Maize is the most important staple crop in Malawi, contributing around 66% of calories to typical household diets. Studies show that the per capita consumption of maize grew from 129kg/year in 1998–2008 to 146kg/year by 2017. Most of the maize consumed in Malawi is produced by smallholder farmers, although in deficit years maize is also imported (both officially and unofficially) while in surplus years, maize is sometimes exported (again both officially and unofficially). An unpredictable maize marketing environment, price volatility and seasonality, as well as production seasonality remain challenges to a well-functioning maize marketing system.
A recent IFPRI study, led by Dennis Ochieng and Rosemary Botha, investigates the structure, conduct, and performance of Malawi’s maize market. The study's preliminary research findings from last main and lean seasons were presented during a research seminar held on May 2, 2019 at the IFPRI Malawi office.
The study describes the structure of the maize market by season and examines the conduct of maize value chain actors and how this influences maize marketing across seasons. The study also analyzes the performance of the maize market across seasons, the channels through which maize flows from producers to consumers, retail maize price volatility, market integration, and speed of price transmission across markets.
The study employs a mixed methods approach: 1,160 semi-structured interviews were conducted with traders plus 28 focus group discussions with maize farmers. A pure panel of 408 traders was interviewed in both the main harvest and lean seasons of 2018/19. The fieldwork took the research team to 7 districts and 14 Extension Planning Areas from Mulanje in the South to Chitipa in the North, covering 62 markets in total. Price and production data was obtained from IFPRI’s own maize market monitoring as well as from WFP, FEWSNET, and FAO.
Over 76% of the traders interviewed by the study team were men, with a majority (51%) of traders aged between 36–50 years. The average time they had been trading maize was eight years, and maize trading is the main occupation of most traders. However, most of the businesses are not registered and most of their trade activities occur within the village based. The research found that only 7.8% of all traders ventured outside their region to do business.
The study found that the structure of Malawi’s maize market is pyramidical in nature; with most traders operating at the lower tiers of the value chain and only a few large private traders at the highest tiers. Some of the traders engaging in wholesale/assembly during the harvest season become retailers of maize or traders of other commodities in the lean season. Like a previous IFPRI study of the commodity exchanges (Comex) and warehouse receipts, the study found that small farmers’ and traders’ awareness of structured markets is limited. Only 33% of traders, 33% of retailers, 35% wholesalers and 27% of the interviewed assemblers were aware of the commodity exchanges. Farmers and small traders perceive ADMARC as serving the interests of large traders and influential businessmen.
The conduct analysis showed that maize prices are mainly set based on cost (51% of traders). Collusion in pricing is also widespread as reported by 27% of traders. There are no standardized quality measures in both the structured and unstructured markets. The study team found that there is a switch between trader types across seasons with assemblers and wholesalers switching to retailers during the lean season (Figure 1). Maize markets are most busy from October to December for all types of traders. With a share of 50.3%, small scale farmers are the biggest source of traded maize during the main harvest season. But during the lean season other traders (56.2%) take the lead. The heavy regulation by the Government of Malawi with export bans and local trade restrictions is widely perceived as a disincentive to maize trading.
Figure 1: Seasonal switching by maize traders
*Click on Figure 1 for full view.
In terms of the performance of the maize market, Ochieng and Botha found that maize prices have been highly volatile with high volume seasonality and very high price volatility. Overall, Malawi had the highest level of price volatility in comparison to other regional countries (such as Ethiopia, Kenya, Mozambique, Rwanda, and South Africa). 61% of traders perceived that prices were most volatile during main harvest seasons. The maize market is characterized by intense competition at lower tiers but minimal competition at higher tiers. It was also found that the maize market is not transparent enough to facilitate traders’ planning of maize marketing, which would likely help stabilize both volumes and prices. In addition, the study found that there is widespread lack of maize grading standards and common weights measures. Also, prices in different markets do not follow the same patterns, which suggests poor integration between markets in different locations (both within and between regions). Even within the same region, markets that were near to each other were not well-integrated.
Ochieng and Botha concluded their presentation by outlining the following tentative policy implications of their research. These included:
- Agricultural commercialization should be accelerated to expand maize productivity and marketed surpluses, coupled with effective post-harvest management practices to improve quality;
- Business skills of small farmers should be enhanced to view maize farming as an agribusiness;
- Small farmers and traders need to be educated about existing structured trade opportunities;
- Discretionary policy interventions that restrict and undermine incentives in the maize trade should be minimized (if not eliminated);
- Upgrading road and telecommunication infrastructure in remote areas, as well as better warehousing, will facilitate timely and cheaper access to markets and market information.
The seminar presentation is available below.
