Heterogeneous responses of smallholder farmers in the central highland of Madagascar to the global fertilizer price surge

Abstract

The sharp increase in fertilizer prices since 2020 poses a serious threat to global food security by reducing crop productivity and disproportionately affecting low-income countries. While cross-country comparisons and simulation models have examined the impact of fertilizer price shocks, there is little micro-level evidence on how smallholder farmers respond to such shocks in terms of land use, the composition of income sources, and consumption levels. Drawing on a balanced panel of 550 Malagasy farm households, this study provides micro-level evidence on how farmers responded to the fertilizer price surge. We employ a household fixed-effects model to test whether the fertilizer price surge is associated with land use, income, and consumption, and whether these associations differ by initial fertilizer reliance and poverty status, classified as bottom-poor, upper-poor, and non-poor by consumption levels. Compared to the pre-shock period (2021), total cropped area declined by an average of 18.3% after the shock (2023), alongside a reallocation of land from fertilized to non-fertilized plots. Despite no significant change in total income, crop income declined by 11.0% while non-crop income increased by 10.5%, indicating compensatory adjustment. Regarding consumption, no significant reduction was observed among bottom-poor households, whereas upper-poor households experienced reductions of 10.9%, 7.5%, and 13.4% in total, food, and non-food consumption, respectively. These reductions reached 24.1%, 11.0%, and 35.5% among non-poor households. Our results highlight the role of rural labor markets in facilitating income adjustment and the importance of broadly accessible and flexible financial support for recovery from input price shocks.