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Below-average crop prospects and worsening macro-economic conditions limit seasonal improvements

  • Food Security Outlook Update
  • Malawi
  • April 2022
Below-average crop prospects and worsening macro-economic conditions limit seasonal improvements

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  • Key Messages
  • CURRENT SITUATION
  • UPDATED ASSUMPTIONS
  • PROJECTED OUTLOOK THROUGH SEPTEMBER 2022
  • Events that Might Change the Outlook
  • Key Messages
    • Despite an unprecedented dry start to the production season, rainfall performance has improved significantly since February 2022, with cumulative rainfall total and length of growing period expected to be sufficient for crops to fully mature. However, mid-season rainfall volatility, multiple tropical storms, and atypically low fertilizer usage are likely to reduce nation crop production to 15 to 25 percent below average, with the most considerable reductions in southern Malawi.

    • Macro-economic conditions in Malawi continue to worsen, driven by existing inflationary pressures, climatic shocks, and disruption to global supply chains due to the Russia-Ukraine war. The minimum expenditure baskets have increased for rural and urban households since the start of the year, particularly in the southern region. Food and non-food prices are expected to increase through the outlook period, September 2022, limiting household purchasing power and financial access to food.

    • Maize grain prices are higher than the five-year seasonal averages owing to increasing inflation pressure, below-average harvest prospects, and a higher than the average farmgate price set by the government for the 2022 maize buying season. Current maize prices range from 160 to 180MWK per kilogram at a time prices typically trend below 100MWK per kilogram.

    • In northern and parts of central Malawi, minimal (IPC Phase 1) acute food security outcomes are expected to continue through the harvest and post-harvest period. Despite entering the harvest period, districts in southern and central Malawi impacted by multiple tropical storms, worsening market dynamics, and below-average harvest expectations face Stressed (IPC Phase 2) acute food security outcomes. In the Lower Shire livelihood zone, Crisis (IPC Phase 3) acute food security outcomes are expected through the outlook period, September 2022, as underlying vulnerabilities have been exacerbated by multiple shocks impacting crop production, access to livelihoods, and financial access to food.  


    CURRENT SITUATION

    Despite an unprecedented late and dry start to the 2021/22 rainfall season, Malawi has received significant rainfall from late January through April 2022, eliminating substantial rainfall deficits recorded in early 2022. According to Department of Climate Change and Meteorological Services (DCCMS) and Climate Hazards Group InfraRed Precipitation with Station data (CHIRPS), the season is expected to end with near or above-average cumulative rainfall for all regions. Further, remote sensing data and field observations indicate rainfall continued into April, leading to a later-than-normal cessation of the season. As a result, crops will likely have sufficient moisture and time to reach maturity, contradicting initial rainfall assumptions outlined in the February 2022 Food Security Outlook.

    In mid-March, Malawi experienced another Tropical Storm, the second within 60 days. Similar to the Tropical Storm Ana, Tropical Strom Gombe primary impacted southern Malawi, flooding cropland, displacing households, and disrupting livelihoods. Although limited information is available, initial assessments indicate that the storm had less impact than the widespread cropland destruction, displacement, and livelihood disruption caused by Tropical Storm Ana in late January 2022. Overall, in southern and part of central Malawi, consecutive tropical storms have impacted about 1.4 million people, including over 50 deaths and 242,000 displaced people, caused flooding in about 16 districts in southern Malawi and parts of central Malawi, caused some livestock deaths and damaged around 95,000 hectares of cropland which in the affected districts ranged from 15 to 50 percent of crop land. Further, the storms reportedly damaged critical infrastructure and destroyed household assets, including farming and irrigation equipment. With limited assistance to date, the widespread disruption to livelihoods caused by consecutive tropical storms in southern and central Malawi is likely to negatively impact poor households, particularly those that lost critical household assets, were displaced, and could not engage in seasonal livelihood activities or income-generating activities.

    Production for main food and cash crops remain lower due to weather factors. In February 2022 Food Security Outlook report, FEWS NET projected that national crop production was likely to be 25 to 35 percent below average, given significantly below-average rainfall totals, cropland damage from tropical storm Ana, and below-average fertilizer access at the time of the report (See February Food Security Outlook). While crop damage and access to fertilizer continue to negatively impact crop production, rainfall performance has significantly improved since February (see above). Recent remote sensing data and field observations indicate that production prospects remain lower than average, ranging from 15 to 25 percent below average. Despite the improvements in the rainfall and increased rainfall window, there was little recovery from crop damage caused by the tropical storms. Overall, crop damage was extensive, and replanting and recovery was very low, limiting the positive impacts of better-than-expected rainfall on crop prospects.

    The main harvest season starts between late April and early May in Malawi. Currently, most crops have reached maturity in southern Malawi and are ready for harvest. Crops have also matured in central Malawi and will be ready for harvest by mid-May. The main harvest also marks the transition into the 2022/23 consumption season. Despite lower-than-average crop production, the current availability of own food for consumption, both green and main harvest, is likely easing food gaps and improving overall food security outcomes for most households.

    Current macro-economic conditions in Malawi continue to worsen, characterized by dwindling foreign reserves, deprecation of the Malawi Kwacha, and inflationary pressure. Previously, the main drivers included the expected below-average harvest and reduced donor flows, including the third consecutive year without the IMF extended credit facility, as highlighted in the February 2022 Food Security Outlook. Further, the global economic crisis linked to the Russia Ukraine conflict has reportedly contributed to worsening macro-economic conditions.

    According to the Reserve Bank of Malawi's Market Intelligence Report (March 2022), Malawi's economic targets are being negatively affected by the global impacts of the war in Ukraine, deepening existing negative drivers and disrupting previously stable market dynamics. In addition, shifting the US and European monetary policy is expected to weaken the Malawi Kwacha to the US dollar foreign exchange rate. From February to March 2022, the Malawi Kwacha depreciated against the dollar by 0.18 percent, with the quarterly deprecation rate reaching 0.51 percent, according to the March 2022 Malawi Market Intelligence Report. Further, despite the decision by the Malawi government to remove the cooking oil VAT, domestic inflation continues to rise. In March 2022, the inflation rate registered at 14.1 percent, a 1 percent increase from February 2022 (13 percent) and 3.3 percent (10.8 percent) in quarter four of 2021, driven, in part, by the continued depreciation of the Malawi Kwacha and the disruption to global food and non-food commodity markets, particularly wheat, fertilizer, crude oil, gas and metals. Overall, worsening macro-economic conditions negatively impact household purchasing power through higher prices across all commodities.

    Notably, the Russia Ukraine Conflict has impacted the fertilizer and fuel industries. In Malawi, fertilizer, which is 100 percent imported, plays an essential role in crop production, exposing Malawi farmers and businesses to global and domestic fertilizer price shocks. Prior to the conflict, households were already experiencing increased fertilizer prices limiting access during the 2021/22 production season. In Malawi, fertilizer prices have roughly doubled since to August 2020. According to The Nation Newspaper (April 2022), the prices of a 50 kilogram of fertilizer increased from 22,042 MWK in August 2020 to approximately 49,000 MWK in April 2022, with recent increases driven by global disruption to supplies. Currently, the demand for fertilizer is low, given that the production season is nearly complete. However, should fertilizer prices remain elevated at the start of the 2022/23 production season in November, households may face a significant reduction in access to fertilizer and be at risk of consecutive years of below-average crop production.

    Further, fuel prices have risen considerably. In April, Malawi Energy Regulatory Authority, in response to the global oil price shock, increased petrol fuel prices by 20 percent and diesel by 31 percent, triggering transportation costs to increase by between 50 and 100 percent of pre-conflict levels. The significant rise in transportation costs has reportedly led to higher prices for all commodities, as traders mark up prices to cover increased transportation costs.

    Lastly, cooking oil prices continue to increase substantially, despite the Malawi Government removing the relatively new VAT on cooking oil in March. Malawi imports approximately one-third of the raw materials used to manufacture cooking oil, with Russia and Ukraine being the major suppliers. As a result, cooking oil prices continue to rise due to the disruption to the supply of raw materials. According to WFP, cooking oil prices increased by 13.7 compared to February and round 300 percent compared to the same time last year, further impacting household purchasing power. According to WFP, the SMEB increased by 3.2 percent in the rural South, 4.0 percent in rural Central, and 1.2 percent in the rural North from February to March. Further, SMEB increased by 2.7 percent for Urban households (See figure 3). The rise in SMEB is attributable to existing poor macro-economic conditions, such as inflation pressure and global supply chain disruptions, and domestic production shocks, including expected below-average harvest and multiple tropical storms.

    While rural communities can access over 70 percent of their basic food needs from own production, urban households rely on markets for nearly all basic food and non-food commodities. Urban poor households are particularly impacted by the rising cost of living, given high exposure to market shocks due to year-round market dependency to meet basic needs and low-income generation. According to the Centre for Social Concern data from March 2022, the minimum needs expenditure basket for households in Blantyre, Zomba, Lilongwe, and Mzuzu cities rose by 18 percent compared to March 2021. In April, the increase in fuel prices has resulted in higher prices across most goods, reducing purchasing power for urban households which are still recovering from COVID-19-related macro-economic shocks.

    Currently, very poor and poor households in rural areas are accessing harvest and irrigation-related agricultural labor opportunities. From February to early April, improved rainfall performance resulted in higher than initially expected crop production prospects, increasing current agricultural labor opportunities for southern and central Malawi households. However, current agriculture labor opportunities remain below the seasonal average, limiting income generation for rural households.

    Compared to December 2021 prices, retail maize prices in March 2022 increased across all FEWS NET monitored markets, with 10 monitored markets reported prices increasing between 5 to 11 percent and 2 markets reporting prices increasing by less than 5 percent (See figure 4). Typically, at the start of the harvest period, between February and March, maize prices seasonally decrease by approximately 15%. However, according to price data from FEWS NET monitored markets, current maize prices remained displayed an unseasonably stable month-to-month trend.  From February to March 2022, there was a marginal decrease, less than five percent, in the price of maize for three monitored markets, a marginal increase, less than five percent, in four monitored markets, and prices were flat in the remaining monitored markets. The seasonally higher price of maize is reportedly linked to the prospects of a lower production year and rising inflation, limiting the expected seasonal decline in the prices. Further, the Malawi government announcement of a minimum farm-gate price of MWK 220 per kg, compared to the current average of MWK 190 per kg, likely attributed to higher than normal prices. Overall, average maize prices were highest in the South and lowest in the north, mirroring regional production expectations and market dynamics.

    As of 20 April 2022, SGR maize stocks stood at 31,036MT out of which 6,067 was already committed for Department of Disaster Management Affairs (DoDMA) for emergency response thereby bringing un uncommitted stocks to 24,968MT. ADMARC has stocks of around 162,714MT, resulting a carryover stock of 187,682 MT into the 2023 consumption season. Private traders and farm-households are also reported to have carryover stocks of approximately 1.2 million metric tons, resulting in a total carry overstock of 1.4 million metric tons.

    Overall, in northern and parts of central Malawi, minimal (IPC Phase 1) acute food security outcomes are expected to continue through the harvest and post-harvest period. Despite entering the harvest period, districts in southern and central Malawi impacted by multiple tropical storms, worsening market dynamics, and below-average harvest expectations face Stressed (IPC Phase 2) acute food security outcomes. In the Lower Shire livelihood zone, Crisis (IPC Phase 3) acute food security outcomes are expected through the outlook period, September 2022, as underlying vulnerabilities have been exacerbated by multiple shocks impacting crop production, access to livelihoods, and financial access to food.


    UPDATED ASSUMPTIONS

    The assumptions used to develop FEWS NET’s most likely scenario discussed in the February to September 2022 Food Security Outlook Report remain unchanged, except for the following:

    Rainfall performance: After an unprecedented dry start to the rainfall season, the most recent rainfall data indicates a substantial improvement in rainfall performance, both in cumulative amounts and duration of the season. As a result, FEWS NET expects the 2021/22 rainfall season to end at near to above-average cumulative totals with cessation of rainfall later than usual, satisfying crop moisture requirements and length of growing period needed for crops to fully mature. However, rainfall performance volatility, mid-season dry spells, and flooding are expected to impact overall crop production negatively.

    Production prospects: Given a positive end to the rainfall season, crop production is expected to improve compared to the original February 2022 Food Security Outlook assumption. However, mid-season rainfall volatility, multiple tropical storms, and atypically low fertilizer usage are still expected to drive a below-average harvest. As a result, FEWS NET assumes that national crop production will be between 15 to 25 below average, with significant reductions in southern and parts of central regions.

    Labor incomes: Due to widespread impacts of multiple tropical storms and below-average harvest prospects in southern and parts of central Malawi, FEWS NET now assumes that household income generation will be below average in most districts impacted in these areas. This expands on the original assumption from the February 2022 Food Security Outlook, which assumed a reduction in income generation primarily for households in the Lower Shire Livelihood Zone. The reduced income in southern and central districts is expected to be driven by reduced harvest labor, petty trading, and irrigated cultivation opportunities, and will negatively impact household purchasing power.

    Retail maize prices: Due to increasing inflation pressure, trade disruptions, government farm-gate prices, and below-average crop prospects, FEWS NET now assumes that the seasonal decline in maize prices is likely to be minimal and temporary. Further, FEWS NET assumes that maize prices will remain above harvest and post-harvest five-year averages. As a result, households are expected to experience increasing limitations to financial access to food from the post-harvest period, in June 2022, through the remainder of the outlook period, September 2022.


    PROJECTED OUTLOOK THROUGH SEPTEMBER 2022

    Through the remainder of the outlook period, up to September 2022, inflationary pressures resulting from existing poor macro-economic conditions and disruptions from the Russia Ukraine conflict will continue to put upward pressure on inflation, increasing prices for a wide range of commodities negatively impacting household purchasing power. Further, the below-average national crop production is expected to limit the normal seasonal decline in maize prices, with prices expected to remain above five-year seasonal averages through the harvest and post-harvest period, September 2022. Lastly, the impacts of multiple tropical storms are expected to disrupt household livelihoods and income generation opportunities, particularly for households in southern and parts of central Malawi.

    Despite an unprecedented dry start to the 2021/22 agricultural season and worsening market dynamics, parts of central and most northern Malawi are expected to be in Minimal (IPC Phase 1) acute food insecurity outcomes from April to September 2022. In southern and parts of Central Malawi, the expected below-average crop production will provide relief to households. However, the relief is expected to be short-lived, as poor households deplete household food stocks and increase market reliance earlier than usual. Increasing household expenditure basket cost, reduced income generation, and increased market reliance is expected to negatively impact poor and very poor households' financial access to food. As a result, in southern Malawi and parts of central Malawi Stressed (IPC Phase 2) outcomes are expected to persist through September 2022. Further, households in the Lower Shire Livelihood Zone are expected to face Crisis (IPC Phase 3) outcomes, given the widespread disruption to livelihoods, relatively worse market dynamics, and limited social safety nets and coping capacity will exacerbate existing vulnerabilities.


    Events that Might Change the Outlook
    AreaEventImpact on food security outcomes
    NationwideFurther economic shocks due of global impacts of the Russia-UkraineUnexpected disruptions to global supply chains and global economic conditions due to sanctions, supply disruptions, or unknown factors linked to the Russia-Ukraine conflict could further increase price of food and non-food commodities, especially fuel prices. Given the expectations of a below normal production year, the earlier than normal increase in market reliance and reduced purchasing power could disproportionately impact urban and rural poor households. As a result, a higher proportion of household may face Stressed (IPC Phase 2) or Crisis (IPC Phase 3) outcomes than expected.
    NationwideProduction of food and cash crops significantly worse than expectedWith an erratic rainfall season, impacts of tropical storms and a likelihood of a reduced irrigated farming season owing to lack of inputs, it is possible that Malawi’s overall food and cash crop production could be much lower. While this is not the most likely scenario, a significantly worse than expected reduction in crop production for both rainfed and irrigation seasons would substantially increase populations facing significant survival and livelihoods protection gaps, increasing rural populations facing Stressed (IPC Phase 2) and Crisis (IPC Phase 3) outcomes.
    NationwideAbnormally high staple pricesCurrent observed prices in March were at 188MWK per kilogram (47% above the earlier projections). Currently, prices are expected to stabilize at elevated levels – however, if food prices continue to increase a proportion of households will face a considerable reduction in financial access to food.

    Malawi Food Security Outlook Update April to September 2022: Below-average crop prospects and worsening macro-economic conditions limit seasonal improvements

     

     

    Figures Map of impacts in southern Malawi from Tropical Storm Ana. Most impact in southern part of southern Malawi.

    Figure 1

    Districts impacted by Tropical Storm Ana

    Source: DoDMA

    Malawi inflation from April 2021 to March 2022. Inflation is rising at increasing rates from October 2021 to March 2022

    Figure 2

    Malawi Overall Inflation Trends, April 2021 – March 2022

    Source: Reserve bank of Malawi

    Table showing expenditure basket prices in Malawi. Highest increases shown in rural south.

    Figure 3

    Malawi Survival Minimum Expenditure Basket Monthly variations, March 2022

    Source: WFP

    Map of maize prices in FEWS NET monitored markets.

    Figure 4

    Percent Change of Maize Retail Prices – December 2021 to March 2022

    Source: FEWS NET

    This Food Security Outlook Update provides an analysis of current acute food insecurity conditions and any changes to FEWS NET's latest projection of acute food insecurity outcomes in the specified geography over the next six months. Learn more here.

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