmers, and as such, agricultural produce would go to a waste.
The needs, wants, income levels, and price levels can affect how produce sell. Similarly, variations in agricultural yield greatly affect the supply for specific crops.
One of the reasons for such variations is unstable weather conditions that can result to substantial variations in the yield of agricultural crops.
Climate change has caused declining crop yields due to unpredictable weather conditions, rising temperatures, changing rainfall patterns, and increased frequency of extreme weather events like draught or flood.
The rainy season in Nigeria typically runs from April to October and farmers have the opportunity to plant different crops during this time, but if after the farmers have gone ahead to plant and the expected weather does not arrive, it can cause significant setbacks and lower yields. In a study by Ali Nasrallah (2023) titled, ‘How Extreme Weather Conditions are Impacting the Agrifood Chain?’, he wrote that “winter rainfall is crucial for recharging underground water tables, which is essential to ensure water availability in spring and summer.
Without sufficient recharge, irrigation may be restricted during the warm season, potentially leading to lower yields, increased prices, and economic instability”.
This is because when there is lower yield, not matching up with the expectations and cost price of the farmer, there would also be an upsurge in the selling price of the produce to complement the losses.
Another fundamental aspect to consider when exploring agricultural trade is market access.
Trade encompasses both domestic and international trade, but when considering market access, it is usually discussed within the context of international market. Restricting the definition to agricultural trade, market access means the ability of farmers and agriculturists to sell their produce across borders.
Market access in international trade is vastly important, as access to international market allows farmers to broaden their customer base and revenue streams, and provides opportunities for growth and enlargement of their businesses and boosts productivity.
Agricultural exports can influence economic growth through market widening accessibility for the large foreign market, which in turn, increases demand and finally agricultural production (Moon, 2021; Setterfield, 2003).
Many local farmers face major hitches in accessing markets to sell their produce. However, it is found that there are many trade policies that have effects on access of local farmers to these international markets.
Trade policies are set of regulations and agreements that govern the exchange of goods and services between countries.
Tariffs and non-tariff barriers are some ways that hinder market access to international trade.
According to Investopedia, import tariffs are taxes and duties imposed on goods when they enter into a country.
These tariffs increase the cost of foreign products, making them more expensive when compared to domestically-produced goods. Alternatively, export tariffs are imposed by a country on products leaving its borders.
These tariffs can reduce the competitiveness of domestic goods in international markets by raising their prices.
There are also non-tariff barriers, which are trade barriers that restrict import or exports of goods or services through mechanisms other than the simple imposition of tariffs, and they include licenses, quotas, embargoes, foreign exchange restrictions, and import deposits.
The World Trade Organisation (WTO) has identified various non-tariff barriers to trade such as import licensing, pre-shipment inspections, rules of origin, custom delayers, and other mechanisms that prevent or restrict trade.
These strategies are implemented by developed countries that use it as economic approach to control the level of trade they conduct with other countries.
For instance, import licensing is used as trade restrictive measure, limiting the quantity or value of goods that can be imported.
These extreme measures put in place by the international market discourages and hinders the willingness and ease of market access.
If these measures are contained and significantly reduced, agricultural exports can influence economic growth by increasing foreign exchange by providing inflow of foreign resources needed for other capital development projects.
In a paper titled, ‘Agricultural Exports and Economic Growth in Nigeria: An Econometric Analysis’, published by Earth and Environmental Science (2019), the Autoregressive Distribution Lag (ARDL), econometric technique was used to analyse the long run relationship and the impact of agricultural export on Nigeria’s economic growth and the results revealed that agricultural exports significantly affect Nigeria’s economic growth and this suggests that, a-1 per cent increase in agricultural export would boost economic growth in Nigeria by approximately 25 per cent. To aid agricultural exports, however, there are trade agreements made between two or more countries that help them trade with each other.
There is also the African Growth Opportunity Act (AGOA), which is a United States trade act enacted on 18th May, 2000 and in force until 2025, to create market access for products of sub-Saharan origin to the US.
The Act provides trade preferences for quota and duty-free entry into the US for certain goods. These goods include agricultural products, chemicals, wine, steel and others. There is the ECOWAS Trade Liberalisation Scheme (ETLS), which is a trade instrument designed by the Economic Community of West African States (ECOWAS).
The scheme offers unrestricted market access to growth the 15 member countries and promotes economic relations within the sub-region, meaning that if the above barriers are addressed, there is hope for better agricultural trade that would in turn, enhance economic growth.
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2 Comments
This article says a lot. Agricultural trade involves both effort of the farmer and the enabling environment created by the government.
The climate change is really disturbing..
This article speaks a lot about Agriculture