Economic aspects of development of agricultural alternatives to tobacco production and export marketing in Malawi.

The report assesses a number of potential agricultural alternatives to production and export marketing of tobacco from Malawi. It provides analysis and findings on current profitability of alternatives as well as potentials for employment and export earnings, as compared with tobacco. The social needs of employing a large number of workers currently engaged in tobacco production and the country’s needs earnings are thus taken into account. The report is intended to contribute to the long-term process of diversification and clarify options. It includes made by an expert Work-shop held in Blantyre, Malawi (21-22 July 1999) Addressed to the private and public sectors on further action on production and export marketing of new agricultural products that have high developmental and export potentials. Following a review and synthesis of literature on the development of agricultural alternatives to tobacco production and exports in Malawi, further analysis was undertaken on production and export marketing of alternative products for the country. Gross margin analysis and Domestic Resource Cost ratios (DRC) were used as methods to identify potential alternative commodities to tobacco. Although previous studies spanned different time periods and differed on scope of commodity coverage, their conclusions were similar. In particular, Malawi should diversify out to tobacco and concentrate on commodities, which are of high value, but less bulky, such as spices, oil seeds, some horticultural crops, cotton, pulses and mushrooms. Although there was convergence of findings to previous studies, changes that occurred later in the terms of trade following of findings to previous studies, changes that occurred later in the terms of trade following market liberalization altered the comparative advantage and priority among them. The use of gross margins and DRC ratios ignores multiple objectives associated with the choice of enterprises or enterprise combinations for farmers to engage. The multiple Objective Policy Analysis Matrix (MOPAM) method was used to overcome this weakness. Factors considered in the (MOPAM) analysis were: drought tolerance, price variability, income generation, food security, employment and diversification potential. Each factor was assigned a weight depending on the importance of that factor for the commodity under consideration, and given a score. A second set of MOPAM criteria were: drought tolerance, computed to complement efficiency criteria for commodity selection. The benefit/cost indicators a ratio between discounted benefits and costs for a commodity. Analysis was carried out on 36 commodities using 1999 price and production statistics. The need to focus on a limited range of potential commodities for diversification prompted consideration of only 10 commodities including beans, groundnuts, pigeon peas, soyabeans, millet/sorghum, cotton, rice and cassava. Although maize is an important food crop for the domestic market, it was not.