IMPACT OF AGRICULTURAL POLICIES ON RESOURCE ALLOCATION AND FARM INCOME - THE CASE OF EGYPT.

In the Sixties the Government of Egypt decided to finance industrialization through taxing the agricultural sector, and at the same time provided food to the consumers at affordable prices; these measures led to the establishment of a number of pricing and marketing policies - policies that are viewed as having led to major distortions in the allocation of agricultural resources. The study reported in this paper evaluates the impact of these policies on the allocation of farm resources and on farm income. Primary data for the analysis were gathered from a survey carried out in the Kafr El Sheikh governorate. Under the existing administered price-cost structure, production of berseem in the winter and maize in the summer constitutes the most profitable cropping pattern. Consequently, Egyptian farmers are often tempted to deviate from and thus violate the crop area quotas that are stipulated by their government. Optimal summer cropping mix, under the free market condition, closely approximates the actual pattern. For the winter growing season, wheat production is more profitable than berseem. Results of this study show that about 97 percent of a potential LE 195 increase in farm income per feddan can be attributed solely to the price increase that would result from a change-over from the administered to the free market level.