Zambezia (1981), IX (ii).RESEARCH REPORTSUPPLY RESPONSE TO PRICES OF MAIZE, WHEAT, ANDTOBACCO IN ZIMBABWE, 1961-1975F.M. MASANZUMinistry of Agriculture, ZimbabweTHIS RESEARCH REPORT SETS out to test the hypothesis that the production ofmaize and wheat in the period 1961-75 was responsive to prices while that oftobacco was not. It should be noted that the first five years of the period precedeU.D.I., while the latter ten years cover the U.D.I, period, during which economicsanctions were imposed against colonial Zimbabwe by the United Nations. Myanalysis is based on the 'static' assumptions of the Nerlovian (1958) theory of priceresponse, which is a common and widely used tool in the field of supply responsestudies. Simply stated, the model asserts that 'supply is a function of expected pricelevel based on previous experience':Equation (1) P( - Pt _ ; =ŁŁ B Pt _ j(i.e., adjustment equation; see Koutsoyiannis, 1975, p.310.)(2) St = bUtWhere:Pt-ptbStut(i.e.,/ =_==supply response as a function of price.)expected priceactual pricecoefficient of expectationcommodity supplyerror termTransforming the equation into supply:(3) of Š OQ T- Oi r( _ i ~r UtIn fitting the Nerlovian model to his data, Sanders (1968, p.82) states that'An analysis of the long-run price elasticities . . . reveals a close and positivecorrespondence between the size of the elasticity and the availability of land',implying that the response is evident where input factors are not a constraint. Abalu(1976, p.39) found that'The results of the model suggest that price expectation isan important determinant of supply response of groundnut producers'.It can be asserted that the Nerlovian adjustment model used by theabove-mentioned scholars, and their concurrent conclusions (with some variations),offer a reasonable model for supply response analysis. There are some differencesin the assumptions made by each of these authors, but they do not seem toinvalidate either set of results. Generally, technology is assumed to be static at the167TablePRICE RESPONSE STATISTICS FOR MAIZE, WHEAT & TOBACCO IN ZIMBABWE, 1961-75wN<iHfflDCOuOVariablePRICEPEACE/WARWEATHERPRICEPEACE/WARWEATHERPRICEPEACE/WARWEATHERConstant65442.82589966.800_-25627.0951955.8000Š60601.45246228.000ŠPrice B21927.876134731.76_6555.899836449.000Š-25589.405-18440.400ŠStandardEtrde B8766.900936596.395_2404.480911762.716_10285.3383515.6604_Elasticity.064854.51684Š1.91555.93013_-.83328-.8344442_.28791.49127_.33107.39820Š.28532.67099_F6.2560613.55387*.0037.43399*.0189.601876.18989*.O2927.51230*.000_T2.50121183.6815582_2.72653443.0986890_-2.4879498-5.2452166Š1.667442.37083_.49643.45721Š.779871.64782_mwm>RCH33mT3o33Š1* = level of significancet = Durbin Watson statisticSources: F.A.O., Commoditv Review and Outlook, 1979-80 (Rome, U.N. Food and Agriculture Organization, 1980); F.A.O., Production Year Books(idem, 1965-1975).F.MASANZU169time of each analysis, and profit (yield) maximization is taken as a given andrational goal. These assumptions are given equal weight in this study.This study also involves time horizon, and uses the statistical regressionapproach which is commonly applied to 'problems of estimating aggregatesupply , . . where time series data exist' (Ogunfowora, 1972, p.82).VARIABLESA regression analysis of the variables was carried out with output as a dependentvariable while the price and the peace/war were independent variables; however,the peace/war variable was inserted as a dummy to reduce discrepancies arisingfrom the situation of economic sanctions (1965-75). With the introduction of thisdummy, we can conclusively argue that the price coefficient, the 'F' test and!2, donot contain war discrepancies, and this allows us comfortably to accept the resultsand the hypothesis postulated earlier. However, the weather variable was notincluded owing to lack of data. Emphasis is laid on statistics from the computerprint-out of the analysis, the crucial statistics being the I2, 'F' test, coefficient andelasticities.It can be seen from the Table that tobacco price and war elasticities are aboutequal, which supports the argument that sanctions affected performance. But thewar elasticities for maize and wheat are far below price elasticities, showing thatthe two crops were more influenced by considerations of price. However, theconditions of the war bore a greater influence on maize elasticity than on wheatelasticity, given that the war elasticity of the former is higher than that of the latter.CROP-BY-CROP RESULTSThe price coefficients of each crop are given, and their elasticities with respectto expected price are also given. The Table shows the statistics resulting from aregression with one period lagged: (1) for maize, a price elasticity of 0.65(rounded) is considered reasonable to support the hypothesis postulated earlier;(2) for wheat, the price elasticity is even higher at 1.92 Š both maize and wheatgive anticipated results; (3) the tobacco price elasticity is Š0.83, which arguablysupports the hypothesis postulated. From these statistics the assertion is sustained.OTHER STATISTICSThe R2, which shows the magnitudes of price influence on yield, is equallyreasonable considering that there are other factors not quantifiedŠsuch asweatherŠwhich affect yield performances. The 'F' test magnitudes given aresimilarly acceptable at their respective levels of significance.It is therefore logical to assert and accept the hypothesis that maize and wheatwere responsive to price while tobacco was not on both a priori and ex post factogrounds. Using, as we did, the Nerlovian theory on the data, credence is given to theconcept of 'supply as a function of previous level of price'.SUMMARYThe economic sanctions imposed by the United Nations from November 1965170RESEARCH REPORTseem to have produced not only a negative coefficient but also negativeelasticities for tobacco. On the other hand, during the period under review maizewas not significantly affected by the imposition of economic sanctions, partlybecause it has had a steadily growing home market resulting from populationincrease and livestock input.Effects of the economic sanctions on maize are almost non-existent if notnegligible. Wheat shows an interesting phenomenon: imported until 1965, itshowed a remarkable increase in production following sanctions because of theeffects of price and of import substitution.Generally, there have been gains and losses in the economy resulting from theeconomic sanctions. It seems, however, that gains to the economy came from cropspreviously imported but now produced within the country. The adverse effects ofsanctions were felt in export-orientated crops, which would in the long ran suffer adrawback in that after the lifting of sanctions the established markets, havingdeveloped alternative sources of supply, would no longer be open. Again,competitive producers for the international market would have increased theirsupply, and thereby their share of the market, and of goodwill, too. Anotherdrawback is that in emerging from sanctions it requires time to rehabilitate some ofthe traditionally exported crops to their previous production levels; certain skills inthe farming of some crops may also have been lost both by natural wastage andemigration. These drawbacks are particularly relevant to tobacco.From the data, however, maize shows a neutral response to sanctions, but apositive one to prices; wheat shows a marked response to prices and a positive gainfrom economic sanctions, while tobacco loses ground. Logically, the performanceof agriculture during the period under review can be identified, crop by crop, withinany one of three categories.The performance of agriculture in the country over this period is to beconceptualized in the framework of a besieged economy where the performance ofthe export-orientated sectors is adversely affected, while crops previouslyimported are now produced unhampered by external competition. The logistics ofsuch an environment suggest a re-orientation of crops to be produced in response tomarket conditions.ReferencesABALU, G.I.O. 1975 'Supply response to producer prices: A case study ofgroundnut deliveries to the Northern States Marketing Board', Havana(1975), IV, i, 33-40.KOUTSOYIANNIS, A. 1975 Modern Micro-Economics (London, Macmillan).NERLOVE, M. and ADDISON, W. 1958 'Statistical estimation of long-runelasticities of supply and demand', Journal of Farm Economics (1958),XL, 861-80.OGUNFOWORA, O. 1972 'Derived Resource of Demand, Product Supply andFarm Policy in the North Central State of Nigeria' (Des Moines, Iowa StateUniv., unpubl. Ph.D. thesis).SANDERS, D.S. 1968 'The Price Responsiveness of Nigerian Cocoa Farmers'(Ann Arbor, Univ. of Michigan, unpubl. Ph.D. thesis).