*3-

agricultural as well as non-agricultural sectors. ro the extent that agriculture is not a protected industry, the adverse, effec-t on investment will be even larger.

Government intervention in marketing of farm products and inputs affects farm profits when these institutional arrangements resuit in inefficiencies, delays, fragmented markets, or inflated costs that depress producer prices. And governments intervene in other areas that affect farm profits as well, such as in land tenure policies or the allocation of newly product've lands (eg. irrigated).

In addition to policy measures aimed at promoting agricvutural growth, governments intervene in the interests of consumers (price levels and stabilization), and to raise revenues (taxation of agricultural exports is an important source of revenue in most African countries). These two typW of policies have distributional consequences between rural and urban peoples, and between export crop and food crop producers.

Most African governments exercise some control in the marketing and pricing of export crops, fixing prices in most cases, although so. ' have recently liberalized these markets. Major food commodities, both domestcally produced and imported, have come under government control for reasons of price stabilization, keeping prices low for consumers, and to prohibit excess profits and control of markets by private traders. Cheap food policies, although common in Africa, have been difficult to enforce in most countries, giving rise to large parallel markets, and making officially announced prices often of little relevance to producers.

# H. TEE IMPACT OF POIYCY ON AGRICULTURAL EXPORTS

# Trends in Prices. Policy Distortione, and Exports

Africa's loss of world market shares for its major agricultural exports is the most telling evidence of its loss of competitiveness. Africa's share of those markets for its 12 major agricultural exports fell by half between 1970 and 1983. And the volume of agricultural export actually declined as well, falling from 14 million metric tons to about 11 million over the same period. _y As figure 1 confirms, the average pattern across 26 countries where complete data are available suggest that the loss of competitiveness in international markets has followed closely the pattern WL overvalued exchange rates (real effective exchange rate index is inverted for better visual presentation), and lower real producer prices. For these 26 countries, only after exchange rate distortions began to decline and real prices paid to farmers began to rise in 1984, did export volumes improve.

The decline and recent recovery of agricultural exports appears to follow closely the pattern of real effective exchange rates over the period, except for 1987. Real producer prices have generally followed a similar pattern, although declining more slowly in the mid-1970s due the boom in international coffee and cocoa prices. The decline in export volumes in 1987 is primarily the result y FAO weighted 'verage export volumes for total agricultural commodities. Much of the analysis is focused on exl. . volumes rather than agricultural production. Agricultural production data is of questionable quality given the rough estimation jrocedures relied on for most ccuntries. Since for most export crops domestic consumption is small relative to the total exported (cocoa, coffee, tea, rubber, tobacco, cotton), export volumes can be takes as a proxy for total production for most of these crops.