Price incentives for maize in Malawi and the Region

Results from FAO’s Monitoring and Analyzing Food and Agricultural Policies (MAFAP) programme

Christian Derlagen, FAOMaize Market Symposium, Lilongwe, 1 October 2015

Source: FAO (State of Food and Agriculture 2012)

what isMAFAP

and whatdo we

measure?

• A programme of FAO to support developing countries strengthen monitoring and analysis of agricultural policies and their effects on producers and consumers in a systematic way

• Implemented by FAO in collaboration with national teams to develop institutional capacity and ensure sustainability

• Provide evidence to support more effective policy-making and investment decisions at national, regional and global level

1. Effects of policy and market structure on prices for producers and other actors in ag value chains

2. Level and composition of public expenditure on agriculture and rural development

3. Coherence between national objectives, expenditure, policies and the effects they generate

* Database of indicators and reports available on our website *

What do we measure?

How price incentives are calculated

Border price international reference

Adjust for market access costs Reference price at producer and consumer levels

Compare with real observed retail and farm-gate prices

Observed higher than Reference? Price incentives.

Observed lower than Reference? Price disincentives.

what arethe results

for Malawi?

1. In the southern region, price incentives vary across years

2005 2006 2007 2008 2009 2010 2011 2012 2013

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

NRP at farm gate

Nominal rate of protection at farm ...2005 2006 2007 2008 2009 2010 2011 2012 2013

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

Domestic and reference price at farm gate

Domestic price at farm gate

MW

K/t

onne

2. Support is generally positive if FISP support is taken into account.

2005 2006 2007 2008 2009 2010 2011 2012 2013

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

Nominal rate of assistance at farm gate

Nominal rate of assistance at farm gate

3. However, preliminary central region figures show mostly disincentives, even taking into account FISP support

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

-40

-30

-20

-10

0

10

20

30

Nominal rate of assistance at farm gateNominal rate of protection at farm gate

Perc

enta

ge

4. Measures to protect consumers do not have long-term effects

2005 2006 2007 2008 2009 2010 2011 2012 2013

-30%

-20%

-10%

0%

10%

20%

30%

Nominal rate for consumers

Nominal rate for consumers

Nominal Rate of Protection at Farm-Gate in selected MAFAP countries

5. Price incentives are volatile across the region.

2005 2006 2007 2008 2009 2010 2011 2012 2013

-60%

-40%

-20%

0%

20%

40%

60%

80%

Tanzania Kenya Mozambique Uganda Malawi

Nominal Rate of Protection at Farm-Gate in selected MAFAP countries

Tanzania Kenya Mozambique Uganda Malawi

-60%

-40%

-20%

0%

20%

40%

60%

80%

2005 2006 2007 2008 2009 2010 2011 2012 2013

conclusions

Conclusions• On average, maize policy and market structure are providing

slightly positive price incentives to farmers in the southern region. However, many constraints to production growth exist.

• Fluctuations of incentives levels are high, caused by vulnerable (rain-fed) production systems, thin market and ad-hoc policies. Eventually, this volatility negatively affects farmers’ supply response.

• It is recommended to reduce ad-hoc policy measures with short-term effects, and develop a more long-term policy plan for the maize market. More predictable policies would mitigate maize market volatility and incentivize farmers towards commercial oriented production

• The limited share of maize marketed increases the vulnerability of consumers to price increases. Potential to move farmers from autarkic to net sellers exists but will require increased public investment in market access (storage, credit, rural infrastructure).

• Analysis indicates that the export ban has resulted in price support to consumers only in 2012.

• Government intervention in the maize market should be rules-based and grounded on evidence about the effects of interventions on producers, consumers and taxpayers for sustainable development of the maize market and a food secure future.

Zikomo kwambiri

For all indicators, reports and policy briefs, visit:

www.fao.org/in-action/mafap