maize marketing policies and export bans in malawi: implications for food security

Maize Marketing Policies and Export Bans in Malawi: Implications for Food Security

Brent Edelman & Karl Pauw, IFPRI4 June 2015

Overview

• Why intervene in staple food markets?• Malawi’s maize market• Ways governments intervene• Export bans• What’s next for Malawi?

Why intervene in the maize market

•The average Malawian household obtains two-thirds of its calories from maize•The average farm household allocates 60 percent of farm land to maize•Government assumes responsibility to ensure adequate domestic food supply at reasonable prices•Result: food security concerns potentially trump poverty reduction goals

Interventions and challenges• Types of interventions:

– Provide farm input subsidies at planting time– Announce recommended price floors – Support a parastatal grain marketing board designed to stabilize market

prices– Control maize trade, e.g., maize export bans– Maintain a national reserve of maize to serve as a buffer when domestic

supplies run low• Challenges:

– Persistent food insecurity: from 2009-14, more than one million people per year on average required emergency food assistance

– Thin supply side– Volatile prices: maize prices in Lilongwe and Blantyre more volatile than

any other in the region

Market engagement

Source: Authors’ calculations based on Jayne et al. (2010)

Timing of sales

Source: Authors’ calculations based on IHS3 and AMIS

Timing of purchases

Source: Authors’ calculations based on IHS3

Seasonality vs. unpredictability

Source: Authors’ calculations based on AMIS

2014/15 maize marketing season

Source: Authors’ estimates based on AMIS

How government intervenes matters

• Rules-based interventions– Engage only when certain criteria are met– Example: set price band, buy/sell only if price goes

outside band– Result: actions are predictable

• Discretionary engagements in markets– Intervene in markets without rules or criteria governing

intervention– Examples: impose import/export ban with little notice,

changing trade tariffs, procuring/selling above/below market prices

– Result?

Discretionary policy: evidence

• Drives the unpredictable component of price volatility– Staple prices more predictable where intervention is

predictable (Uganda, RSA, Mozambique)– Unpredictable prices where intervention is

discretionary (Zambia, Ethiopia, Tanzania, Malawi)– Why? Ad hoc policy limits private sector’s ability to plan

• Recent experience in Zambia: – Predictable policy can increase production– Commitment can improve payoffs

Export bans in Malawi

• Cotton: permanent• Soya: ad hoc• Maize: somewhere in between

Soya export bans

Maize export bans: official trade

Maize export bans: informal trade

Conclusions and recommendations

• State of Malawi’s maize market– Thin market, susceptible to government interventions– Most volatile prices in region, very difficult to predict– Volatility does not benefit farmers– Current season difficult to explain, outside of expected behavior

• Need to reverse cycle of uncertainty and unpredictability– Continue to invest in infrastructure to support private sector activity– Rules-based approach to government intervention

• Transparent criteria for export bans• Enable government to intervene when necessary• Just as important, encourage farmers and traders to engage more in the

market• Create conditions for private sector to plan and invest

Selected references

Chapoto, A., & Jayne, T. S. 2009. The Impact of Trade Barriers and Market Interventions on Maize Price Predictability: Evidence from Eastern and Southern Africa. Jayne, T.S., N. Sitko, J. Ricker-Gilbert, and J. Mangisoni. 2010. Malawi’s maize marketing system. Kaminski, J., Christiaensen, L., & Gilbert, C. L. 2014.

The End of Seasonality? New Insights from Sub- Saharan Africa.