Effects of increasing staple food prices on maize market participation and intensity in Malawi

Abstract

Increasing staple food prices over the last seven years have imposed a cumbersome burden on modern day policy makers with the concern that extreme poverty and hunger will prevail across the earth. There is need to implement effective policies that will minimize the risk and boost the contribution smallholder farmers make to their national economy through market participation. Commercializing smallholder agriculture is one of the effective ways to boost farmers’ incomes and stimulate the growth agricultural dependent economies in developing countries. In order to make effective policies, policy must be made based on empirical evidence on how smallholder farmers’ marketing decisions respond to changes in prices. Using panel data from 2004/2005 and 2008/2009 the study compared both market participation and intensity in maize markets in the different price environments using Cragg’s the double hurdle model. Results show that increasing food prices strongly and positively affect smallholder farmers’ decision to participate in maize markets but not much impact on the quantity of maize sold. Policies that encourage maize productivity should be implemented to enhance the quantity of maize sold. Also essential alongside such interventions are strategies to improving market access by reducing transaction costs that arise due marketing information seeking and transportation