Market intermediaries, storage and policy reforms

Abstract

Intermediaries play a crucial role in the functioning of agricultural and food markets in developing countries through linking production, imports and storage with consumption. We analyse how competition in the intermediary sector and alternative forms of intermediaries determine the incentives for storage and market outcomes more generally. We apply this framework to the Egyptian wheat sector as an illustrative case study, a country where food security is a priority, where both forms of intermediaries co-exist and undertake storage but where issues of reforms to the role of intermediaries have been raised. Through stochastic simulation, we analyse two changes in government policy: first, the effects of changing the policy instruments with both types of intermediaries undertaking storage; second, relating to market reforms where the private sector replaces the storage function of the parastatal. These issues have wider significance for addressing the interaction between food security and a wide range of policy reforms including de-regulation of parastatals in developing countries.