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Assessing the profitability and feasibility of climate-smart agriculture investment in Southern Malawi

Understanding the costs and benefits in a volatile and changing climate












Ignaciuk, A., Maggio, G. & Sitko, N. 2021. Assessing the profitability and feasibility of climate-smart agriculture investment in Southern Malawi. Understanding the costs and benefits in a volatile and changing climate. FAO Agricultural Development Economics Working Paper 21-07. Rome, FAO.  




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    Widespread maize monocropping in Malawi exposes farmers to significant livelihood risk in the context of increasing climate variability. 36 percent of rural households grow maize in monocrop. These farmers are often poor and land constrained, and experience low levels of productivity and high production volatility. The effects of crop diversification on farm productivity and income volatility in Malawi varies across cropping systems. Maize in combination with legumes is the only cropping system in Malawi that is significantly associated with an increase in productivity and a reduction in crop income volatility. Contrary to expectations, cropping systems with 3 or more crops do not significantly reduce crop income volatility relative to maize monocropping. Market weaknesses for many non-maize crops in Malawi limit the benefits from diversification. Higher volatility in prices of many non-maize crop is a disincentive to the adoption of diversified systems and pushes farmers toward monocropping. Household constraints are a key barrier to adopting more diverse cropping systems. Sufficient household assets, particularly land, enable households to overcome the investment and risk costs associated with crop diversification. Coordination between private and public investments are required to improve the incentives for diversification in Malawi. A coordinated effort to strengthening input and output markets for non-maize crops, combined with public support to overcome household-level resource constraints to diversification (including public works programmes, input subsidies, and cash transfers) is necessary to promote widespread crop diversification.
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    This brief details the three functional elements of climate vulnerability: risk exposure, sensitivity and adaptive capacity, in order to assess the interactions between participation in Malawi’s largest public works programme, the Malawi Social Action Fund (MASAF) and three widely promoted climate-smart agriculture (CSA) practices. Using three waves of national panel household survey data, we find that participation in MASAF significantly increases the likelihood that farm households adopt CSA practices. This suggests that MASAF participation improves farmers’ adaptive capacity by reducing direct and indirect constraints to adopting climate adaptive farm practices. Moreover, we empirically demonstrate that the joint treatment effect of MASAF participation in combination with the adoption of CSA practices generates greater and more consistent positive impacts on farm welfare than the standalone impacts of the treatments. This is indicative of synergies between social protection and agricultural interventions. Finally, we show that under extreme dry conditions the short term standalone adoption of CSA practices does not generate positive impacts on farm and household outcomes. However, when combined with MASAF participation, and particularly when the CSA practice is adopted for multiple years, evidence of positive impacts is found. These findings provide empirical evidence on the importance of multi-sectoral approaches that link agricultural interventions with social protection to address the climate vulnerability of resource poor farmers.
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    There are a wide range of agriculture-based practices and technologies that have the potential to increase food production and the adaptive capacity of the food production system, as well as reduce emissions or enhance carbon storage in agricultural soils and biomass. However, even where such synergies exist, capturing them may entail significant costs, particularly for smallholders in the short-term. In this paper, we provide a brief review of the adaptation and mitigation benefits from vario us practices, and then focus in detail on empirical evidence concerning costs and barriers to adoption, both from household and project-level data. Findings indicate that up-front investment costs can be a significant barrier to adoption for certain investments and practices, and furthermore, the evidence also supports the hypotheses that opportunity and transactions costs across a wide range of investments and practices. Additionally, potential synergies between food security, adaptation an d mitigation opportunities, as well as costs, can differ substantially across different agro-ecological zones, climate regimes, and historical land use patterns.

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