Too much of a good thing? Rethinking inorganic fertiliser subsidies

A new Clim-Eat Discussion Starter questions long-established fertiliser subsidy programmes. It makes the case for a more nuanced approach to subsidies and considers whether payments for ecosystem services (PES) schemes could play a role in building soil health.

Subsidies for inorganic fertiliser are a big deal. For example, in some years they have consumed up to 50% of Malawi’s agriculture budget, typically to support farmers growing its staple crop maize. But while the policy has benefited some farmers, yields remain stubbornly low and in some cases are declining – along with soil health. Experts estimate it is now around five times cheaper to import maize than to import fertiliser for maize production, meaning the subsidy policy makes little economic sense. Also, by accounting for such a large chunk of the agricultural budget, it is crowding out financial support for other agricultural and rural services.

It means that continuing fertiliser subsidies in their current form is akin to throwing good money after bad. That isn’t great in a country of 20 million people, around a fifth of whom are food insecure.

In short, it’s probably time for a rethink.

Clim-Eat’s Discussion Starter #5, Rethinking inorganic fertiliser subsides, provides just that. It gives an overview of the options for refocusing public funding to ensure maize fertiliser subsides are targeted at the farmers who can really benefit from them, while freeing up resources for improving rural transport and energy infrastructure, providing critical services such as climate-informed advisories for farmers, and more.

It also calls for soil health to feature more prominently in public policy, suggesting that a system of payments to farmers could help incentivise tried-and-tested soil health practices and on-farm carbon sequestration. While it acknowledges such a system would need to overcome a number of challenges, it highlights the multiple benefits it might bring, from encouraging the uptake of sustainable agriculture, to increasing and diversifying farmers’ incomes, to improving their credit ratings and access to finance.

“Subsidies for inorganic fertiliser are vital in Malawi and they will continue to be so – but they must be better targeted and part of a broader and more robust package of public support measures,” said Bruce Campbell, Clim-Eat Chief Innovation Strategist and lead author of Discussion Starter #5. “This would enable the country’s farming sector to better respond to the challenges of food insecurity, malnutrition and climate change.”

“Soil health improvement won’t be a silver bullet for farms, livelihoods and food security in Malawi, but bringing soil health into policy discussions opens up opportunities to encourage more sustainable practices and direct public money more effectively,” he added.

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