their labor at the full wage rate every day of the year and this approach is at least a clear and simple way to recognize the value of this input. Further analysis could always look at the effects of different family wage rate assumptions, but the basic outcome is easy to predict since labor costs and final estimated shipment values are directly related. In all cases, the quantity of family labor was estimated on the basis of a five member household with proportionate adjustments for tasks that must be carried out over a limited number of days, in which case hired labor must be used.

30. **Investment costs.** The annual per hectare (or per ton) cost of long term investments used at each stage of the value chain have been estimated using the _capital recovery cost_ method. Specifically, this cost is the annual payment that will repay the cost of a fixed input over its useful life and provide an economic rate of return on the investment. This approach has the advantage over the simple division of an input’s value by its useful life as it accounts for the fact that if the investor did not purchase the input, the money could have been invested in some other enterprise.<sup>9</sup> 31. **Domestic transportation.** For domestic routes, the transport cost estimate of MWK 18.00 per ton per kilometer (USD 0.129) has been assumed. This is the average cost reported during data collection by transport experts and private operators for the 2007/08 season. For cotton a premium of 30% premium was applied to account for the light/bulky nature of this good.

32. **International transport.** Because the value chain analysis is interested in comparing Malawi’s final shipment value for each commodity with an international parity price, road and sea freight prices were also needed. In this case, the cost estimates were made from information provided by the Ministry of Transport as set out below. For maize, a price of USD 80 per MT was used to calculate freight costs from the SAFEX reference point at Randfontein to Harare plus USD 40 per MT for onward freight from Harare to Blantyre.

**Table 3: Fixed transport rates for international routes**

**Fixed rates for International Routes (road, including port charges)**

|Container ratesreported byMinistry of T<br>**USD pe**|ranportincludinglan<br>**r 40' container**|d transport and p<br>**Per M**|ort charges<br>**T**|**Distance**|**MT per**|**Km**|
|---|---|---|---|---|---|---|
|**(+/- 32 MT**|**maximum load)**|MWK|USD|**(Km)**|MWK|USD|
|**Beira - Blantyre**|2,710|11,856|84.69|620|19.12|0.137|
|**Beira - Lilongwe**|2,850|12,469|89.06|931|13.39|0.096|
|**Nacala - Blantyre**|2,860|12,513|89.38|880|14.22|0.102|
|**Nacala - Lilongwe**|3,095|13,541|96.72|1,191|11.37|0.081|
|**Durban - Blantyre**|7,100|31,063|221.88|2,480|12.53|0.089|
|<br>**Durban - Lilongwe**|7,200|31,500|225.00|2,730|11.54|0.082|
|**Dar es Salaam - Lilongwe**|4,560|19,950|142.50|1,720|11.60|0.083|
|<br>**Dar es Salaam - Blantyre**|5,360|23,450|167.50|2,031|11.55|0.082|
|Port charges quoted at $750 for Beir|a and Nacala; $95|0 for Durban; an|d $360 for Da|r es Salaam.|||

33. With respect to ocean freight, rule of thumb prices excluding port fees were used as follows:  Fertilizer (ex Black Sea or Middle East) = USD 56.00 per MT to Beira.

9 Annual cost per hectare (or per MT) = purchase price of implement * per hectare (or per MT) share of total use * capital recovery factor. CRF = ((1+i)^n)*i/(1+i)^n-1 where i = real interest on savings and n = number of years in the implement’s useful life. See Monke and Pearson, 1989 for a detailed discussion of this methodology.

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