The impact of agricultural price policies on the supply and demand for agricultural products:
[Thesis]
A. S. Al-Hussinie
The case of barley and wheat in Saudi Arabia
W. G. Brown
Oregon State University
1988
237
Ph.D.
Oregon State University
1988
The general objective of this research is to gain some insights into the impact of market intervention on the barley and wheat sectors. Intervention, mainly through price subsidies, in these two sectors is at the core of the Saudi agricultural policies in its drive to achieve self-sufficiency in major agricultural products. In recent years, there has been an excess production of wheat, while barley imports have soared. An econometric model was constructed for barley, the major feed grain in the country, to quantify the interrelationships among the economic forces and policy instruments affecting this sector. The structural equations were estimated over 1970-1986 using the OLS technique. Overall, the estimated relationship appears consistent with a priori expectations. The barley model was integrated with an independent wheat model after the latter one had been re-estimated and up-dated to ensure compatibility. This merging of research produced a model with a total of 12 equations, of which seven were used to explain behavioral relationships. The model validation was performed by dynamic simulation via the Gauss-Seidel approach. The estimated result implies that the livestock industry is the major driving force behind barley imports. The own-price elasticity of imported barley estimated at mean values was usd-0.59usd. The model was used to examine the potential impacts of changing levels of price support at the farm and retail level for the period 1987 through 2000. The results indicate that current agricultural policy may not achieve its stated objectives and several other proposed policies may be more effective. The model was also used to investigate (1) the extent of price distortions; (2) their effects on acreage, output, inventory, and consumption of both crops; and (3) their consequences on the income of producers, consumers, and the national budget along with their net social loss. The welfare losses created by price distortions were estimated at 214 million SR per year. These losses accounted for 25 percent of the yearly price subsidies.