Crisis (IPC Phase 3) outcomes expected during the lean season in areas with localized poor production

• Minimal (IPC Phase 1) outcomes are expected to persist across most of the country through at least May 2021. However, poor households in some southern districts and the central Salima district are expected to run out of own-produced food atypically early. Most of these areas are already facing Stressed (IPC Phase 2) outcomes and are expected to deteriorate to Crisis (IPC Phase 3) between November 2020 and January 2021. In April and May 2021, conditions will improve to Minimal (IPC Phase 1) as households access food and income from the 2021 harvests. In urban areas, outcomes are expected to improve to Stressed (IPC Phase 2) around December 2020 as the economy recovers.

• According to national and international forecasts, La Niña conditions are expected to persist through March/April 2021. This will likely result in average to above-average rainfall across Malawi during the 2020/2021 rainy season. As a result, average 2020/2021 production is expected, which will support access to income from agricultural labor opportunities. However, income-earning will likely be below average in areas facing Crisis (IPC Phase 3) outcomes due to reduced purchasing power among those who hire labor.

• According to FEWS NET price projections, maize grain prices are expected to follow seasonal trends but remain above five-year average levels throughout the projection period. Typical seasonal price increases are expected in the coming months, driven by increasing demand as more households run out of own-produced food. Demand from government institutions who plan to buy 200,000 to 400,000 MT of maize grain will also put upward pressure on prices.

• Due to a significant reduction in COVID-19 cases in recent months, the government has re-opened airports, re-opened schools, and lifted other restrictions. This has led to a pickup in economic activity, generally increasing income-earning opportunities for households impacted by layoffs, business closures, and reduced demand for labor and trade. However, income-earning is not yet back to normal.

Current Situation

Overall, food availability across the country is high due to above-average production in the 2019/20 agricultural production season. According to crop estimates from the Ministry of Agriculture and Food Security (MoAFS), Malawi produced about 3.7 million metric tons of the maize staple (28 percent above the five-year average) against a total national food requirement (including maize and other foods) of about 3.3 million metric tons. When production of alternative cereals and other foods is added, the food surplus is even larger. However, some districts in southern Malawi registered below-average production due to poor rainfall performance.

Despite the surplus production, levels of stocks in the national grain reserves—held by the Agricultural Development and Marketing Cooperation (ADMARC) and the National Food Reserve Agency’s (NFRA) Strategic Grain Reserves (SGR)—remain well below target levels of 200,000 MT each. By mid-October 2020, ADMARC reported having procured only 55,000 MT out of a planned 200,000 MT, and the NFRA had procured just under 30,000 MT of a planned 200,000 MT. The NFRA normally procures at least 200,000 MT of maize in a consumption year, while ADMARC sells over 50,000 MT. Normally, ADMARC stocks maize grain for sale at subsidized prices during the lean season, while the NFRA stocks maize grain for use as humanitarian assistance and as an emergency stock.

Maize grain prices remained steady from August to September 2020 in some markets but increased in others—mostly in southern areas—according to data from MoAFS. Specifically, prices increased by 6 to 17 percent in Balaka, Lunzu, Phalombe in Southern Malawi, and Salima and Ntcheu in Central Malawi. These increases are in line with typical seasonal trends as an increasing number of households run out of own-produced food and become reliant on market purchases, which typically happens first in southern areas. At the national reference market of Mitundu, maize grain prices have remained relatively stable, increasing by 3 percent from MWK 160/kg in August to MWK 165.57/kg in September. Prices at Mitundu were 23 percent lower than prices at the same time last year but 14 percent higher than the five-year average. Meanwhile, prices at Mzuzu market in Northern Malawi fell by 10 percent between August and September, mainly due to reduced demand from traders that buy and sell the maize in Tanzania. In all markets, prices in September remained 9 to 30 percent lower than prices at the same time last year. Compared to the five-year average, maize grain prices were comparable in some markets but were up to 19 percent above average in others.

In rural areas, poor households are currently earning income from agricultural labor (especially land clearing and ridging) as the country enters the peak agricultural labor period. Poor households are also earning income from petty trade and self-employment activities, some non-agricultural labor, and some late crop sales.

In southern areas, poor households are currently earning income from agricultural labor, irrigated crop and vegetable sales, petty trade and self-employment activities, some non-agricultural labor, and some livestock sales. However, labor wages are expected to be slightly below average due to increased competition for available work and reduced purchasing power among those who hire labor. Additionally, incomes from livestock sales in Chikwawa and Nsanje districts are expected to be limited due to a ban on livestock sales in place since July 2020 due to an outbreak of Foot and Mouth disease.

Since the start of September 2020, the number of new COVID-19 cases reported has generally remained under 10 per day (significantly lower than the 80-100 per day during the peak of the outbreak in July), on average, with very few or no COVID-19 related deaths now being reported. This has prompted the government to re-open airports for international flights, re-open schools, and relax other restrictions (such as those on government office work and sporting events). This has resulted in a modest increase in trade and full resumption of business operations by the hospitality industry (though patronage is still

very low). Many of those impacted by temporary layoffs and suspended salary payments in the formal employment sector (including teachers) are now receiving their regular salaries again. However, others who were laid off remain out of work. Overall, this relaxation has resulted in a general increase in economic activity, increasing income-earning opportunities for poor urban households dependent on labor, traded goods and petty trade, and small businesses and self-employment. However, income-earning is still below pre-COVID levels due to reduced demand for goods and services.

The availability of foreign reserves in Malawi has declined this year due to reduced tobacco export earnings, the most important individual foreign exchange earner. Tobacco sales this year were affected by reduced production volumes as well as COVID-19 related disruptions to marketing activities. By the end of August 2020 (which marks the end of tobacco marketing season), Malawi realized $174.5 million from tobacco sales, 31 percent below last year and 43 percent below the five-year average. This is expected to lead to foreign currency shortages and a widening gap between the official and parallel market rates. As of the end of September, media reports were already reporting forex shortages and the parallel forex markets were trading at 820 to 860 MWK/USD while the official rate ranged between 740 and 760 MWK/USD.

Although no recent nutrition surveys have been conducted, it is expected that the prevalence of acute malnutrition among children under five remains low. According to the most recent nutrition SMART survey conducted in July 2019, the prevalence of Global Acute Malnutrition (GAM) at the national level was 0.5 percent (95% CI: 0.3 - 1.0). This is the lowest recorded in recent years and falls within “acceptable” levels (GAM<5%) according to WHO classification. Given the provision of humanitarian assistance during the 2019/2020 consumption season and the above-average recent harvests, sustained access to food and income is expected to be supporting similarly low levels of acute malnutrition.

Following above-average 2020 harvests, most rural households across Malawi are still consuming food from own-production, with Minimal (IPC Phase 1) outcomes widespread. However, in areas that registered localized below-average production, some poor households are now running out of own-produced food and are becoming reliant on market purchases. In these areas, access to income is likely insufficient to meet all essential non-food needs given increased competition for available income-earning opportunities, with Stressed (IPC Phase 2) food security outcomes present in worst-affected southern areas.

Assumptions

The Food Security Outlook for October 2020 to May 2021 is based on the following national-level assumptions:

• According to national, regional, and international forecasts, cumulative rainfall in the October 2020 – March 2021 rainy season is most likely to be average across the southern half of the country and above average across the northern half of the country during this time. Although average rainfall is the most likely scenario in the southern half of the country (highest probability), there is an elevated probability (second-highest probability) of above-average rainfall due to La Niña conditions expected to persist into March/April 2021. La Niña is associated with above-average rainfall across much of southern Africa, including parts of Malawi. The start of the 2020/21 season is likely to be normal across the country.
• Overall, rural households are expected to access adequate inputs (particularly seed and fertilizer) for the 2020/21 production season given the new government subsidy program (Affordable Input Program), which will allow all rural farmers to buy fertilizer at a subsidized price.
• Given the current rainfall forecast and expectations for access to inputs, average production of staple food—mostly maize—is expected in the 2020/2021 season for the third consecutive year. As a result, income from food and cash crop sales in the 2021 marketing season beginning in April (but peaking in May and June) is expected to be average.
• Informal cross-border maize imports will likely remain below normal levels due to above-average supply within Malawi as well as lower market prices in Malawi relative to Tanzania, resulting in a lack of incentive for traders to import and sell maize in Malawi. Despite this, a negative net trade balance (net imports) is expected. Typically, Malawi imports approximately double as much maize as it exports through informal cross-border trade. There will likely be no significant formal maize imports by the government given above-average production.
• National supply of the maize staple will likely remain above average from October 2020 to March 2021 due to above-average production of most food crops in the 2019/20 production season and net imports from neighboring countries. Given anticipated average production, maize supply is expected to remain average from April to May 2021. However, supplies are expected to remain lower than normal in ADMARC markets as ADMARC purchases are still very low.
• Given 2019/20 production, cereal stocks at the household level will generally be above average for most households through the end of the consumption season in March 2021. However, household stocks will be below average in areas that registered reduced production due to localized weather hazards, especially in the southern region. Given anticipated average production, households stocks expected to remain average from April to May 2021.
• According to FEWS NET’s integrated price projections (Figure 1), prices of the maize staple are generally expected to follow seasonal trends but remain above five-year average levels throughout the projection period. Maize grain prices are expected to gradually increase through February 2021, as is typical due to increasing demand as households become reliant on market purchases. In March 2021, prices are expected to decrease, as is typical, as traders sell old stocks in anticipation of the harvest. Additionally, the NFRA and ADMARC are expected to purchase maize throughout the consumption season, putting upward pressure on prices.
• Overall, agricultural labor availability and wages will likely be average in most areas as the country enters the peak agricultural labor period from October to January. However, in southern areas that registered low production, wages will likely be below average due to an increase in people seeking labor opportunities and reduced purchasing power among those who hire labor. In some tobacco growing areas in central and northern Malawi, reduced income from tobacco sales may also put downward pressure on wages due to reduced purchasing power among those who hire labor. This could also affect investment in the 2020/21 production season.
• In rural areas, availability of non-agricultural labor opportunities (especially brickmaking and construction labor) and wages are generally expected to be normal. However, wages will likely be below normal levels in southern areas impacted by localized poor production due to an increase in people seeking labor opportunities and reduced purchasing power among those who hire labor. In-kind payments for labor are not expected at significant levels in these areas due to the poor production year. In tobacco growing areas of central and northern Malawi, reduced purchasing power among those who hire labor may also put downward pressure on wages. 
• In rural areas, petty trade and self-employment opportunities (including charcoal, firewood, and handicraft sales) are expected to be available at normal levels throughout the outlook period across most of the country. However, overall levels of income earned from these opportunities are generally expected to be below average in the southern Lower Shire and Middle Shire livelihood zones where households will seek to expand this income source, putting downward pressure on prices of firewood, charcoal, crafts, and traded goods.
• Labor migration to neighboring districts of Malawi as well as to Zambia and Mozambique is expected to be normal. 
• Based on current trends, the global COVID-19 pandemic is likely to continue throughout the projection period. The rate of increase in total COVID-19 cases in Malawi is expected to remain close to current low levels.
• Due to the ongoing global impacts of COVID-19 and the expectation that economic recovery takes time, economic activity in Malawi is expected to increase gradually before reaching normal levels around the end of 2020.
• Due to expectations for economic recovery, access to income in urban areas—from labor opportunities, self-employment, small businesses, and petty trade, as well as some salaries—is expected to continue to increase but remain below average through at least December 2020 due to the prolonged impacts of COVID-19 on the economy. From January to May 2021, income-earning in urban areas is expected to be average.
• Households identified by MVAC will likely receive full rations of humanitarian assistance from December 2020 to March 2021. According to a government press release in September 2020, approximately 2.6 million people (of whom about 586,000 are in urban centers) will likely be targeted with in-kind or cash assistance during this period. However, at the time of this analysis, humanitarian assistance was not fully funded. Until assistance is fully planned and funded, FEWS NET assumes the absence of assistance. However, the impacts of assistance on food security outcomes are analyzed in the “events that might change the outlook” table below.
• Livestock herd sizes and body conditions are expected to remain normal in most areas. Prices are generally expected to remain average or above average due to fewer households selling livestock in the above-average production year. In southern areas affected by below-average production, livestock prices will likely follow seasonal trends, decreasing during the lean season from November to March as households sell livestock to buy food. In the Lower Shire districts of Chikwawa and Nsanje, the ban on sales and reduced supply at the national level is likely to keep prices from falling as low. Overall, income from livestock sales will likely remain below average in these districts. 
• Due to below-average tobacco export earnings during the 2020 marketing season, the availability of foreign currency is likely to be constrained through the 2021 tobacco marketing season. As a result, a widening gap between official and parallel market exchange rates is expected throughout the scenario period. This is likely to result in upward pressure on food and non-food prices because of the dual effect of increased export demand for regionally traded maize and beans (export parity prices will decrease with the depreciation of the currency, leading to increased demand for Malawi’s maize in the region) and high import parity prices for imported goods (e.g. fuel, imported rice). Overall, prices of domestically produced foods–especially maize—are not expected to be meaningfully impacted due to the above-average harvest and sufficient availability at the national level and within the region.

Most Likely Food Security Outcomes

Most rural areas are likely to experience favorable food security conditions and Minimal (IPC Phase 1) outcomes throughout the projection period. This is due to the above-average production of food crops and some cash crops, which will support households’ ability to consume food from own-production, supplemented with some purchases.

However, some areas in the deficit-producing southern region—namely Nsanje, Balaka, Chikwawa, and parts of Blantyre and Neno—and in the Salima district in central Malawi—registered localized below-average production. Many poor households in these areas are expected to exhaust food stocks atypically early and become dependent on markets for food. Given expectations for income-earning and the impacts of previous poor seasons in some areas, an increasing number of poor households are expected to be unable to meet all food needs throughout the projection period. In the absence of assistance, area-level Crisis (IPC Phase 3) food security outcomes will likely emerge in November 2020 in Nsanje and Balaka districts, in December 2020 in other southern areas, and in January 2021 in the central Salima district. These outcomes will likely persist through the end of the consumption period in March 2021, with an increasing number of households expected to face Crisis (IPC Phase 3) outcomes during that time period. Beginning in mid-February to March, households will begin to access food from the green harvests, improving food consumption. In April and May, households are expected to access the full harvests. Improvement to Stressed (IPC Phase 2) outcomes is expected in April, though access to income will generally remain insufficient to meet all essential non-food needs. In May, further improvement to Minimal (IPC Phase 1) outcomes is expected as households access income from crop sales.

In the urban areas of Blantyre, Zomba, Lilongwe, and Mzuzu, an increasing number of poor households are expected to resume normal levels of income-earning in the coming months as the economy recovers. Area-level Crisis (IPC Phase 3) outcomes are expected to last through December 2020, at which point improvement to Stressed (IPC Phase 2) is anticipated.

Events that Might Change the Outlook

Possible events over the next eight months that could change the most-likely scenario: