1. Willingness to Pay for Hermetic Grain Storage Bags in Malawi
Gloria Guevara Alvarez* and William A. Masters
Friedman School of Nutrition Science and Policy, Tufts University, Boston MA
Motivation
Results
Implications
Stored grain is subject to damage by animals, insects, and mold. Post-harvest loss is especially harmful for the poorest farmers in rural Malawi, where mold growth on maize and other grains leads to high intake of harmful aflatoxins.
Hermetic bags can protect harvests by stopping the flow of oxygen, limiting respiration and growth. Once the bag is sealed, the available oxygen is exhausted and organisms inside the bag cause little or no further damage.
This study aimed to measure farmers’ demand for hermetic bags, in a region subject to high levels of postharvest loss and aflatoxin contamination. Our study occurred in June-July 2017, just after hermetic bags were first introduced to the region through a small number of demonstration events.
Measuring the highest price at which each respondent would buy a bag reveals how many farmers would purchase at each price. We also aim to identify farm characteristics linked to purchase, thereby guiding the sale or donation of hermetic bags to improve post-harvest storage and limit contamination.
Of the 266 interview subjects, 44% (n=116) chose to participate in the randomized market experiment. Of that self-selected sample, 25% (n=29) had attended a demonstration event showing how hermetic bags prevent damage from mold and insects.
Mean willingness and ability to pay (WTP) for the sample as a whole is 311 Malawi kwacha (USD 0.42), relative to a market cost of about 750 MWK. Parametric hypothesis tests using equations 1-4 revealed no significant associations between farmer characteristics and their WTP for the hermetic bags.
The distribution of WTP by attendance status is shown in Figure 1, and used to estimate market demand curves in Figure 2. The fraction of respondents who are willing and able to pay above the market cost is higher among those who attended demonstrations, but still below 10% of respondents.
When surveyed within a year after initial product introduction, a small fraction (under 10%) of participating farmers would pay at or above market cost for hermetic bags, even among those who reported having attended a product demonstration.
Participants in the market experiment are self-selected based on their interest in purchasing a bag, so results are an upper bound on the fraction of all farmers who would be able and willing to buy these bags at market costs.
Adoption of hermetic bags by a larger fraction of the study population would require subsidized distribution, or a sharp decline in the cost of supplying hermetic bags. To reach more than 80% of respondents, prices would need to decline below about 200 Malawi kwacha (USD 0.27) per bag.
These results are qualitatively similar to previous studies of demand for hermetic bags in other countries (e.g. Goentzel et al. 2016, Mwaijande 2017, Skula and Baylis 2017), which revealed that commercial sales occur primarily among higher-income farmers for higher-value crops than this population of maize growers in Malawi.
Figure 1. Distribution of farmers’ willingness-to-pay for hermetic storage bags
(n=29)
(n=87)
Approximate market cost
Methods
The study population is 116,291 farmers enrolled in “marketing clubs” organized by the UBALE project in three very poor districts of Malawi, from which we drew a stratified random sample of 266 respondents.
We offered respondents the opportunity to participate in a randomized market experiment, in which subjects state the highest price they would be willing and able to pay for a bag. The interviewer then draws a random price, at which the sale occurs if it is at or below the respondent’s offer.
This random-price auction method was introduced by Becker, DeGroot and Marshak (1964), and is the gold-standard technique to predict purchase behavior and identify which individuals would buy at each price (Miller et al. 2010).
Our survey prior to the auction elicited farmer characteristics that might affect demand, including household wealth, amount of grain stored, knowledge about aflatoxins and how bags work, including whether they had attended an UBALE project demonstration event showing how hermetic bags prevent damage from mold and insects.
Our analysis plan compared individuals’ willingness and ability to pay (WTP) for a bag to the cost of selling each bag, and to farmer characteristics using a variety of model specifications:
Conclusions and next steps
Using hermetic storage to reduce post-harvest loss and contamination will require initial distribution of donated or highly subsidized bags, until farmers’ willingness and ability to pay for them rises above their market cost.
Improvements in the supply of bags would lower the threshold of WTP needed for commercial purchase, and also limit the cost of donated or subsidized bags.
A second round of data collection in summer 2018 aims to test for increases in demand associated with the spread of information and trust in hermetic bags, and to distinguish among causes of low demand, including the role of financial constraints and demand for storage bags in general, using cash transfers and traditional jute bags.
References cited:
Becker, G.M., DeGroot, M.H., Marschak, J. (1964). Measuring utility by a
single-response sequential method. Behav Sci. 9 (3): 226–32.
Goetzel, J et al. (2016), Summary report: Scaling adoption of hermetic post-harvest storage technologies in Uganda. Cambridge, MA: MIT Comprehensive Initiative on Technology Evaluation.
Miller, K.M., Hofstetter, R. Krohmer, Z.H., Zhang, J. (2011). How should consumers' willingness to pay be measured? J. of Marketing Rsch 48(1):
Mwaijande, F. (2017). Farmers’ adoption and willingness to pay for post- harvest technologies in Tanzania. J. of Postharvest Tech, 5(1), 1-6.
Shukla, P., & Baylis, K. (2017). Safe and secure: Food safety, food security and technology adoption in India. Urbana-Champaign, IL: University of Illinois.
Figure 2. Nonparametric estimation of demand by attendance at product demonstration
Fraction of respondents
willing and able to buy
at the market price
Approximate market cost in June-July 2017 ( Malawi kwacha)
Malawi
Source:
* Corresponding author:
Acknowledgements: This work was funded by the U.S. Agency for International Development under cooperative agreement AID-OAA-A , through the UBALE project led by Catholic Relief Services. We thank them and especially Angela Tavares and Juma Masumba for support of this study. Ethical approval was obtained from the Tufts University Institutional Review Board as IRB Study # , and from the Malawi National Commission for Science and Technology as Protocol P.06/17/181.