Some have proposed that the Ethiopia Grain Trading Enterprise (EGTE) offer a minimum
support price (MSP) on wheat. The goals of the MSP are to stimulate wheat production,
decrease the need for wheat imports, and reduce seasonal variability in wheat prices. The MSP
would also help the EGTE meet its target of 250,000 tons of purchases this year. The purchase
of wheat by the EGTE, however, must be accompanied by a policy on how the stock will be
managed and sold. The EGTE wheat stocks could be distributed through the Productive Safety
Net Program (PSNP), channeled into the urban food-rationing program, and/or sold to the
large-scale millers.
Governments in sub-Saharan Africa and elsewhere have a long history of trying to stabilize
prices by buying when prices are low and selling when they are high. We discuss those
experiences below, but find such efforts have been expensive, ineffective, and plagued with
corruption. It is important, therefore, to carefully evaluate the justification for MSP, to keep
the scale modest and to avoid some of the mistakes of earlier experiences.