100. We however attribute the low crop yields to the low levels of fertilizer intensity and use of low yielding crop varieties, mostly as a result of the high cost of agricultural inputs in Malawi compared to other countries. In land abundant countries such as Mozambique, the yield difference could also be attributed to differences in the natural fertility of the soils.

# **_High cost of agricultural inputs_**

101. Malawi is a relatively high cost country in terms of agricultural inputs. As shown in Table 26, Malawi’s costs for fertilizer and other agricultural inputs are generally higher than most comparator countries. Malawi’s cost advantage lies only in the cheaper labor. _Clearly Malawi can only compete based on its labor cost advantage, and this has been confirmed in almost all the value chains analyzed._

**Table 26: Comparison of input price build-up between Malawi and other countries**

||Basal<br>Fertilizer|General<br>Herbicide|General<br>Insecticide|Casual<br>Labor|Road<br>Freight|
|---|---|---|---|---|---|
||_MT_|_Liter_|_1ha cotton_|_1 day FAM_|_1MT per Km_|
|Malawi (2006)|532.82|-|-|-|-|
|Malawi (2007)|728.57|7.14|14.29|0.71|0.129|
|Mozambique (2006)|377.60|5.00|25.02|0.48|0.070|
|Zambia (2007)|540.00|5.00|29.28|1.25|0.100|
|Nigeria (2006)|295.45|5.15|8.56|2.65|0.053|
|Cameroon (north) (2007)|702.19|7.00|45.83|3.13|0.115|
|Brazil (2006)|301.40|3.49|30.18|20.88|0.064|
|Thailand (2006)|346.60|3.59|n/a|n/a|0.027|

Notes: Fertilizer price for most common blend in each country; Herbicide price for paraquat, round-up or similar product used for general weed burn-down. Insecticides for cotton = 1ha FAM-high in Malawi and Cameroon; 1ha FAM in Nigeria; 1ha ECF in Mozambique, and Zambia; and 1ha LCF in Brazil. Actual quantities of insecticide will vary. Transport costs in Cameroon for direct shipping method (can go to USD 0.54 per MT per km if use informal roadside freight). Slightly lower rates prevail in southern Cameroon because of proximity to refinery. Input prices in Cameroon are 10-15% higher in north than in the south due to transport costs and other fees.

102. Fertilizer is the single most important cost component in the production of most arable crops. The analysis shows that it accounts for 20 – 50 percent of the farm-level costs of production for all crops considered in the analysis. In 2007, Malawi’s fertilizer cost, estimated at USD 728.57 per ton, was almost twice as expensive compared to Mozambique, Nigeria, Brazil and Thailand (see Figure 8). The cost of herbicide and insecticides was also equally high (although the insecticide cost is not so high).

103. Malawi imports all its fertilizer and other agricultural inputs. Domestic blending and/or production capacity is very limited. As such, the high cost of fertilizer is mainly due to the high international and domestic transports costs, estimated at 22 percent and 4 percent, respectively. Furthermore, domestic dealer mark-ups are also quite high in Malawi, estimated at 16 percent compared to 5 percent or less in Zambia and Mozambique. Given that fertilizer is a major component of farm costs, the domestic price levels have a major bearing on final competitiveness, not just in terms of accumulated SV at the point of final competition, but also in terms of the influence on farmer decision making and yield expectation.

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