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Exports will only increase if local consumption is declining
Dear Editor,
Your editorial of February 9, 2010 captioned, “Review of the Budget – some preliminary observations”, noted that a staff member in the Ministry of Agriculture advanced the idea that increased agriculture export is due to increased agriculture output, justifying thereby that the agriculture sector is an expanding enterprise.
Unfortunately, exports will only increase if local consumption is declining and the evidence strongly suggests that this is the case in Guyana.
So what is the evidence? We know that output is down (see Kaieteur News letter of 12-14-09) for some crops such as bananas and plantains due to Sigatoka disease problems as identified by the Ministry of Agriculture
Table 1
(http://www.stabroeknews.com/2010/stories/02/01/ministry-intensifies-spraying-of-banana-plantain-farms/).
Recorded in Table 1 below are the prices (G$ per KGS), for a selected group of crops including plantains, bananas, cabbage and peppers for 2005 and 2008 (Source – Guyana Marketing Corporation website). The table also includes the value of agriculture output for 2005 and 2008 (Bank of Guyana Half Year Report 2009, Table 10.2). The evidence in the table show that prices have increased no less than 15 percent for cabbage and pineapples, while apple-bananas and plantain prices have increased more than 40 percent for each of these crops, an outcome that could be linked with the fall in output due to the effects of the disease associated with these crops.
Furthermore, the key finding from this information is that while the price for the crops shown (and many others as well) have increased between 2005 and 2008, the total value of agriculture output in the economy has decreased, moving down from G$1.1 billion in 2005 to G$941.0 million in 2008, a fall of 14.5 percent.
Consequently, falling output, rising prices and a depreciating Guyana dollar will only lead to increased exports, if local consumption declines and export demand increases. This is the only plausible outcome for increased exports, given that total output (Y) is equal to the sum of local consumption (C) and exports (X): Y = C + X. In other words, as output falls and exports rise, consumption must decline. Therefore, rising domestic prices is a clear signal of this situation in the domestic market.
C. Kenrick Hunte
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