Analyzing the importance of diversifying beyond tobacco for small-scale farmers in Malawi

This thesis analyses potential agricultural alternatives to production and marketing of tobacco in Malawi. I study existing patterns of crop and income diversification and factors that limit crop diversification. I also provide an analysis of the current profitability of different important cash crop alternatives that are commonly grown among smallholder farmers and compare their profitability to that of tobacco. Following a review and synthesis of available literature on alternatives to tobacco, analysis is presented that relies upon data collected in 2009 from 380 households in Kasungu and Machinga districts of Malawi. Simpsons Index of diversification was used to measure the extent of diversification for both crop and income sources. Gross margin analysis was employed to identify alternative commodities to tobacco while OLS and Tobit regression models were used to analyze the determinants of crop diversification. The OLS results indicated that crop diversification is determined by age and level of education of the household head, number of children under 12 years old, household size, land holding size, access to input loan, distance to market and ownership of livestock units. Age of household head, distance to market and number of children less than 12 years old showed a negative relationship with crop diversification while educational level, household size, land holding size, livestock ownership and access to loan were found to favor crop diversification. The Tobit results indicated that crop diversification is positively influenced by educational level of household head, household size, land holding size, access to input loan and ownership of livestock units. However both models indicate that there are significant differences in crop diversification levels between the two districts, with Kasungu having higher diversification levels than Machinga district. The study has shown that there is non-specialization among the farm households from the two study areas in terms of number of crops grown and number of income sources. The Simpsons indexes for both crop and income diversity was 0.56 and 0.84 respectively. The results also indicate that these farm households grow 4 crops on average and have an average of 4 income sources per farmer. However the study further reveals that majority of these households prioritize home consumption need when they produce these crops as a result majority of them do not sell their produce. Gross margin analysis indicated that tobacco continues to have high comparative advantage over other crops just because it had a higher gross margin than all other crops. The profitability of maize was higher than grain legumes and root crops. Horticulture crops (tomato, leafy vegetables and Irish potato), Soybean, dry beans and groundnuts were found to be possible alternatives to tobacco as they have high gross margins than other crops and have an added advantage over tobacco in that they can be grown 3 to 4 times per year