On 1 October 2015, IFPRI, with support from a multi-partner planning committee, held a high-level event to explore the evidence on best practices for improving the functionality of staple food markets. Technical presentations from IFPRI, FAO, the World Bank, and IAPRI laid out evidence on the topic. Stakeholder discussions then reflected on the current realities of the maize market in Malawi. The symposium report summarizes event proceedings, research findings, panel discussion points, and key policy suggestions.
In summary, regional and global evidence indicates that discretionary policies contribute to volatile and unpredictable maize prices, while predictable rules-based policies have contributed to staple food price stabilization during times of crises. Regional analysis shows that decreasing government intervention in maize markets and increasing the predictability and transparency of market interventions is associated with more predictable prices. However, Malawi’s maize marketing is currently not providing the level of predictability needed to create better market incentives to reduce price volatility and increase food security.
Furthermore, while export bans are meant to protect consumers by ensuring maize availability in domestic markets, in practice they do not stop trade but rather push it to the informal sector. The costs of informal trade increase, which depress prices for farmers and raise costs for consumers. Analysis shows that maize export bans in Malawi decrease farm-gate maize prices but maize retail prices tend to increase later in the season when consumer demand increases, regardless.
The limited share of maize marketed in the country increases the vulnerability of consumers to price increases. Agriculture sector production losses due to systemic risks in Malawi have averaged US$150 million per year over the past 30 years, with maize suffering almost 30 percent of the time and incurring losses bigger than any other single commodity. Rather than protecting Malawi’s maize market through export bans, government can incentivize investment in the maize sub-sector and stabilize prices through allowing – and regulating – maize exports, while decreasing farmer risk through a broad set of interventions such as heavy investments in agricultural extension and research, irrigation, and crop insurance, in addition to the Farm Input Subsidy program.
The key policy recommendations that came out of the panel discussion at the symposium are as follows:
- Improve the timeliness and accuracy of information on maize prices and stocks for farmers, traders, processors and government. Initiatives that will support this include: (a) improving the accuracy and public trust in the maize production estimates, which are often considered to be inaccurate; (b) establishing a formal platform for communication from government to private sector on policy actions in Malawi’s maize market to provide information, assuage fears, and limit speculation in times of doubt, and increase trust between government and the private sector; and (c) developing criteria to guide market interventions in consultation with consumer organizations, producers and private sector.
- Invest in the agriculture sector, in particular to decrease the systematic risks of maize farming in Malawi. Investments in the current Farm Input Subsidy Program should continue, but investments should also be expanded to include irrigation, improved agricultural extension and research, and crop insurance.
