Smallholder farmers’ access to markets is important for agricultural growth, food and nutrition security as well as poverty reduction. Market information guides decision making on where, what, when and to whom to sell. Structured markets (such as commodity exchanges and vertically integrated supply chains) support the stabilization of volumes and prices of agricultural commodities and therefore provide a more predictable trade environment. Despite these potential benefits of structured markets, uptake by smallholder farmers and traders has been rather small in Malawi.
In an IFPRI Malawi brown bag research seminar on February 26, 2020 Rosemary Botha presented the findings of a recent IFPRI Malawi study, which analyzed whether providing better price information increases volumes sold through structured markets, sales prices, and farmers’ levels of commercialization. Using an action research experiment, the study investigated the impact of providing price information from a commodity exchange to small farmers and traders of maize and soybean in four purposively selected districts in central Malawi (Figure 1) during the 2018/19 main harvest season.
The study team employed a multistage sampling procedure to sample the study areas, smallholder farmers and traders. In each district, the study team selected two farmers associations (FA) and assigned one FA that was closer to a warehouse of the Agricultural Commodity Exchange for Africa (ACE) to the intervention group, and the other that was farther away from the ACE warehouse to the non-intervention (control) group. The baseline for the study surveyed a sample of 416 (204 treated and 212 non-treated) farmers and 78 traders in March 2019. The endline sample in September 2019 included 399 (204 treated and 195 non-treated) farmers and 68 traders. The intervention involved providing all sampled traders and a treatment group of half the sampled farmers with weekly information on maize and soybean prices on ACE’s trading platform via SMS between April to September 2019 (Figure 2). The other half of farmers were included into the control group, which did not receive price information. For traders, who could not be assigned to treatment or control groups, the study analyzed impact in terms of the mean differences in sales volumes through structured markets, and sales volumes and sales prices before and after the intervention.
About 80 percent of the surveyed farm household heads were men. The mean age of household heads was 47 years with about 6.5 years of formal schooling. Although the average household comprised five members, the dependency ratio was generally high (32 percent). The average farm size was about 3.8 acres with a low level of crop diversity. Public transport was available to most farmers (70 percent). About 60 percent of the farmers could access the local agricultural extension agent.
Looking at the impact on quantities sold and selling prices, the study found (1) a significant reduction in quantity of maize sold; (2) no significant impact on quantity of soybean sold; and (3) a positive but not statistically significant impact on prices farmers received. The study found no statistically significant effect on sales through structured markets and commercialization rate. Botha highlighted significant differences in level of awareness of ACE among traders and use of ACE services between baseline and endline periods. The proportion of traders who were aware of ACE increased by about 25 percent. More importantly, the proportion of traders that used ACE services increased by 62 percent. There was also a significant increase in the average volume of maize sold between the two periods. However, the volume of soybeans sold reduced. Strikingly, the average maize and soybean prices received by traders increased significantly between the two periods by MWK62/kg and MWK88/kg, respectively. This, so Botha, suggests a possible improvement of trader bargaining power when knowledge of market prices improved. The share of maize and soybean sales through structured markets also increased between baseline and endline, although the increments were not statistically significant.
Finalizing her presentation, Botha highlighted that provision of price information alone is not enough to facilitate small farmers’ use of structured markets. Strengthening farmers’ associations capacity, through ACE’s marketing school, and greater use of warehouse receipt systems and trade facilitation services is also needed. It is also important to sensitize small farmers and traders about the quality and quantity standards required for structured markets.
The seminar presentation is available below.
