Department of Agricultural Economics

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Browsing Department of Agricultural Economics by Subject "Agricultural diversification -- Risk assessment -- Malawi"

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    The risk-return trade-off to diversified agriculture in Malawi : a quadratic programming approach
    (Stellenbosch : Stellenbosch University, 2021-03) Pyman, Dylan Harvey; Greyling, Jan C.; Stellenbosch University. Faculty of Economic and Management Sciences. Dept. of Agricultural Economics.
    ENGLISH SUMMARY : The rapid growth in the human population has sparked shifts in the way agricultural sectors have evolved in different countries. Most developed countries and those with a commercially driven agricultural sector have placed emphasis on increasing productivity in a bid to ‘produce more for less’. Developing countries, by contrast, are often dominated by subsistence agriculture where the focus lies on ensuring household food security rather than profit maximisation. Malawi falls into this category with a vast majority of the working population involved in agriculture – more specifically, in the smallholder sub-sector. The risk of crop losses in these countries has dire consequences for people reliant on these crops for their everyday meal. Minimizing such risk in countries like Malawi is therefore of paramount importance. Many studies, such as the one conducted by Ibrahim (2015), place diversification at the heart of risk management within the agricultural context. Consequently, this study investigated the use of diversification as a tool to minimise the levels of risk faced by smallholder farmers in Malawi. Studies by Mango, Makate, Mapemba and Sopo (2018) and Kankwamba, Mapila and Pauw (2013) analysed the determinants of diversification in Malawian agriculture and the current levels of diversification within the country’s agricultural sector. Their results provided insight into the factors influencing diversification and indicated a bimodal distribution for the number of crops grown – peaking at three as well as one. Evidently, the importance of diversification has already reached Malawian smallholder farmers. However, minimal research has been done into the optimum diversification strategies for these farmers to implement on the smallholder level. Some success optimising cropping portfolios for smallholder farmers in Malawi was found using Quadratic Risk Programming. However, that particular research called for an updated and more data accurate investigation. Accordingly, this study implemented the Quadratic Risk Programming model on a large sample of smallholder farmers in the southern region of Malawi. Six models were created, varying the size of the smallholder field and the capacity of the farmer to apply inorganic fertiliser. Five primary crops, namely maize, soybeans, groundnuts, common beans and sweet potatoes, were identified and their performance was analysed over three consecutive years. Each model included a variance-covariance matrix, incorporating the relationships between crops to derive optimized cropping portfolios according to the desired level of risk exposure. For small farms, the results showed that, of the available 2 acres, 1,3 acres should be allocated to maize and the balance shared between groundnuts and beans. A ratio favouring beans gave lower risk than when groundnuts were favoured. However, models for medium and large farms recommended an average allocation of 50 percent of their arable land to groundnut production. In consideration of food security, all models contained a minimum threshold for maize growth. The results for all fertilised farm models indicated sweet potato growth at the maximum constraint, prompting the recommendation for improved storage and marketing facilities for this crop in Malawi. Finally, recommendations were made regarding the use of the state-owned marketing platform, ADMARC, to protect farmgate prices and stimulate an agricultural environment conducive to the findings of this thesis.