Fertilizer Market Reform And The Determinants Of Fertilizer Use In Benin And Malawi

Most countries in sub-Saharan Africa have reduced or eliminated fertilizer subsidies and liberalized input marketing as part of the reform process that began in the early 1980s. The effect on fertilizer prices and use is one of the most frequently mentioned criticisms of liberalization. The effect of these reforms, however, has varied widely across countries. For example, in Benin fertilizer use has increased ten-fold since 1982, while in Malawi it has risen just 30 percent, less than population growth over the period. This paper explores the factors behind these widely different experiences with input market reform. It relies in part on household survey data collected by IFPRI and collaborating institutions in 1998. The two surveys used nationally representative samples of 800-900 farmers and covered a variety of topics. A Heckman model is used to identify the determinants of fertilizer use. The study finds that fertilizer use is closely related to crop mix and access to inputs on credit, but not to household income. In both countries, farmers growing cash crops are three times as likely to fertilize their maize fields as other farmers. In Benin, 88 percent of the fertilizer purchased by farmers is bought on credit through the integrated cotton marketing system managed by the parastatal SONAPRA. However, almost one third of this fertilizer is diverted to maize and other crops. In Malawi, tobacco is the most important cash crop among smallholders, but less than half the tobacco growers are able to purchase fertilizers on credit. Maize accounts for about 60 percent of the fertilizer use, compared to less than a third for tobacco. This difference in the tradability of the main crop being fertilized helps explain some of the difference in performance. In Benin, fertilizer use was stimulated by the 1994 devaluation of the CFA franc, while in Malawi real depreciation of the currency has reduced the profitability of fertilizer. The results demonstrate some of the paths by which cash crop and food crop production may be complementary. This can occur through the residual effect of fertilizer on food crop production, through the alleviation of cash constraints for the purchase of fertilizer, and through the availability of inputs on credit. In Benin, the availability of inputs on credit is facilitated by the SONAPRA monopsony on cotton purchasing, which makes loan recovery easier. Thus, the benefits of export liberalization must be weighed against the risk that it will weaken the enforceability of seasonal agricultural credit, with indirect consequences for food crop productivity.