In my last article I started discussion of the Minister of Finance's budget presentation on agriculture. He outlined four steps that are to be taken to deal with the agricultural sector and I referred to the first two in that article.
The third and fourth steps are: "The Ministry of Food Production is continuing to distribute standard agricultural leases for two-acre sized plots to the former employees of Caroni. We have decided to expedite the lease issuance exercise by utilising private attorneys to assist in the preparation of the leases. We expect that within the next two years more than 5,000 such leases will be distributed" and "The Ministry of Food Production, with agricultural land becoming less and less available in Trinidad and Tobago, has moved to establish a food security facility with the Government of Guyana. The facility would commit both governments to expanding agricultural production in Guyana through the establishment of commercial relationships for funding the establishment of several large agricultural estates in Guyana".
With respect to the two-acre Caroni plots I have pointed out in previous articles the difficulties with these arrangements. If the plots are to be commercially viable the farmers must grow high priced crops-mainly ("green") vegetables. The existing farmers already cater for our needs of these items. To bring another 10,000 acres into production would flood the market and put many farmers, existing and/or new, out of business.
Since there are 7,000 former Caroni workers the total acreage could be 14,000 acres. Export of fresh vegetables is difficult so I do not see this as a solution and indeed nothing has been said of the plans to deal with this extra production.
With respect to the terms of leases in general, my understanding is that the length of leases has been reduced from 30 years to five or 10 years (I do not know if this will apply to Caroni land). This is a retrograde step since short term leases are a great disincentive to farmers. The leases should have a clause that allows for termination if the land is not properly cultivated.
I agree with the proposal to develop a relationship with Guyana in food production and have advocated this in the past. I hope that the experience gained from such past efforts will be used to avoid the numerous pitfalls for this new venture.
Perhaps most of those involved now will be too young to remember the dismal failure of the Caribbean Food Corporation's Corn/Soyabean project in Guyana and the substantial financial losses. But our discussions on "out sourcing" food to Caricom should not be confined to Guyana but should extend to Suriname and Belize.
Last year Belize produced a large surplus of onions which that country had difficulty in marketing while, no doubt, this country was buying this commodity from non-Caricom countries.
The Minister of Finance referred to the large number of incentives offered to farmers. These incentives, in my view, are wrongly placed on production processes (digging of ponds, buying a vehicle and so on) and there needs to be a thorough cost-benefit study of the effectiveness of these incentives. Payments are made whether or not there is any agricultural commodity produced. Incentives should be at the beginning and/or at the end of production. So I agree with the policy of lower interest rates for agricultural loans (this is at the beginning) which has been implemented. A loan has to be repaid or else there is a penalty.
After there has been production and a commodity to show then there can be rewards by subsidisation of the end product. We have to be creative in subsidising without breaking World Trade Organisation rules as most developed countries are able to do.
I shall now discuss aspects of the budget presentation of the Minister of Food Production. The Minister stated that the reduction in food inflation was in part due to the efforts of his predecessor, Minister Vasant Bharath. While in previous articles I have praised Minister Bharath for his efforts when he was Minister of Food production, Land and Marine Affairs, I am not persuaded that his efforts are as yet affecting the prices of locally produced food. In fact the review of the economy suggests a flat performance of domestic agriculture with a projected 0.3 % growth in 2012 compared to 3.5 per cent in 2011.
The ups and downs of the various commodities reported probably reflect changes in weather conditions and we will have to wait to see if the relatively modest increases targeted in the National Food Production Action Plan are realised on a consistent basis over a longer time period.
The Minister also referred to the decreased interest rates of the Agricultural Development Bank and to the incentive programme both of which I have discussed earlier in this article. He noted the production of planting material of avocado, citrus, cocoa and so on. I would warn against forecasting the production of these commodities by the amount of planting material supplied. There is the old joke that if all the plants supplied by the Ministry of Agriculture over the years had grown to maturity this country would be covered many times over in citrus, cocoa etc. In fact in spite of the generous supplies of this planting material production of these commodities has continued to fall steadily.
One of our greatest mistakes has been the heavily subsidised selling price of these plants. Many years ago a cocoa plant being sold for $1 cost $40 to produce. The selling price is still probably $1 but the cost of production must now be at least $100! So why should farmers worry if plants die; at $1 per plant they can be replaced.
To be continued. —John Spence is professor
emeritus, UWI. He also served as
an independent senator.