Analysis of farm to retail maize marketing margins in Zambia

Abstract

Marketing margin analysis has usually been used to examine the behaviour and competitiveness of markets and the share of a retail commodity price accruing to farmers. Most studies examining marketing margins have typically considered margins to vary either spatially or temporally; with little attempt to understand how or why marketing margins may vary across households holding both space and time constant, even though inter-household variability has been observed in most rural maize marketing areas. This article determines the relative importance of spatial, temporal, and household-specific factors in the maize prices received by farmers in Zambia and in the associated farm-to-retail marketing margin under the assembly trader channel. We find that spatial factors account for the largest source of explained variation (72%) in the maize marketing margin and farm-gate prices obtained by farmers followed by temporal factors (16.7%). Household-specific factors account for the smallest source of explained variation (11.3%) in marketing margins, with marital status, kinship ties to the chief or village elders, and access to price information being the most important. Wide inter-household variation in farm-gate prices within the same locality and month suggest the importance of unobserved household-specific factors. These results hence indicate that the prices that maize farmers in Zambia obtain are not fully exogenous to farmers as often assumed. Programs that generate and improve farmers’ access to timely market information can raise prices that farmers obtain, while improved road infrastructure in areas where marketing margins are high could significantly improve farm-gate prices.