Agricultural Commodity Price Changes, Food Security and Households’ Welfare in Tanzania

Agricultural commodity prices remain inherently volatile and have attracted great attention from both policymakers and governments in developing countries. There is an unresolved empirical question of whether the Government prefers low price of agricultural produce to smoothen households’ consumption or high price of agricultural produce to encourage production, trade, and export earnings. This study aimed at uncovering this dilemma by investigating the effects of experienced low and high agricultural commodity prices on households’ welfare. This was undertaken using a behavioural approach that accommodates consumption, production, and labour market imperfection. The study used the advantages of the available Tanzania National Panel Survey Data, ranging from 2008 to 2015, in the context of the compensating variation framework.

The finding shows that regardless of the price scenario, households’ welfare gains deteriorated less under imperfect markets as compared to the perfect market. Nevertheless, the dynamics effect is associated with higher households’ welfare gains compared to static effects. Generally, lower prices of agricultural products are not the desired choices of the agricultural households since they tend to lower their welfare gains when compared to higher agricultural prices. READ ON…