Malawi and poverty impacts of improvement to trade procedures for fertilizers

The aim of this note is to examine the likely impact of a better access to fertilizer on households’ incomes and poverty in Malawi. The issue is first of all related to recent analyses that have shown the potential impact of regional trade integration on the price of staple food and crucial crop inputs (Keyzer, 2012). Tchale and Kayzer (2010) show indeed that the price of fertilizer is high in Malawi compared to regional neighbors. By streamlining processes, trade improvements may reduce the cost of inorganic fertilizers. In turn, this might increase agricultural profits and income. The issue is also related to the impact of fertilizer use on yields. Field trials made on experiment stations show large increase of yields due to fertilizers. However, adoption rate by African smallholders remain low. The literature has provided a number of explanations for low adoption, such as learning and informational barriers, credit constraints or time inconsistency in the absence of a commitment device (Duflo, Kremer and Robinson 2011). Alternatively, some papers go one step back and re-examine the actual improvement of yields and cost-benefit ratios observed on real farmers’ plots. They stress the uncertainty due to the fluctuation of maize price across years and within a year (Duflo, Kremer and Robinson 2008), spatial heterogeneity of benefits and costs among poor farmers (Suri 2011) or the complementarity of fertilizer with soil quality (Marenya and Barett 2009). This note looks at the impact of a better access to fertilizers on the income of poor farmers in Malawi. It shows that the use of fertilizers is quite heterogeneous across households. A better access to fertilizers matters first of all at the extensive margin, for farmers who cannot access to them now and could afford to adopt them if the price shrinks. The effect at the extensive margin is significant. Generalizing access to fertilizer could result in a drop of the poverty rate by 1.5 percentage point and lifts 140 000 individuals out of poverty. Moreover, 143 000 individuals will be able to get enough food to meet their basic daily calories requirement. The effect at the intensive margin, on farmers who already use fertilizers today, would be comparatively smaller. It will not so much change the overall rate of poverty than alleviate the depth of it. A more intensive fertilizer use would have a significant impact on the poorest households and leave unchanged households already close to the poverty threshold. The remainder of the note presents maize producers in Malawi and characterizes their use of fertilizers, before turning to the impact of fertilizer use on households’ income and poverty. All calculations are made based on a household survey in 2004/2005