Assessment of price support schemes for tree crop export industries in Papua New Guinea and policy recommendations on future assistance

• Department of Agriculture and Livestock, Papua New Guinea
• National Research Institute, Papua New Guinea

Farmers in Papua New Guinea (PNG) produce coffee, cocoa, coconut oil, copra and palm oil, among other things. These tree crops are significant exports, besides employing many workers in rural areas.
The Government of PNG has had a policy of intervening when world prices for exports fluctuate. Commodity boards and corporations have used commodity price stabilisation schemes. However, during the late 1980s the prices for cocoa, copra, palm oil and coffee were low and the stabilisation funds ran out, These industries sought loan funds to maintain their farm-gate payments to producers.
Supportive payments are triggered when prices fall below a threshold. In 1994 world prices rose substantially for coffee, coconut oil and palm oil, so the trigger prices for these have now been lowered. Nevertheless, the AGPS is expected to run for its full five-year term, until early 1998, at a cost approaching K500 million.

Policy makers need to know how alternatives to the Agricultural Guaranteed Price Sheme (AGPS) will affect each industry's farmers, productivity and exports, and the national economy. There is little information on the effectiveness of past economic policies in PNG. However, Australia's agricultural industries provide some examples of price support and stabilisation schemes.

The project will collect data that describe the current situation and that can be applied to alternative schemes. The data will be fed into an applied general equilibrium model, adapted from the existing general equilibrium model model for PNG, prepared by the National Centre for Development Studies in Canberra.
The data used in the existing model will be used here as well, but extensively supplemented for each of the four industries. Researchers will examine the way factors such as investment in roads and services, research, the exchange rate, modified price support, subsidies and stabilisation schemes affect national and rural incomes and farmers tree crop management, including productivity, returns, potential for diversification and intercropping. Researchers will gather data from published statistics, from research station reports and records, targeted surveys, and from expert focus groups consisting of farmers, extension officers and researchers.