Comments on: How fertiliser subsidies have transformed Malawi

By: Richard Ewbank

Richard Ewbank — Thu, 13 Jan 2011 14:38:21 +0000

I’m wondering if I’m reading the same report (The Malawi Agricultural Input Subsidy Programme: 2005-6 to 2008-9)because on page 13, it states that reports on household food security “do not show any clear trends in improvement” and that while there is evidence that poverty has generaly declined “it
is not possible to directly attribute this to the subsidy programme” citing a number of other factors, such as good weather and high tobacco prices. Later in the report, serious concerns on both economic and ecological sustainability are raised. The fact that the AISP absorbs about 74% (2008/9) of the agriculture budget clearly has implications on resourcing for training and extension, soil management, research, etc, for Malawi’s smallscale farmers.

By: Stephen Carr

Stephen Carr — Wed, 05 Jan 2011 14:55:14 +0000

There have been many years of research to produce open-pollenated (non-hybrid) seed adapted to local conditions and seed of these varieties is readily available. Under the subsidy scheme farmers have a choice of x kg. of open-pollenated maize seed, of which farmers can save their own seed, or half of the quantity of hybrid seed. 85% consistently chose hybrid because the plant vigour and yield is just so much greater. Farmers across the world decide for themselves which varieties they want to grow and there appears no reason why Malawian farmers should be pressurised into using inferior planting material for their main food crop.

By: Bridget

Bridget — Mon, 03 Jan 2011 02:37:16 +0000

‘Farmers obtain subsidised hybrid maize seed produced by three international companies in competition with one another.’

Is there any will to produce non-hybrid maize-seed adapted to the regional climate? Nothing more important than to have your own seeds.

By: fontvieille

fontvieille — Sat, 01 Jan 2011 20:01:14 +0000

En France et en Europe nous aussi nous utilisons depuis longtemps des engrais chimiques et le résultat est inquiétant pour les sols puisque l’humus est entrain de disparaître. Ne serait il pas plus sage de faire connaitre aux villageois la possibilité de produire de l’humus excellent fertilisant à partir des latrines privés ou publiques . J’accepterais selon mes disponibilités être invité pour faire un diagnostic sur ce problème extrêmement préoccupant merci Consultez le site merci lombrics .com

By: Justin

Justin — Thu, 30 Dec 2010 07:43:51 +0000

The opposition to Malawian fertilizer subsidies has always been deeply hypocritical.
I agree that in a perfect world fertilizer subsidies do not make sense. But so long as one country is willing to subsidize its farmers every other country will also do so. Furthermore developed countries that might be able to afford giving less farm subsidies without the immediate specter of famine looming on their doorstep really need to take the lead on this issue if they are going to have any credibility when they ask developing countries to end their own subsidy programs.
Finally the goal of agricultural development projects probably should not be to ensure that smallholders are able to make more money and be more productive. There is no nation on the planet which has a large middle class of smallhold farmers who are able to send their kids to college and retire at 65. Rather the priority should be food security AND economic development projects that get people off their small plots and into more productive work either through education or industry.

By: Stephen Carr

Stephen Carr — Tue, 28 Dec 2010 15:35:39 +0000

There are several good reasons why agricultural credit is not the answer to Malawian smallholders’ need for access to good quality seed and fertiliser.
The first is that 75% of the country’s 2.4 million smallholders grow no cash crops and sell no significant amount of produce. They are subsistence farmers with an average of less than one hectare of land and for many years have suffered serious food deficits as they farm on the same plot of land year after year with no restoration of nutrients. As a result the country, until recently ,had a child death rate of 22% with over 50% of children stunted. These 1.8 million farmers have virtually no resources with which to purchase fertiliser at commercial prices and the incremental maize which they produce from the current subsidy programme is all used to supplement home consumption so that there is no surplus with which credit could be repayed. Banks do not lend money to subsistence farmers for inputs which are intended to improve on the family diet and chance of survival but which produce no cash surplus.
The second reason for the banks reluctance to lend is that the high cost of fertiliser in Malawi (the result of long and expensive import and distribution links) means that at current prices of inputs and outputs commercial maize production is not an attrative proposition. Twenty years ago Malawi had a highly successful credit programme which benefitted about 15% of farming families. The government had a monopoly on maize marketing and set the maize price at a level which enabled the privleged few to repay their loans and make a profit from the use of hybrid seed and fertiliser. This resulted in a cost of maize which was beyond the reach of the majority of the poor and led to widespread hunger and the death of large numbers of children. There are few who would want to return to that situation.
The subsidy produces maize which replaces expensive imports from South Africa so that the estimate of its economic benefit does not hinge on the local low price of maize but on the cost of imports and at that cost fertiliser use makes economic sense.
Malawi faces two options: either help the majority of farmers who are poor subsitence producers to gain access to yield enhancing inputs and feed their families adequately or import a million tons of maize a year and heavily subsidise its price to avoid widespread hunger.
The obvious route out of this situation is to identify a high value cash crop which could be grown by a couple of million smallholders.Unfortunately 25 years of studies and searches by some of the top entepreneurs and agronomists on the continent have failed to come up with any single such crop.
Much of the rest of the world has subsidised its farmers for the past 50 years and it seems odd that when the richest countriee have failed to find an exit strategy from subsidising intensified agriculture that one of the poorest should be expected to find such a strategy.
Acouple of quick responses to John Fowler Malawi has had two droughts in the past 60 years so rainfall has not played any significant role in the increases of the past five years. Farmers obtain subsidised hybrid maize seed produced by three international companies in competition with one another.
Smallholders dominate the farming scene with some 2.4 million and maize dominates the farming pattern with only small areas of other crops.
The writer lives in a village in Malawi and has been working with Malawian smallholders for the past 23 years

By: Nick Mathiason

Nick Mathiason — Tue, 21 Dec 2010 23:59:38 +0000

“The majority of smallholder farmers exhaust their own food supplies with between 3 and 6 months left to the next harvest, and then have to work on the farms of others in …..”

The Malawi model analysis by Dorward and Chirwa is timely and suggests a convincing alternative to where rising public and private flows in African agriculture may be heading.

Interesting to know if co-operatives and similar smallholder organisations have increasingly formed in the past eight years and if so how they have fared.

By: Lee

Lee — Tue, 21 Dec 2010 23:30:01 +0000

A cheaper alternative to subsidies is a custom savings account allowing farmers to save harvest profits until the next planting season.

This RCT found effects comparable to a 50% subsidy.

http://poverty-action.org/project/0408

By: John Fowler

John Fowler — Tue, 21 Dec 2010 21:08:49 +0000

Well done to the Farmers who have been able to increase production so dramatically over the last few years. I’d be very interested in the answers to a few simple questions.
1/. Has there been good rainfal over this period ?
2/. What seed is used & how sustainable is the supply ?
3/. What other food crops are grown & are planting times staggered to spread risk ?
4/. What is the proportion of small-scale farmers to large-scale farmers that have cotributed to these statistics ?
5/. Have the Extention Workers been able to be with the farmers to a greater extent than previously ?

By: Jonathan Said

Jonathan Said — Tue, 21 Dec 2010 18:56:00 +0000

This is a well written article and I have been delighted to see the improvement in food production in Malawi in recent years. However I advise to not ‘leave our economics theory at the door’. Economics theory does not equate to an automatic reliance on private markets. Indeed it calls for government intervention in order to address market failures. Market failures arise when markets fail to result in an optimal (or in this case, pro-development) outcome. Market failures justify government intervention. However the intervention must be such to sustain an optimal (or quasi-optimal) outcome in the long-run. In the case of fertilizers, the market failures at play are asymmetric information in the financial sector and the applicability of property rights. If the financial system worked well, if banks knew of the success of fertilizers and were confident that farmers would not default, then they would lend money to farmers to buy the fertilizer. In such a case banks would devise a favourable pay-back plan and provide affordable rates of interest. While it is important to recognise the success of subsidies in raising food production by tackling the issue of fertilizer affordability, it will be difficult for this approach to be sustained in the long-run. With time, pressures will mount for the expenditure on subsidies to be spent addressing other market failures (such as on sectors that have positive externalities like education, housing and health) and the subsidy’s negative contribution to farmer incentives may also become engrained. In the long-term, the financing of the subsidy will likely become a strain on government finances unless the taxation system works highly effectively and not many other markets require government intervention. My suggestion is to recognise the benefit and success of the subsidy program in unlocking the food sector, but to treat this as a temporary kick-start rather than a long-term solution. In this regard, I would seek to address the core issue, which is the market failure of the financial sector. I would suggest introduced a mechanism to taper off the fertilizer subsidy while simultaneously ensuring a fully functioning financial market and a strong property rights system. The funding of a government mutual guarantee fund that targets farmers and a programme to raise financial sector knowledge about the contribution of fertilizers might be two approaches to take. The role of Malawi’s development partners should be to use economics theory to present the case to the Malawian Government to tackle the root cause of the market failure in the food sector and to devise appropriate policies to address the cause of the market failure.