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Malawi: Subsidising Agriculture is Not Enough
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UN Integrated Regional Information Networks
5 February 2008
Posted to the web 5 February 2008
Johannesburg
Malawi is riding high on the success of its fertiliser subsidy programme and has become a regional exporter hoping to profit from booming food prices, but analysts are a bit more wary.
Globally food prices have shot up by nearly 75 percent within a decade and will continue to do so, according to the World Bank's annual Global Economic Prospects 2008.
"We are looking to expand our exports regionally, at least; the high food prices have come as an added incentive. It is a good opportunity for our farmers - we have to invest in agriculture," said Patrick Kabambe, permanent secretary in the Ministry of Agriculture.
Malawi's National Food Reserve Agency officially exported 286,589 tonnes of maize to Zimbabwe by the end of December 2007, according to the USAID-funded Famine Early Warning System Network (FEWS-NET). The World Food Programme also sent 32,363 tonnes of Malawian maize to Zimbabwe, bringing the total official exports from Malawi to 321,406 tonnes. The country also donated maize to drought-hit Lesotho and Swaziland.
World prices have risen sharply partly because of the "stepped-up" use of food crops for biofuels and partly because of other factors like rapid income growth in developing countries, high fertiliser prices, low stocks, and droughts, the World Bank said.
In 2007, the ministry of agriculture recorded a "big jump" in the number of farmers growing maize, said Kabambe. "We are still compiling the data."
According to the last situation report from the Food and Agriculture Organisation (FAO), cereal-based food staples like bread, pasta and tortillas became more expensive in countries across the world, as did milk and meat.
"Prices have been contained for now but continue to remain high at the beginning of 2008," said Abdolreza Abbassian, secretary of the FAO-Intergovernmental Group on Grain. "The price of wheat and soya-bean [in January 2008] was at the highest it has been in 30 years, while maize is trading at 10-year high prices."
Fears of a global "economic meltdown" and a positive crop forecast for the northern hemisphere have helped stabilise food prices in the past few weeks.
Malawi's agriculture has turned a corner since the drought in 2005, which left close to five million people in need of food aid. The government estimated the 2007 maize crop at 73 percent higher than the average for the past five years. The country requires around two million tonnes of maize annually to feed its population of over 12 million but harvested surplus of about 1.5 million tonnes.
The government attributed the high maize production to subsidised fertiliser, which was sold to farmers at 950 kwacha [about US$6.50] per 50kg bag in 2007; in 2004 the price was around K4,000 [about $27] per 50kg bag.
Each kilogram of fertiliser applied per hectare can produce a minimum yield of over 3kg of grain, according to the Zimbabwe-based African Centre for Fertiliser Development. Farmers in Africa usually apply 16kg/ha, while the desirable level is 100kg/ha. Fertilisers account for one-third of the worldwide increase in cereal production, with India contributing 50 percent of the increase, according to the FAO.
The UN agency has warned that unless the nearly 70 million smallholder families in sub-Saharan Africa apply fertilisers and start practising sustainable land and water management on their farms within the next decade, they "will seriously jeopardise their long-term food security, productivity and incomes, while environmental degradation will accelerate".
FAO recommended that average fertiliser application rates in sub-Saharan Africa increase up to 23kg/ha within the next decade to prevent loss of nutrients in the soil and resultant low productivity, but few farmers in Africa can afford them.
Subsidies at what cost?
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Agricultural pundits tend to criticise input subsidies. "The problem is one of opportunity cost - what might have been achieved with the same resources had they been spent on something else?" asked Steve Wiggins, Research Fellow in Rural Policy & Governance at the UK-based Overseas Development Institute (ODI).
"The clearest candidate is agricultural research, where studies repeatedly show very high returns to additional spending; rural roads would be another candidate. Besides, he warned, "the political economy of subsidies is not so good either: once in place, they are the very devil to remove".
Subsidies tend to rise and India is often used to illustrate the pitfalls. "Spending on farm subsidies for electricity, irrigation and water [in India], having once been modest, now exceed the budget for primary education," Wiggins commented.
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