IS MARKET LIBERALIZATION COMPATIBLE WITH FOOD SECURITY - STORAGE, TRADE AND PRICE POLICIES FOR MAIZE IN SOUTHERN AFRICA

Concern for the negative impacts of staple food price fluctuations lim its the extent to which governments in low-income countries are willin g to liberalize their agricultural markets. These concerns are legitim ate, as such price fluctuations can lead to high transactions costs fo r poor consumers in the short run and low growth in the long run. Howe ver, past government attempts to stabilize food prices completely have been expensive and ineffective. Use of a dynamic programming optimiza tion model suggests that a different type of policy regime could reduc e price variability significantly compared to what would prevail in fr ee markets, and could accomplish this at relatively low cost. This pol icy regime includes allowing some official price flexibility with resp ect to changes in production and world price, exporting when regional market opportunities exist, and holding considerably lower stocks than in the past.