Analysis of Maize Market Integration in Malawi: Are Government Influenced ADMARC Prices Transmitted to Retail Markets?

Maize is economically an important food commodity whose pricing defines
household food security in Malawi. The study focuses on six strategic retail maize
markets spread across the northern (Mzimba, Chitipa), central (Dowa, Lilongwe) and
southern (Ntaja, Lunzu) regions. The Malawi Government’s agriculture datasets
collected by the Agricultural Market Information System are used for the analysis. The
trend of maize prices for the period 2005-2017 is studied using economic analytical
methods. Vector Error Correction model and Granger causality tests are applied to
determine market integration and price transmission between ADMARC and the retail
maize markets. Stationarity test is conducted using Augmented Dickey Fuller test.
Using the Johansen test, co-integration model is applied to determine correlation
between ADMARC and retail market prices. The findings show that contrary to the
mandate of serving as an instrument for transmitting maize prices to other markets
across the country, ADMARC fails to transmit price information to retail markets in
Malawi except Dowa market. The long-run coefficients also show no significant
relationship between ADMARC prices and those in the retail markets. However, strong
integration exists among the retail markets both in the short-run and long-run. The
study demonstrates that ADMARC does not perform price leading function in the
pricing of maize to guarantee food security among low income households in Malawi.
As a social protection agency, ADMARC should purchase maize at a floor price that is
competitive with retail market prices. Increased investment, and reduced
administrative and bureaucratic constraints in the procurement of maize would be
required