FARMERS’ PERCEPTIONS AND KEY INFLUENCING FACTORS OF MARKET RISKS IN GROUNDNUT FARMING IN MCHINJI DISTRICT, MALAWI

Abstract

The groundnut value chain is highly vulnerable to market risks, including price volatility, inflation, infrastructural limitations, political instability, and technological shifts. These challenges are exacerbated by informal supply chains, which dominate groundnut trade in many regions, creating further uncertainty for farmers. Farmers’ perceptions and responses to market risks have been proven undisputedly vital for understanding risk behaviors. These perceived risk patterns are highly contextual and different across systems and geographical regions. Besides, the perceived levels are incongruent and are influenced by the farmers’ socioeconomic and institutional factors such as education of the household head, farm size, household income, access to credit and extension services. The knowledge of farmers’ perception of market risk sources is important for the farmers, extension advisory service providers, industry stakeholders, and policymakers. The deficient information about how risk is perceived, particularly in most developing countries like Malawi, poses a big challenge for policymakers and researchers to design appropriate risk management systems at the farm level. It is in line with this view that this study investigated farmers’ perceptions of market risks to which groundnut farmers are exposed and the factors that influence their perceptions of the market risk sources among 161 smallholder groundnut farmers in Mchinji District, Malawi. Using Exploratory Factor Analysis (EFA) and Panel Probit estimations, the research identifies disorganized markets, high food prices, and fluctuating output prices as the most significant and devastating market risks. Key determinants influencing farmers’ risk perception include groundnut production scale, farm size, and wealth levels. Based on the results, the study highlights the urgent need for stabilizing market prices through commodity trading platforms. These could include the strengthening of the existing and establishment of new structured commodity platforms. The study also recommends the adoption of holistic risk management strategies that target farmers regardless of their farm and socioeconomic characteristics such as farm size and wealth status.