Interlinked credit and farm intensification: evidence from Kenya

This paper addresses the potential for interlinked credit/input/output marketing arrangements for particular cash crops to promote food crop intensification. Using panel survey data from Kenya, we estimate a household fixed-effects model of fertiliser use per hectare of food crops, using an instrumental variables approach for addressing the endogeneity of participation in interlinked credit arrangements. Results indicate that households engaging in interlinked marketing programs for selected cash crops applied considerably greater fertiliser on other crops (primarily cereals) not directly purchased by the cash crop trading firm. These findings suggest that, in addition to the direct stimulus that interlinked cash crop marketing arrangements can have on small farmer incomes, these institutional arrangements may provide spill-over benefits for the productivity of farmers' other activities such as food cropping.     

Estimating the Enduring Effects of Fertiliser Subsidies on Commercial Fertiliser Demand and Maize Production: Panel Data Evidence from Malawi

Most studies of input subsidy programmes confine their analyses to measuring programme effects over a one‐year period. This article estimates the potential longer‐run or enduring effects of fertiliser subsidy programmes on smallholder farm households' demand for commercial fertiliser and maize production over time. We use four waves of panel data on 462 farm households in Malawi for whom fertiliser use can be tracked for eight consecutive seasons between 2003/2004 and 2010/2011. Panel estimation methods are used to control for potential endogeneity of subsidised fertiliser acquisition. Results indicate that farmers acquiring subsidised fertiliser in three consecutive prior years are found to purchase slightly more commercial fertiliser in the next year. This suggests a small amount of crowding in of commercial fertiliser from the receipt of subsidised fertiliser in prior years. In addition, acquiring subsidised fertiliser in a given year has a modest positive impact on increasing maize output in that same year. However, acquiring subsidised fertiliser in multiple prior years generates no statistically significant effect on maize output in the current year. These findings indicate that potential enduring effects of the Malawi fertiliser subsidy programme on maize production are limited. Additional interventions that increase soil fertility can make using inorganic fertiliser more profitable and sustainable for smallholders in sub‐Saharan Africa and thereby increase the cost‐effectiveness of input subsidy programmes.     

The Effects of Maize Market and Policy Reforms on Price Discovery and Competitiveness in Zimbabwe, 1991–1997

Abstract

Maize is Zimbabwe's staple food. An adequate supply of maize is essential to food security and domestic stability. A series of droughts and government mismanagement of the economy led to a maize production and food security problem in the 1980s. Zimbabwe's maize marketing system was transformed dramatically from a government monopoly to a competitive market system in which prices are determined by market forces in the 1990s. This paper examines the steps that Zimbabwe took towards maize market reform and the benefits of that reform. The movement to a competitive market led to formation of a commodity exchange to improve price discovery and increase price transparency. De-regulation has increased entry and competitiveness from new private sector hammer millers and traders. Farmers, millers, and traders face new profit opportunities and new price and financial risks that have increased management responsibilities. Consumers enjoy lower cost maize meal products and more convenient service. The benefits of the 1991–1997 reforms indicate what could be achieved in the long run if prices are determined by the market, rather than by the government.     

Smallholder Supply Response to Marketing Board Activities in a Dual Channel Marketing System: The Case of Zambia

In recent years, parastatal grain marketing boards have re‐emerged as important elements of grain markets in eastern and southern Africa, yet little is known about how farmers are responding to their scaled up activities. This article develops a conceptual model of farmers’ production decisions in the context of dual output marketing channels (government and private sector) when output prices at harvest time and the availability of one of the marketing channels are unknown at planting time. It then applies the model to the case of Zambia and uses nationally representative household‐level panel survey data to estimate the effects of the Food Reserve Agency (FRA), the government parastatal maize marketing board, on smallholder crop production and fallow land. The FRA buys maize from smallholders at a pan‐territorial price that typically exceeds market prices in major maize producing areas. Results suggest that increases in the farmgate FRA maize price raise farmer maize price expectations, which induces a supply response. Smallholders respond to an increase in the FRA price by extensifying their maize production. On average, a 1% increase in the FRA price is associated with 0.06% increases in smallholders’ maize area planted and quantity harvested. There is also some evidence that farmers reduce the area of land under fallow in response to FRA incentives but there is no evidence of reductions in the area planted to other crops.     

Off‐farm Employment and Input Intensification among Smallholder Maize Farmers in Kenya

We derive input demand functions for fertiliser and hybrid seed, testing for the combined and separate effects of income from non‐farm sources and agricultural wage labour among smallholder maize farmers in Kenya. More income from off‐farm sources, and specifically non‐farm sources, competes with maize intensification, particularly in more productive areas where use rates are higher. In less productive areas, where households rely more on off‐farm income and input use in maize is extremely low, agricultural wage labour reduces the likelihood that fertiliser is applied, but when used, has a positive effect on quantities purchased of both seed and fertiliser.     

The effects of NCPB marketing policies on maize market prices in Kenya

The Government of Kenya pursues maize marketing policy objectives through the National Cereals and Produce Board (NCPB), which procures and sells maize at administratively determined prices, and stores maize as a contingency against future shortages. A private sector marketing channel competes with the NCPB. This article estimates the effects of NCPB activities on the historical path of private sector prices in Kenyan maize markets between 1989 and 2004. The analysis is carried out using a reduced form vector autoregression model (VAR) estimated with sparse data and imposing only minimal identification restrictions. Results show that NCPB activities have stabilized maize market prices in Kenya, reduced price levels in the early 1990s, and raised average price levels by roughly 20% between 1995 and 2004. Over the past decade, the price-raising activities of the NCPB have transferred income from urban consumers and a majority of small-scale farm households that are net buyers of maize to a relatively small number of large- and small-scale farmers who are sellers of maize.     

The impact of conservation tillage on maize yield and input demand: the case of smallholder farmers in north‐west Ethiopia

This study analyses the economics of conservation tillage (CT) with respect to its effect on maize yield and chemical fertiliser, herbicide, and female and male labour demand. We estimate production and input demand functions using seemingly unrelated regressions on plot‐level cross‐sectional farm household data collected in the north‐west of Ethiopia. A two‐step control function is applied to address potential endogeneity bias due to the inclusion of the CT adoption decision as an explanatory variable. Our results show that CT increases maize yield and chemical fertiliser demand. Additionally, the results show that the adoption of CT reduces female and male labour required for crop production. However, this is achieved through the increased use of herbicides, which might have an undesirable health and environmental effects.     

AGRICULTURAL PRICE POLICY,FOOD AID AND INPUT SUBSIDY REFORMS IN BURKINA FASO

This paper examines the agrarian decline in Burkina Faso that prompted structural adjustment reforms by the World Bank and the IMF in the early 1980s. Official interventions in the cereals, cotton and fertiliser sectors are examined, and an analysis made of regional impacts of the proposed reforms on producers and consumers. Counter-factual simulations with a multi-region, multi-commodity agricultural sector model are used to evaluate three policies: eliminating input subsidies, increasing official market commodity prices, and reducing food aid imports. Model results show that these reforms would improve agricultural-sector performance, but depend on cotton exports to pay for fertiliser, contrary to government self-sufficiency objectives. Relaxing capacity constraints on official marketing operations would also need to be eliminated to achieve reform objectives.     

Land degradation, drought and food security in a less-favoured area in the Ethiopian highlands: a bio-economic model with market imperfections

This paper presents a bio‐economic model of Andit Tid, a severely degraded crop‐livestock farming system with high population density and good market access in the highlands of Ethiopia. Land degradation, population growth, stagnant technology, and drought threaten food security in the area. Drought or weather risk appears to have increased in recent years. The bio‐economic model is used to analyse the combined effects of land degradation, population growth, market imperfections and increased risk of drought on household production, welfare and food security. We find that the indirect effects of drought on household welfare through the impact on crop and livestock prices are larger than the direct production effects of drought. Provision and adoption of credit for fertiliser, although risky in itself, may lead to increased grain production and improved household welfare and food security. Provision of credit may have a negative effect on conservation incentives but this effect may be mitigated by linking a conservation requirement to the provision of credit for fertiliser.     

Has China’s new round of collective forest reforms caused an increase in the use of productive forest inputs?

Forestland tenure and financial incentives are the most important policy issue to sustainable forest resource management. The new wave of reform of collective forestland tenure (NRCFT) has been launched since 2003 and the governmental matching reform measures (MRMs) for the NRCFT have been introduced since 2009. The objective of these reforms is to enhance sustainable forest resource management in Chinese collective regions by encouraging rural households’ productive forest inputs. We use a unique dataset of 1778 sample households in 18 counties of nine provinces with six years and employ a fixed effects model with clustered standard errors. Our empirical results indicate that: 1) the NRCFT has increased households’ forestland area of different tenure types, and the effects of the MRMs on rural households’ labor input and production expenditures for forestry purposes are generally positive, especially household used forestland as collateral for a loan and afforestation or reafforestation subsidy and reform of Annual Allowance Cut (AAC) have significantly contributed to increase in the use of productive forest inputs; 2) the NRCFT and the MRMs have different impacts on the use of productive forest inputs for different tenure forests, and these reforms have caused the most significant changes in rural households’ production decision changes for household responsibility forestland; 3) both the NRCFT and the MRMs have significant effects on rural households’ rent-in and rent-out forestland; and 4) forestland fragmentations have caused additional labor and investment inputs for rural households’ forest resource management and protection. And finally, market drivers and household and village characteristics factors also affect households’ decisions for productive inputs for their managing forests.     

Trade Liberalization,State Trader Management Tenure,and Grain Pricing in Botswana

This article examines how trade liberalization and grain marketing board management tenure influenced grain pricing in Botswana. Regression analyses of nominal protection rates (NPRs) and marketing margins (MMs) are used to test the hypothesis that policy reforms influenced grain pricing in the country. Moreover, a comparison of NPRs is undertaken to determine whether management tenure has had an influence on grain pricing. The results indicate that the marketing board switched from taxing to subsidizing consumers following the 1991 policy reform from food self-sufficiency to food security. A reversal occurred after the board's 1997 restructuring, which involved, among other things, closing down Botswana Agricultural Marketing Board's (BAMB's) loss-making units and a change in the composition of BAMB's board of directors. Management tenure at BAMB also had an influence on grain pricing. The period 1989–1997, in particular, was characterized by high consumer subsidization, highest marketing margins, and lowest profits. This could have been avoided had management adopted pricing regime consistent with public policy. This notwithstanding, perennial losses experienced by the marketing board also resulted from fragmented production and low producer market participation.     

Ex Ante Research Evaluation and Regional Trade Flows: Maize in Kenya

Public sector investment in agricultural research is an important component of developing country efforts to bolster staple cereal production in the face of rapid population growth. This paper uses a spatial equilibrium model to evaluate the potential impact of maize research in six regions of Kenya. The application highlights the important role of research in meeting future food needs, as well as the geographic variability of producer and consumer benefits from technology and trade policy options. Despite significant research induced supply shifts, Kenya will require additional production increases of 1.5 to 2 per cent per year to meet stated goals of self-sufficiency in maize production with open markets. Import restrictions can ensure self-sufficiency and generate producer welfare gains at greater expense to the majority of Kenyans who are net consumers of maize. In the debate over trade policy, public sector investments in maize research should be seen as a potential mechanism to compensate producers for welfare losses associated with market liberalisation.     

What does Malawi's Fertiliser Programme do to Private Sector Fertiliser Sales? A Quasi‐Experimental Field Study

Malawi implemented reforms to its Farm Input Subsidy Program (FISP) during the 2015/16 agricultural season that allowed certain large‐scale, private sector fertiliser dealers to sell subsidised fertiliser at their network of retail stores in select districts on a pilot basis. At the same time, small‐scale independent fertiliser dealers were excluded from participating in the pilot. We use a unique panel dataset of large‐scale corporate fertiliser dealers and small‐scale independent fertiliser dealers collected before and after the policy change to estimate the impacts of the FISP on those who participated in the pilot and those who did not, using a difference‐in‐differences estimator. Results indicate that large‐scale dealers who sold the FISP fertiliser under the pilot programme in 2015/16 did not have their commercial sales either crowded‐in or crowded‐out by the FISP pilot. Instead, the average volume of fertiliser sold at each of their retail stores increased by 59% due to an increase in subsidised fertiliser sales. Conversely, small‐scale independent fertiliser dealers who were not allowed participate in the pilot had their commercial sales crowded‐out by the programme. They experienced a 60% decline in the volume of commercial fertiliser sales on average at each store. This implies that the FISP reforms have mainly benefited large‐scale fertiliser dealers who sell 90% of the fertiliser in Malawi, but caused some harm to the many small‐scale independent fertiliser dealers who sell about 10% of the private sector's fertiliser in Malawi, but often operate their businesses in more remote areas.     

Adoption and Impacts of Sustainable Agricultural Practices on Maize Yields and Incomes: Evidence from Rural Zambia

This paper uses a multinomial endogenous treatment effects model and data from a sample of over 800 households and 3,000 plots to assess the determinants and impacts of adoption of sustainable agricultural practices (SAPs) on maize yields and household incomes in rural Zambia. Results show that adoption decisions are driven by household and plot level characteristics and that the adoption of a combination of SAPs raises both maize yields and incomes of smallholder farmers. Adoption of improved maize alone has greater impacts on maize yields, but given the high cost of inorganic fertiliser that limits the profitability of adoption of improved maize, greater household incomes are associated rather with a package involving SAPs such as maize–legume rotation and residue retention.     

Are we overestimating the negative impact of higher food prices? Evidence from Ghana

Most studies of the welfare impact of higher food prices adopt Deaton's approach, based on the first‐order effect of prices changes using income and expenditure survey data. This paper explores the impact of higher maize and food prices in Ghana and considers the sensitivity of results to changes in several assumptions. If second‐order effects are included, incorporating household response to price changes, the welfare impact of food price increases is more positive, but only modestly so. However, if we assume that marketing margins are constant in real terms rather than proportional to prices, the welfare impact is substantially more positive. These findings highlight the need for more research on the behavior of marketing margins under volatile prices.     

The effects of the Food Reserve Agency on maize market prices in Zambia

Over the last decade, governments throughout eastern and southern Africa have increasingly used strategic reserves and/or marketing boards to influence grain market outcomes, yet little is known about how these activities are affecting grain markets. This article estimates the effects of the Food Reserve Agency (FRA) on maize market prices in production and consumption regions in Zambia using a vector autoregression model and monthly data from July 1996 through December 2008. In recent years, FRA has become the dominant buyer of smallholder maize in Zambia. Simulations show that FRA activities stabilized market prices throughout the July 1996–December 2008 study period and raised mean prices between July 2003 and December 2008 by 17–19%. The price raising effects of FRA policies have assisted surplus maize producers but adversely affected net buyers of maize in Zambia, namely urban consumers and the majority of the rural poor. The increase in maize price stability is unlikely to have had substantial welfare effects on poor households. In contrast, relatively wealthy producers are likely to have benefited from the higher average and more stable maize prices resulting from FRA policies.     

PRICE TRANSMISSION IN THE UNITED KINGDOM YELLOW FATS MARKET IN THE PRESENCE OF IMPERFECT COMPETITION

The yellow fats sector comprises butter, margarine and a number of newer dairy-and low-fat spreads. In analysing the transmission of policy prices (e.g. the intervention price of butter) in this sector, which is characterised by concentrated processors and retailers, it is unrealistic to assume that marketing margins are competitively determined. The empirical estimates in this paper suggest that, since the mid-1980s, processors and retailers of margarine take into account the price of butter when setting margarine prices, which they can only do if they possess market power. This implies that the benefits of CAP reform (in the form of lower butter prices) may be seriously underestimated if the resulting fall in margarine prices is ignored; the increase in butter consumption would be overestimated.     

Direct Market Retailer Perceptions of State-Sponsored Marketing Programs

Direct market retailers were surveyed to evaluate their participation and opinions of the Jersey Fresh state marketing program. Other states interested in establishing a similar marketing program could target retailers who are most likely to participate in such a program. Specifically, the study results suggest that retailers with outlets in urban areas or with retail outlets open for more than eight months during the year would be more likely to participate. Retailers who used other logos to identify their fresh produce were more likely to intend to use state promotional logos in the future. A successful approach to recruiting these retailers might be to form partnerships with local cooperative organizations which label and market produce from many growers collectively.     

Demand for improved fish feed in the presence of a subsidy: a double hurdle application in Kenya

Fish farming households’ demand for improved fish feed from the private market in Kenya is potentially influenced by the government's feed subsidy program. This article applies the double‐hurdle model to a cross‐section of fish farms to analyze demand for improved fish feed from private markets, and whether the government feed subsidy program has an effect on private demand for improved feed. The results indicate that households’ decisions to participate in the improved feed market are affected by the quantity of improved feed received from the government. Once the participation decision has been made, we find evidence of crowding‐in of the private improved feed sector; that is, the government's allocations of subsidized feed appear to increase private sector demand. In addition, the price of improved feed negatively affects the quantity purchased as expected. Education, extension contacts, and ease of marketing matured fish increase household propensity to purchase improved feed commercially. Policies that help reduce the price of improved feed such as reduction in tariffs on imported feeds and feed ingredients will foster demand for the feed, as will policies that facilitate marketing of fish at reasonable prices by households.     

Welfare effects of maize technologies in marginal and high potential regions of Kenya

This paper describes the findings of a study that used a multi‐market model to assess the potential impact of improved maize technologies on the welfare of various types of rural and urban households in Kenya. The modelling results indicate that technologies developed for high potential regions are likely to have more profound aggregate impacts on maize production and lead to greater reductions in import demand (if prices are controlled) or maize prices (if maize prices are flexible). Technology adoption in high potential regions is likely to have substantially greater positive impacts on aggregate real incomes, but inferior income distributional outcomes compared to technology adoption in marginal regions.