Background to the Study

The disappointing performance of the agricultural sector in many developing countries of the world is receiving increasing attention of the monetary and exchange rate policy makers. This intervention in agricultural markets is widespread and is practiced in rich and poor countries alike. The policies on money supply, nominal exchange rates, interest rates income, international capital flows, fiscal and trade directed at macroeconomics sector of the economy are of utmost importance to agriculture. Monetary policy uses the monetary authority to control the supply of money in the economy. Every agricultural business entity is set up with the primary objective of making profits and several considerations underlying their profit motive come to bear in determining the pricing of their goods between associated parties.