Nicholas J. Sitko

Input Subsidy Programs and Climate Smart Agriculture: Current Realities and Future Potential

The achievement of Climate Smart Agriculture (CSA) goals in Africa will require widespread farmer adoption of practices and technologies that promote resilience and system-wide collective action to promote ex ante climate risk management activities and ex post coping strategies. Leveraging public sector resources is critical to achieve goals at scale. This study examines the scope for input subsidy programs (ISPs) to contribute to achieving CSA objectives in Africa. Available evidence to date suggests that in most cases ISPs have had either no effect on or have reduced SSA smallholders’ use of potentially CSA practices. However, recent innovations in ISPs may promote some climate smart objectives by contributing to system-level ex-ante risk management. In particular, restricted voucher systems for improved seed types that utilize private sector distribution supply chains may prove capable of promoting CSA goals. Generally, moving from systems that prescribe a fixed input packet to a flexible system with a range of input choices holds promise, but fixed systems still hold some benefits. Conditional ISPs would require improved monitoring and compliance as well as defining practices with clearly measurable productivity benefits vis-a-vis CSA goals. The potential of ISPs to achieve widespread CSA benefits must address these challenges and be evaluated against benefits of investments in irrigation, physical infrastructure, and public agricultural research and extension, which may generate higher comprehensive social benefits.

Institutional Models for Accelerating Agricultural Commercialization: Evidence from Post-Independence Zambia, 1965 to 2012

This paper traces the trajectories of successful commercial smallholders operating under differing sets of market institutions. Analysis focuses on maize, cotton and horticulture, three widely marketed crops with strikingly different market institutions. Maize receives intensive government input and marketing support. In contrast, cotton relies primarily on private contract farming schemes, while horticulture enjoys no large-scale institutional support from either the public or private sectors. Using a mix of quantitative and qualitative methods, the analysis aims to identify personal characteristics and institutional factors that enable smallholder transitions to high-productivity commercial agriculture. The study concludes that only a small minority of Zambian smallholder farmers succeed in transitioning to high-productivity, high-volume commercial agriculture. Only about 20% of cotton farmers and less than 5% of maize and horticulture farmers succeed as top-tier commercial growers. By tracing the long-term agricultural trajectories of successful commercial smallholders, the paper identifies two broad agricultural pathways out of poverty. The low road, exemplified by cotton production, involves a two-generation transition via low-value but with well-structured markets. The more restrictive high road, epitomized by horticulture production, offers a steeper ascent, enabling prosperity within a single generation, but requires commensurately higher levels of financing, management and risk.This paper traces the trajectories of successful commercial smallholders operating under differing sets of market institutions. Analysis focuses on maize, cotton and horticulture, three widely marketed crops with strikingly different market institutions. Maize receives intensive government input and marketing support. In contrast, cotton relies primarily on private contract farming schemes, while horticulture enjoys no large-scale institutional support from either the public or private sectors. Using a mix of quantitative and qualitative methods, the analysis aims to identify personal characteristics and institutional factors that enable smallholder transitions to high-productivity commercial agriculture. The study concludes that only a small minority of Zambian smallholder farmers succeed in transitioning to high-productivity, high-volume commercial agriculture. Only about 20% of cotton farmers and less than 5% of maize and horticulture farmers succeed as top-tier commercial growers. By tracing the long-term agricultural trajectories of successful commercial smallholders, the paper identifies two broad agricultural pathways out of poverty. The low road, exemplified by cotton production, involves a two-generation transition via low-value but with well-structured markets. The more restrictive high road, epitomized by horticulture production, offers a steeper ascent, enabling prosperity within a single generation, but requires commensurately higher levels of financing, management and risk.

The Quiet Rise of Large-Scale Trading Firms in East and Southern Africa

Abstract The share of smallholder-produced maize sold to large-scale traders (LSTs) has increased from virtually nil 10 years ago to 12 per cent and 37 per cent in Zambia and Kenya, respectively. We examine the causes and consequences of this transformation. LST investment has responded to growing market demand as well as to changes in farm structure and has been especially prominent in areas where medium-scale farms are concentrated. After controlling for distances travelled and other factors, farmers selling to LSTs receive prices that are 4.9 per cent and 3.6 per cent higher than those offered by small-scale traders, and are more likely to access input credit, private extension services, and price information.

An evolution in the middle: examining the rise of multinational investment in smallholder grain trading in Zambia

This article examines the causes and consequences of multinational investment in smallholder grain markets in Zambia. We show that direct purchases of smallholder maize and soybeans have increased rapidly over time and amounted to 90,000 mt of maize and 5600 mt of soybeans in 2014/15. Factors influencing this investment wave include: a large and growing segment of relatively larger smallholder farms, rapid expansion of processing capacity for animal feed and soybean oil, and reasonably stable macro-economic and foreign investment policy. This investment wave is associated with a decline in farm-gate to wholesale price margins of 13%, increased access to input credit and market price information for smallholders, and perceptions of increased market transparency by farmers. We find no evidence of market concentration driven by entry of these firms, as competition from domestic market traders remains robust. Some, but not all, of the factors driving this investment wave are shared by other countries in the region, suggesting an uncertain future for regional multinational investment in smallholder grain markets.

Price Transmission in the Zambian Sugar Sector: An Assessment of Market Efficiency and Policy Implications

ABSTRACT Market liberalisation that swept through Africa starting in the 1990s was intended to promote agricultural growth by stimulating investment in under-capitalised sectors. The article assesses price transmission to better understand market performance following liberalisation and foreign investment. Our findings show weak and asymmetric price transmission. These results imply room for policy interventions to enhance the welfare effects of the growing sugar sector. Weak and asymmetric price transmission also implies that increased access to export markets, as through the European Union (EU) Everything But Arms (EBA) agreement, could have smaller and less widely distributed benefits than would otherwise be the case.