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How Responsive to Prices is the Supply of Milk in Malawi?


  • Revoredo-Giha, Cesar
  • Arakelyan, Irina
  • Chalmers, Neil
  • Chitika, Rollins


Dairy is a key investment sector for the Government of Malawi. Advocacy institutions operating in the country have successfully lobbied for increasing the duty applied for powder milk, with the aim of improving the price received by farmers. It should be noted that whilst an increase of the price paid to farmers would rise their revenues (assuming the same amount of milk delivery), it might also bring additional blessings, in the sense that if farmers respond to prices, they may rise their revenues beyond the increase in prices, and furthermore, they would expand their delivery of milk to processors offsetting the imports of powder milk and reducing their idle capacity in factories. Hence, the purpose of this paper is to measure the responsiveness of the deliveries of milk at the milk bulking groups to prices paid to farmers (i.e., the elasticity of supply faced by processors). This is done using a unique dataset that comprises information by milk bulking group from January 2009 to February 2013. The results indicate that the supply of milk is price responsive. The price elasticity in the short term is equal to 0.6 and in the long term is 1.44. This indicates that farmers’ revenues not only benefit from an increase in the price of milk but also from the increase in the quantity produced. Furthermore, it indicates the possibility that domestic producers could offset imports of milk powder by processors, although answer to this requires further research.

Suggested Citation

  • Revoredo-Giha, Cesar & Arakelyan, Irina & Chalmers, Neil & Chitika, Rollins, 2013. "How Responsive to Prices is the Supply of Milk in Malawi?," Working Papers 152214, Scotland's Rural College (formerly Scottish Agricultural College), Land Economy & Environment Research Group.
  • Handle: RePEc:ags:srlewp:152214

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    References listed on IDEAS

    1. Choi, In, 2001. "Unit root tests for panel data," Journal of International Money and Finance, Elsevier, vol. 20(2), pages 249-272, April.
    2. Cesar Revoredo-Giha & Alan Renwick, 2016. "Market structure and coherence of international cooperation: the case of the dairy sector in Malawi," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 4(1), pages 1-23, December.
    3. Maddala, G S & Wu, Shaowen, 1999. " A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 631-652, Special I.
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    Cited by:

    1. Revoredo-Giha, Cesar & Arakelyan, Irina & Chalmers, Neil, 2015. "Processors pricing and smallholders’ milk supply response in Malawi: An application of the nonlinear autoregressive distributed lag model," 2015 Conference, August 9-14, 2015, Milan, Italy 212295, International Association of Agricultural Economists.

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    Milk supply; autoregressive distributed lags; panel data.; Food Consumption/Nutrition/Food Safety; International Relations/Trade;

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