High food prices and below-average incomes disrupt access to food in southern Malawi

• Households face constrained access to food purchases in markets due to atypically high prices exacerbated by limited access to income, particularly in rural and low-income urban families in southern Malawi. Buying and retail prices for the maize staple continue to be atypically high in the immediate post-harvest period. June to July, prices of maize grain increased by a range of 7.1 percent to 46.3 percent in all except two FEWS NET monitored markets. Prices rose the most in northern Malawi markets ranging from 7 to 46 percent, followed by central Malawi markets at 10 to 28.2 percent and southern Malawi being the least at -1.9 to 16.3 percent. Compared to the same time last year, the prices in July 2022 were higher by a range of 75.8 to 226 percent and compared to the five-year average; the July 2022 prices were higher by a range of 67.0 to 171.4 percent. Drivers for price increases remain the increased market demand, especially in southern Malawi, increased transactional costs due to rise in fuel prices, general inflation due to global factors and the recent devaluation of the local currency, the Malawi Kwacha, and higher demand in markets across the border in Tanzania (through to Kenya).

• Recent household survey data indicates a worsening situation across most of Malawi, characterized by high reliance on consumption and livelihood-based coping. According to the Malawi household food security bulletin for June to July 2022, 88 percent of households report an acceptable food consumption score. However, 70 percent of households also reported a reduced coping strategy index of severe, indicative of heavy reliance on consumption-based coping such as reducing the number of meals per day to prolong existing food stocks. There is a 51 percent increase in households reporting severe consumption-based coping compared to last year, from 18 percent in 2021 to 69 percent. Further, the proportion of households reporting severe consumption-based coping was evenly spread throughout each region, indicating a deterioration of food security conditions across most rural Malawi.

• In Malawi, acute food insecurity outcomes continue to worsen, particularly in southern Malawi. In most south Malawi districts, very poor and households face Stressed (IPC Phase 2) and Crisis (IPC Phase 3) critical food insecurity outcomes. Very poor and poor households currently in Stressed (IPC Phase 2) will likely transition to Crisis (IPC Phase 3) food security outcomes from October 2022 through the lean season, November to March 2023. The anticipated deterioration in food security conditions is driven by the coinciding impact of multiple tropical storms, below-average crop production, limited income opportunities, and worsening macroeconomic shocks on financial access to food, including reliance on coping strategies to meet food needs. Currently, in the Lower Shire livelihood zone, the above-mentioned shocks have already exacerbated existing vulnerabilities and food insecurity, including limited coping capacity, resulting in Crisis (IPC Phase 3) acute food insecurity outcomes for the area. Households in central and northern districts remain in Minimal/None (IPC Phase 1) outcomes which will persist through December 2022, with some very poor households likely facing Stressed (IPC Phase 2) outcomes due to unfavorable macro-economic conditions.

The main harvesting period ended around July, and the Ministry of Agriculture and Food Security released the third round of Agricultural Production Estimates for the 2021/22 agricultural season. The estimates have indicated maize staple production of 3.7 million metric tons, down from 4.6 million metric tons last year, representing a 19 percent decrease due to delayed start to the rainfall season, poor rainfall distribution throughout, and below-average fertilizer access. Despite the decline in production, Malawi will break even and be slightly above average in terms of net maize stocks due to carryover stocks estimated to be slightly above 1 million tons in April. In July 2022, the state institutions ADMARC (Agricultural Development and Marketing Corporation) and NFRA/SGR (National Grain Reserves Agency/Strategic Grain Reserve) reported a total of 468,568 MT of maize stock between them, with ADMARC having 177,377 MT in stock and NFRA/SGR 291,191 MT in stock.

Typically, the Malawi government generates most of its foreign currency reserves through tobacco sales, which is relied on for importing commodities. In July, the peak period of tobacco sales, the price of tobacco was approximately 2.14 USD per kilogram, a 33 percent increase compared to last year and 31 percent above the five-year average. However, poor growing conditions resulted in a significant decline in tobacco production, a 31 percent decrease compared to last year and 43 percent below the five-year average. As a result, revenue generated from tobacco sales reportedly decreased by 8 percent compared to the previous year. It was 25 percent below the five-year average, negatively impacting available foreign currency reserves.

Malawi depends heavily on foreign exchange reserves due to the low level of exports in high-level imports, including fuel and fertilizer. However, recent reports from the reserve bank of Malawi indicate depleting foreign currency reserves available for imports. In July 2022, the Reserve Bank of Malawi reported fewer than two months of foreign funds available to cover imports, below the threshold of three months. In addition to lower-than-average revenue from tobacco sales, the Malawi government depreciated the MWK in May 2022 by 25 percent. As a result, the import cost increased significantly, reducing available foreign currency reserves.

In July 2022, government agencies ADMARC and NFRA increased the maize stocking price from 220 MWK per kilogram to 290 MWK per kilogram, improving cash sale income for households with excess maize stocks. However, ADMARC increased the retail price of subsidized maize from 205 MWK per kilogram to 300 MWK per kilogram, a 46 percent increase. Overall, increased maize stocking prices relieved farmers who harvested maize. However, the increase in subsidized maize retail prices negatively impacted very poor households, which generated limited income from crop stocks and currently depend heavily on markets to access food.

Along with increasing food prices, the prices of imported commodities, such as petroleum fertilizer and consumer goods, along with essential raw materials for manufacturing, continue to rise, increasing the cost of business and contributing to overall inflationary pressure across the economy. According to the Malawi National Statistics Office (NSO), inflation in July was recorded at 24.6 percent, with food inflation at 32.5 percent and non-food inflation at 17.5 percent, respectively (See Figure 1). Continued high food inflation erodes disposable income for many low-income urban and rural households, limiting their purchasing power. Further depleting foreign currency reserves and the rising cost of imports due to local currency depreciation and global supply chain disruptions have limited food and non-food supplies, further increasing inflationary pressure.

According to FEWS NET informal cross-border monitoring import and export data from July 2022, Malawi is experiencing registering a reduction in informal maize imports and an increase in informal maize exports. Informal imports through southern Malawi, via Mozambique, and northern Malawi, via Zambia, were 23 percent below last month and 21 percent below the five-year average. Further, July 2020 trade data also indicated that informal exports increased by 38 percent compared to the previous month and were 281 percent above the five average, reducing local food supplies. Overall, significantly above-average informal exports pose a risk to the food supply in Malawi. Higher demand and prices in neighboring countries and East Africa have resulted in a significant uptick in exports, reducing local food availability, despite carryover stocks and harvest production initially indicating a net-even food supply for the 2022/23 consumption period.

Households face constrained access to food purchases in markets due to atypically high prices exacerbated by limited income access. Although most very poor and poor families, especially in southern Malawi, are mainly relying on market purchases for food, many of them have reduced capacity to afford adequate food. As an example, a FEWS NET outcome analysis in June showed reduced incomes for very poor households as compared to the baseline years (See Figure 2). Buying and retail prices for the maize staple continue to be atypically high in the immediate post-harvest period. Month on month, from June to July, prices of maize grain were stable in two monitored markets but reported increases ranging from 7.1 percent to 46.3 percent in the rest of the markets. Segregated by region, the highest percentage increases were registered in northern Malawi markets ranging from 7 to 46 percent, followed by central Malawi markets at 10 to 28.2 percent and southern Malawi being the least at -1.9 to 16.3 percent. Compared to the same time last year, the prices in July 2022 were higher by a range of 75.8 to 226 percent and compared to the five-year average; the July 2022 prices were higher by a range of 67.0 to 171.4 percent. Drivers for price increases remain the increased market demand, especially in southern Malawi, increased transactional costs due to rise in fuel prices, general inflation due to global factors and the recent devaluation of the local currency, the Malawi Kwacha, and higher demand in markets across the border in Tanzania (through to Kenya).

Overall, worsening macroeconomic conditions have negatively affected most sectors, including manufacturing, wholesale, retail, and transportation. Further, reduced business productivity and increased cost of imports have eroded household disposable income due to higher prices and limited income-generating opportunities. Most notably, low-income urban and rural households with high dependency on markets likely face the highest exposure to ongoing macroeconomic shocks throughout Malawi.

Recent data on drivers and household food security outcomes indicate a worsening situation across most of Malawi, characterized by high reliance on consumption and livelihood-based coping. According to the Malawi household food security bulletin for June to July 2022, 88 percent of households report an acceptable food consumption score. However, 70 percent of households also reported a reduced coping strategy index of severe, indicative of heavy reliance on consumption-based coping such as reducing the number of meals per day to prolong existing food stocks. There is a 51 percent increase in households reporting severe consumption-based coping compared to last year, from 18 percent in 2021 to 69 percent. Further, the proportion of households reporting severe consumption-based coping was evenly spread throughout each region, indicating a deterioration of food security conditions across most rural Malawi.

In southern Malawi, multiple coinciding and sequential shocks since January 2022 have manifested into increased reliance on coping strategies to meet food needs, eroding households' current and future resilience. In addition to consumption-based coping, households also report high usage of livelihood-based coping strategies, such as selling household assets, increased reliance on credit, and atypical labor migration. According to June to July 2022 data, nearly one-third of households reported using Crisis livelihood coping strategies to meet their food needs, likely in response to the early depletion of food stocks and disruption to financial access to food. Further, reports indicate that the rapidly deteriorating market conditions have also heavily impacted rural and urban households in central and northern Malawi. Households most affected include very poor and poor families that cannot afford current market prices but generate insufficient income from crop sales and labor.

The Malawi Vulnerability Assessment Committee (MVAC) report for the 2022/23 consumption season released in August has shown that there are 2.3 million people in the current period who are facing Crisis (IPC level 3) food insecurity outcomes (July to September 2022) and require assistance and project that a total of 3.8 million people will be facing Crisis (IPC 3) food security outcomes in the projected period of (October 2022-March 2023).

In southern Malawi, very poor and poor households are currently experiencing Stressed (IPC Phase 2) acute food security outcomes, with a proportion of very poor households facing Crisis (IPC Phase 3). In the Lower Shire Livelihood Zone of southern Malawi, very poor and poor households are already experiencing Crisis (IPC Phase 3) outcomes, given the significant impact of multiple tropical storms, below-average harvest, and minimal income on already existing vulnerabilities and limited resilience.

Most Central and Northern Malawi districts remain in Minimal (IPC Phase 1) acute food insecurity outcomes. However, as indicated by current food security outcomes, an increasing proportion of very poor and poor households are likely to be Stressed (IPC Phase 2), with a small portion in Crisis (IPC Phase 3). Overall, across most of Malawi, the negative impact of multiple shocks throughout the growing, harvest, and post-harvest period has resulted in the earlier than usual reliance on consumption and livelihood-based to mitigate disruption to food access resulting in current food gaps and eroding household resilience.

The assumptions used to develop FEWS NET’s most likely scenario discussed in June 2022 to January 2023 Food Security Outlook Report remain unchanged, except for the following:

• Through August 2022, seasonal income from crop sales, including cash crops, is expected to be below average for all wealth groups. In southern Malawi, agricultural-related income from the harvest period is expected to be moderately below average. In contrast, central and northern Malawi households are expected to have generated slightly below-average income.
• According to FEWS NET and its science partners, preliminary weather forecasts conclude on a timely start to the 2022/23 rainfall season in October 2022 with the expectation of above-average rainfall through March 2023. In southern Malawi, above-average rainfall is most likely between October 2022 and January 2023 due to the forecast La Nina conditions. A timely start to the rainfall season is expected to improve agricultural hiring and income generation for rural households.
• From August 2022 to January 2023, high import prices, high inflation, and depreciation of the MWK are expected to continue to limit foreign currency reserves available, reducing the government and traders’ capacity to import critical commodities such as fertilizer and oil (See figure 3.). As a result, imports will be below-average throughout the outlook period, limiting supplies and increasing prices.
• From September 2022 to January 2023, supply of fertilizer for the government fertilizer subsidy program is expected to be below average due to worsening macroeconomic conditions which are limiting foreign currency availability and imports. This will lead to reduced access to fertilizer for most households and negatively impact 2022/23 production expectations.
• Prices of agriculture inputs on the commercial market, including fertilizer, are expected to increase significantly and remain above average through the projection period. As a result, households are expected to reduce the total land planted and limit agricultural labor hiring from October 2022 to January 2023.
• Total income from agriculture labor through the projection period is expected to be below average for very poor and poor households as the negative impact of increased fertilizer prices and below-average land cultivation. As a result, Below-average hiring is expected to erode the positive effects of favorable rainfall conditions. Southern and central Malawi is expected to experience the highest reduction in agricultural labor.
• Maize prices in Malawi are expected to be substantially higher than initial projections in June 2022. Current prices range between 219 MWK and 369 MWK, significantly above the previous year and the five-year averages for the post-harvest period, driven by below-average production and inflationary pressure. Through the projection periods, maize prices are expected to continue to increase as household food stocks are depleted, and an increasing proportion of households rely on markets to access food.

• Limited access to markets is expected to continue affecting households’ food security situation. Recent Malawi Food Security Bulletin shows that 44 percent of the households have limited access to markets. Of these households, 90 percent cited a lack of money as the major reason.  The Rural Centre has the highest proportion of the households who with unlimited access to markets (62 percent), followed by the Rural North (57 percent) with rural south at 56 percent. Thus, limited income and significantly above-average food prices are expected to disrupt household financial access to food, particularly for rural poor and very poor households. As a result, financial access to purchase food for very poor and poor households is expected to be moderately below average in southern Malawi and slightly below to moderately below average in central and Northern Malawi.

From August to September, households in southern Malawi are expected to deplete remaining household food stocks, increasing their reliance on markets to meet basic food needs. Further, high market reliance will likely continue through March 2023, before the 2022/23 harvest. Atypically high reliance on markets will expose poor and very poor households to expected deterioration in macroeconomic conditions through the outlook period, January 2023. Most notably, household financial access to food is expected to be significantly disrupted due to the below-average income, including labor opportunities, and already high and increasingly food and non-food prices.

From August to October 2022, households in southern Malawi will face Stressed (IPC Phase 2) acute food insecurity outcomes, with a small proportion of very poor households facing Crisis (IPC Phase 3). Households in Stressed (IPC Phase 2) have minimal food stocks and rely on markets to meet food needs yet experienced a significant reduction in income from crop sales and limited labor opportunities. Very poor households, including households in Lower Shire Livelihood Zone, have likely already exhausted household food stocks and rely on multiple coping strategies to mitigate the impact of below-average income and above-average prices, resulting in Crisis (IPC Phase 3) acute food insecurity outcomes.

From October 2022 to January 2023, most poor households in southern Malawi will exhaust their remaining food stocks, resulting in near full reliance on markets to cover food needs. Further, the expected continuation of poor macroeconomic conditions through January 2023 will limit financial access to food. The start of the 2022/23 agricultural season in October 2022 will improve agricultural labor opportunities. However, high fertilizer prices and reduced land cultivation is expected to result in below-average agricultural-labor income for very poor and poor households, despite the favorable rainfall forecast. As a result, households already in Stressed (IPC Phase 2) will face Crisis (IPC Phase 3) acute food insecurity from October to January 2023, characterized by large consumption gaps or increased usage of livelihood-coping strategies to meet basic food needs.

In central and northern Malawi, household food stocks are reportedly higher and expected to remain adequate through January 2023, limiting household exposure to macroeconomic shocks. As a result, most central and northern Malawi districts will likely face Minimal (IPC Phase 1) acute food insecurity outcomes through January 2023, dependent on adequate household food stocks. However, a proportion of very poor households with inadequate food stocks and limited income generation from crop sales likely face Stressed (IPC phase 2). From October 2022 to January 2023, an increased proportion of poor households is expected in Stressed (IPC Phase 2) outcomes, as more households exhaust food stocks and increase market reliance, with a small proportion of very poor facing Crisis (IPC Phase 3) outcomes.

According to the MVAC IPC analysis in June 2022, low-income urban households will register acute food insecurity due to reduced incomes and increased cost of basic food and non-food needs due to worsening economic conditions. According to the MVAC analysis, between 10 to 20 percent of the population in four major urban areas will register Crisis (IPC Phase 3) food security conditions in the August to October period, with 10 percent in Mzuzu, 15 percent in Zomba and Blantyre, and 20 percent in Lilongwe). Further, from October 2022 to January 2023, the macroeconomic situation is expected to worsen, resulting in 20 to 30 percent of urban populations experiencing Crisis (IPC Phase 3) food security outcomes, with 20 percent in Mzuzu and Zomba, 25 percent in Blantyre, and 30 percent in Lilongwe.

ossible events over the next eight months that could change the most-likely scenario.