Monday, February 1, 2016

Government Assistance--Part IV--George's Post

1.    Government Support and Intervention

Over the years the Malawi Government has adopted a number of programs to help subsistence farmers, including agricultural training through an country-wide farm extension program, the sale to farmers of the  maize seed and commercial fertilizer, at subsidized below-market prices, to boost annual maize yields, and in some areas, the building of large scale irrigation projects.    One of the most visible of these programs is the periodic sale of maize flour to the public through ADMARC, a government-owned agency, with outlets throughout the country.   During the year, especially in the immediate months after the new harvest, ADMARC purchases maize, most recently from Zambia, stockpiling the product for later sale to consumers in Malawi, at subsidized prices, when purchasing maize on the open market through private retailers becomes expensive.   ADMARC sales are to be made only to consumers, so per person purchase limits are imposed, to ensure that government’s supplies are widely distributed and are not purchased by retailers for resale at much higher prices to desperate families.   But the experience on the ground seems to be quite different.  First of all, there are often chronic shortages of maize supplies at local ADMARC outlets, forcing poor families to go without maize or to purchase it from retailers at much higher prices.   Frequently, local newspapers report that no maize is available at ADMARC outlets, at the same time as the government reports maize available for purchase.    A second problem is that significant portions of the ADMARC supplies, due to corruption, theft, or graft, somehow find their way into the hands of private maize suppliers, subverting the government’s plan of ensuring that the government supplies actually benefit the poor.  
As with other perishable commodities, maize prices fluctuate dramatically during the year, responding to the economics of supply and demand.   Immediately after the harvest, a 50 kg bag of maize will sell for 3,000 to 6,000 kwacha (roughly $5 to 10 USD), but the price for the same bag will increase almost three-fold, to 16,000 to 18,000 kwacha, just before the next harvest.   Those with the capital and facilities to store maize during the year have the potential to make substantial profits, taking advantage of the annual swings in maize prices, but these opportunities are largely closed to small subsistence farmers lacking the wherewithal to purchase and speculate on fluctuating commodity prices and needing virtually all of home-grown product for personal consumption.   Access to clean, dry and secure storage and the risks of spoliation are further impediments to private efforts to benefit from the annual swings in maize prices.