A Policy Note from the International Food Policy Research Institute (Ifpri) shows that prices paid to soybean farmers have improved in 2021 above the minimum farm-gate price, but not those paid to maize farmers due to a number of factors.
Between April and July 2021, 79.4 percent of farmers selling soybeans received prices equal to or greater than the minimum farm-gate price of K320 per kilogramme (kg) while just 8.8 percent of farmers selling maize got prices equal to or greater than the minimum farm-gate price of K150 per kg.
The jump in soybean prices is attributed to tight market conditions in which a small number of soybean buyers have been competing for a limited soybean harvest, while good rains and increased availability of subsidised fertilizer led to a bumper harvest caused maize purchase prices to crash.
It reads: “Between April and July 2021, 79.4 percent of farmers selling soybeans received prices equal to or greater than the minimum farm-gate price of K320 per kg. In contrast, just 8.8 percent of farmers selling maize received price equal to or greater than the minimum farm-gate price of K150 per kg.
“The decline in maize prices, albeit small, over time is not what one would expect and may reflect the maize harvest being even better than was expected, due to both the Affordable Inputs Programme [AIP] and good rainfall during the 2020-21 growing season.”
Despite restrictions on soybean exports to other countries from Malawi, high international prices for soybeans appear to have filtered through to the domestic market, it observes.
Reads the report in part: “The primary reason for a higher proportion of soy-bean sellers receiving prices above the minimum farm-gate price this year are tight market conditions in which a small number of soybean buyers have been competing for a limited soybean harvest.
“In contrast, good rains and the increased availability of subsidized fertilizer led to a bumper maize harvest causing their purchase prices to crash. The vast majority of farmers therefore ended up receiving much less than the minimum farm-gate price for the maize they sold.”
In its August 2020, a paper titled can a maize price band work in Malawi? Ifpri said over the last 12 years, government intervention has been unable to lift estimated farm-gate maize prices above the floor set by minimum farm-gate prices.
“While a separate modeling exercise is required to estimate the volumes of stocks needed to stabilize maize prices, Ifpri estimates from 2016 suggest these are very large and would cost at least K100 billion a year,” it said.
Further, a November 2020 assessment by the Agriculture Policy Research Africa (Apra) faulted government for failing to enforce the minimum farm gate prices, a failure which leads to most traders not complying with the same, and eventual losses for farmers.
It its assessment, Do farmers benefit when they sell to small-scale traders in the rural market in Malawi? Apra observes that while traders are supposed to purchase agricultural commodities from smallholder farmers at or above the set minimum farm gate prices, most traders do not comply.
It reads: “The traders are supposed to purchase agricultural commodities from smallholder farmers at or above the set minimum farm-gate prices. However, the government does not enforce the minimum farm gate prices; as such, most traders do not comply.
“Evidence indicates that the purchasing prices that traders use are below the official farm gate prices by about two-thirds. Further, most traders use unstandardised equipment (i.e. weighing scales) to purchase from smallholder farmers, which rips off farmers’ income.”
Apra recommended promotion of collective marketing among smallholder farmers to improve their bargaining power and attract penetration of large-scale traders that buy in large quantities and offer better prices in the rural areas.
It also stressed the need of linking smallholder farmers to financial and credit institutions, saying, this would enhance their access and use of improved farm inputs, which will allow them to produce greater market surpluses.
Earlier, Farmers Union of Malawi president FrightonNjolomole decried the continued decline in maize prices saying this will have a negative impact on farmers’ income and food security.
He said: “With increased prices of fertiliser, it means farmers have to sell a significant amount of maize to buy fertiliser and other inputs for the coming season.
“The low maize prices also reduce the capacity of farmers to buy inputs for the next season which might result in food insecurity in the next season and deepening poverty.”
Minister of Agriculture Lobin Lowe asked councils to work with the Malawi Police Service to prevent traders from buying cereals from farmers at lower than farm gate prices.
A number of traders have been arrested across the country for offering prices below the minimum farm-gate prices.
In the 2017/18 season, maize was set at K170 per kg while in the 2018/19 season, it was pegged at K180 per kg. In the 2019/20 season, it was set at K200 per kg before the current K150 per kg.
The minimum prices are based on historical monthly prices that are collected across the country in 72 markets.