HERE is an interesting article in which Lesotho farmers state that they will increase production during 2010 because a new milling company has promised them "prices set to influence highest production and sustainable supply".
A farmer said that they "would be inspired to produce more food, adding that their efforts have always been thwarted by lack of market for their produce".
I am sceptical. It seems that the South Africans have never had a problem finding a market here, so why would Basotho farmers?
The only reason I can think of is that South Africans produce food more cheaply than Basotho farmers; it is perfectly reasonable that, given tight budgets, people and firms prefer to purchase cheaper food.
This new milling company, Nala Milling, is presumably prepared to pay above the odds for grain produced in Lesotho (like Hovis in the UK). They might feel that the supply is more reliable, and, if this is true, it would be a reasonable policy. I suspect though, that South African grain supply is both cheaper and more reliable.
I also imagine that Nala Milling will have to pass on the costs to their consumers. Unfortunately, the quote by the farmer above suggests Basotho have already shown that they prefer cheaper South African produce to more expensive stuff produced in Lesotho.
The farmer is correct from his perspective though; higher prices will encourage more production. I am concerned though that unnaturally high prices (i.e. those not determined by the market) are not viable in the long run and, when supported through other mechanisms (e.g. Government intervention, or, in this case, firm policy), resources are put to use when they could be better used elsewhere, dampening economic growth and development in the long run. Eventually unnaturally high prices have to crash, sometimes in spectacular style and at great pain to those in the industry.
In the short run, farmers in Leribe Disrict (where Nala is operating) can benefit, but I hope that for their own sake, it is good business practice that is causing Nala to offer high prices and not even more agricultural nationalism to add to the world's woes.
A farmer said that they "would be inspired to produce more food, adding that their efforts have always been thwarted by lack of market for their produce".
I am sceptical. It seems that the South Africans have never had a problem finding a market here, so why would Basotho farmers?
The only reason I can think of is that South Africans produce food more cheaply than Basotho farmers; it is perfectly reasonable that, given tight budgets, people and firms prefer to purchase cheaper food.
This new milling company, Nala Milling, is presumably prepared to pay above the odds for grain produced in Lesotho (like Hovis in the UK). They might feel that the supply is more reliable, and, if this is true, it would be a reasonable policy. I suspect though, that South African grain supply is both cheaper and more reliable.
I also imagine that Nala Milling will have to pass on the costs to their consumers. Unfortunately, the quote by the farmer above suggests Basotho have already shown that they prefer cheaper South African produce to more expensive stuff produced in Lesotho.
The farmer is correct from his perspective though; higher prices will encourage more production. I am concerned though that unnaturally high prices (i.e. those not determined by the market) are not viable in the long run and, when supported through other mechanisms (e.g. Government intervention, or, in this case, firm policy), resources are put to use when they could be better used elsewhere, dampening economic growth and development in the long run. Eventually unnaturally high prices have to crash, sometimes in spectacular style and at great pain to those in the industry.
In the short run, farmers in Leribe Disrict (where Nala is operating) can benefit, but I hope that for their own sake, it is good business practice that is causing Nala to offer high prices and not even more agricultural nationalism to add to the world's woes.
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