Pakistan Institute of Development Economics



Comparing the Seed Cotton and Wheat Marketing Chains in Sindh

This paper contrasts the operation of seed cotton and wheat marketing systems in Sindh. Analysis of marketing margins indicates that the private sector cotton marketing chain appears to be working efficiently, given the many adverse aspects of its socioeconomic environment. There is evidence that higher domestic prices resulting from alignment with world markets have been transmitted through the marketing chain to producers, and that production has increased. In contrast to cotton, the government continues to be heavily involved in wheat procurement and storage, with private traders usually acting as intermediaries between the Food Department and the grower. Despite expensive involvement of the same private traders as in cotton, the wheat market is characterised by bureaucratic failure and rent-seeking behaviour, leading to stagnation of incentives and production. For cotton, the primary recommendations are to sustain liberalisation of the market and to support the developing beneficial model of private competition through improvements in communications and transport infrastructure. The practical means to improve the grading of cotton lint and seed cotton should also be developed and promoted to provide incentives for higher quality output. For wheat, the main recommendations are to liberalise farmgate prices, reduce the state’s role in procurement, and privatise government godowns. Research is needed on how this might best be achieved, with attention to the conditions necessary for private financing of storage activities, and to ways of minimising price and supply fluctuations. The impact of higher flour prices on poor consumers also needs to be addressed

Mike Stockbridge, Laurence E D Smith, Hari Ram Lohano