Recent rises in the price of maize have again raised questions about the structure, conduct and performance of Malawi’s maize markets. Maize is by far Malawi’s most important staple crop and contributes about 66 percent of calories to typical household diets. The crop, which contributes 45.2 percent to the Consumer Price Index, is both a food crop and a raw material for agro-industries and generates employment for millions. Indeed, Malawi’s food security is often defined in terms of availability of and access to maize. Like many eastern and southern African countries, Malawi’s maize market has been characterized by considerable price volatility and volume seasonality.
Working Paper 29 investigates the structure, conduct and performance (SCP) of Malawi’s maize market in the 2018/19 main harvest and lean seasons, using interviews with 749 traders from 74 markets, focus group discussions with a total of 480 farmers, as well as daily and weekly price data from 13 regional markets. The Working Paper explores the structure of maize markets by examining marketing channels, barriers to entry and the competitiveness of different tiers of the marketing chain. The study team analyzed inequality in sales revenues, switches in trader types between seasons, quality and weights standardization, and the behavior of traders as indicators of market conduct. The study assessed performance by examining traders’ costs and margins, and the spatial and temporal integration of maize markets.
The study found that Malawi’s maize market is pyramidal in structure and highly competitive at lower tiers of trade but ‘oligopolistic’ at higher tiers. Marketing channels vary across seasons with switches between trader types and instances of rural-urban trade reversals. There is considerable inequality of sales revenues among traders of similar capacities, and a widespread lack of structured trading despite existing institutions. A high ratio of marketing costs to revenue suggests marketing inefficiencies. Malawi maize prices were highly seasonal, and more volatile than neighboring countries. In contrast to previous studies, findings show weak spatial integration of markets and slow price adjustments even among short-distance market pairs.
The study highlights five pathways to improving Malawi’s maize marketing system: (1) increased policy predictability to promote private-sector investment; (2) institutionalization of quality grades and standardization of weights and measures; (3) increased commercialization of smallholder maize production; (4) investment in enabling infrastructure; and, (5) the promotion of structured trading.
Authors: Dennis O. Ochieng, Rosemary Botha, and Bob Baulch, August 2019.
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