fertiliser subsidy reforms and maize in malawi
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FERTILIZER SUBSIDY REFORMS AND
MAIZE IN MALAWI MARIAM A.T.J. MAPILA
MASSP RESEARCH DISSEMINATION SEMINAR
GROWTH, POVERTY, NUTRITION LINKAGES AND THE ROLE OF FISP
APRIL 9, 2014
CROSSROADS HOTEL, LILONGWE
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Introduction
Positive impact of input subsidies on maize commodity market in Malawi - undoubted
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WHY REFORM STRATEGIES
Input subsidies intended to be short term strategy
Resistance to scaling down or removal from:◦Beneficiaries ◦Non-beneficiaries ◦Politicians
OBJECTIVES OF THE STUDY
Analyze the impact of reforms of the Farm Input Subsidy Program on Malawi’s maize commodity market
Malawi maize model
Key Endogenous variable
Exogenous variable
L Lag
Local maize price
Local economy
Parity prices Malawi policy instruments
Domestic production/consumption
ADMARC maize price
Trend
Local maize production
Household income (with maize income)
Local maize consumption
Local rainfall
L
Net exports
Domestic maize
consumption
Trend Per capita GDP
Aggregate demand
Yield
Area
Domestic production
Aggregate supply
RainfallPrice of fertilizer
Per capita maize
consumption
L
L
Population
Source: Mapila, 2011
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Model simulations A) Baseline scenario – fertilizer subsidy continues B) Reforms of subsidy program:
1) Complete removal of subsidy program 2) Scale down amount of subsidized fertilizer 3) Reduce number of targeted beneficiaries 4) Complement exit strategies with improved Agricultural Extension Services
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Baseline scenario (con’t)
2012/13
2013/14
2014/15
2015/16
2016/17
2017/18
1,141.50
1,143.00
1,144.50
0
1000
2000
3000
Domestic maize production & acreage
Maize Production Area
Agricultural season
Hec
tare
s
Thou
sand
mt
2012/13
2013/14
2014/15
2015/16
2016/17
2017/18
0.00
0.75
1.50
2.25
0
1000
2000
3000
Domestic Maize production and yield
Maize Production Yield
Agricultural Season
mt /
hec
tare
Thou
sand
mt
Acreage Yield Domestic production
Domestic consumption
ADMARC maize price
-40
-20
0
20
Impact multiplier (2012/13)
Total long run dynamic multiplier
% c
hang
e
Area planted Yield Domestic production
Domestic consumption
ADMARC maize price
-40
-20
0
20
40
Impact multiplier (2012/13)
Total long run dynamic multiplier
% c
hang
e
Complete removal combined with extension services
Complete removal of subsidy
Area Yield Domestic production
Domestic consumption
ADMARC maize price
-60
-40
-20
0
20
Impact multiplier (2012/13)
Total long run dynamic multiplier
% c
hang
e
Area planted Yield Domestic production
Domestic consumption
ADMARC maize price
-30
-20
-10
0
10
20
Impact multiplier (2012/13)
Total long run dynamic multiplier
% c
hang
eReduced amount of fertilizer
Reduced amount of fertilizer combined with extension services
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Conclusions Complete removal of farm input subsidies is feasible only at a cost ◦ Negative impacts on maize commodity market ◦ Cost of new investments i.e. in extension services
Scaling down more likely to occur using more ‘practical’ options:◦ Scaling down number of targeted beneficiaries◦ Scaling down amounts of subsidized fertilizer
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Conclusions Considerations in designing reforms:
◦ Gradual implementation ◦ Need for complementary strategies to minimize losses◦ Duality of smallholder farmers – producer and
consumer to be taken into account ◦ Entrenchment of fertilizer subsidies in the African
political agenda
Other areas of research – impact of exit on households, private sector input markets and networks
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Zikomo kwambili