UK Accounting Glossary
In agriculture, a cash crop is a crop which is sold for money. The term is used to differentiate from crops that are not sold, such as those fed to livestock or grown as food for the producer’s family.
In tropical and subtropical areas, coffee, cocoa, sugar, bananas and oranges are common cash crops. In cooler areas, grain 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 import/export controls 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 developing nations to export their goods overseas, and forces developing nations to compete with imported goods which are exported to the developing nations at artificially low prices. 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 the production of food remotely.
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This glossary post was last updated: 20th February 2020.