Cash crop

From Academic Kids

In agriculture, a cash crop is a crop which is sold for money. The term is used to differentiate from subsistence crops, which are those fed to the producer's own livestock or grown as food for the producer's family. In earlier times cash crops were usually only a small (but vital) part of a farm's total yield, while today, especially in the developed countries, almost all crops are mainly grown for cash. In non-developed nations, cash crops are usually crops which attract demand in more developed nations, and hence have some export value.

In tropical and subtropical areas, coffee, cocoa, sugar cane, bananas, oranges and cotton are common cash crops. In cooler areas, grain crops, oil-yielding crops and some vegetables predominate.

Prices for major cash crops are set in commodity markets with global scope, with some local variation (called basis) based on freight costs and local supply and demand balance. A consequence of this is that a nation, region, or individual producer relying on such a crop may suffer low prices should a bumper crop elsewhere lead to excess supply on the global markets.

Issues involving subsidies and trade barriers on such crops have become controversial in discussions of globalization. Many developing nations take the position that the current international trade system is unfair because it has caused tariffs to be lowered in industrial goods while allowing for high tariffs and agricultural subsidies for agricultural goods. This makes it difficult for a developing nation to export its goods overseas, and forces developing nations to compete with imported goods which are exported from developing nations at artificially low prices. The practice of exporting at artificially low prices is known as dumping, and is illegal in most nations. It was controversy over this issue which lead to the collapse of the Cancun trade talks in 2003, when the group of 22 refused to consider agenda items proposed by the European Union unless the issue of agricultural subsidies was addressed.

Agribusiness and the associated high-capital-investment industrial agriculture it prefers, very often skews production towards cash crops and away from anything that is consumed locally or which cannot be preserved, shipped and sold abroad. In addition it makes moral purchasing difficult, as it is hard to tell what production practices might be involved in production of food remotely.

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