* The intermediate buyer program has increased the options for smallholder tobacco sales
 and has led to an increase in prices for both smallholders and tenants.

* There has been a major increase in the extent of private sector trade and a reduction in the
 importance of ADMARC.

 These changes have greatly affected the income earning opportunities for households,
particularly in the rural sector. They have also affected the relative prices households face for the
commodities they sell and purchase. Price changes in turn affect cropping patterns and
consumption choices. Seasonal price changes in the private sector should create greater incentives
both for intra-seasonal storage in the private sector and for on-farm storage.

 With the increasing withdrawal of ADMARC from remote rural markets, concern has been
expressed about the availability of commodities in these market and how fast private traders will
move to fill the void left by ADMARC. In the short run the withdrawal may increase transaction &Adt
costs, in particular for maize. On the other hand, it is difficult to estimate the extent to which thin
markets are currently a problem, as conditions in the market are changing quite rapidly.

 In some parts of the country other changes can be seen in increased smallholder reduction
of burley tobacco. This production has increased the demand for casual agricultural labor. In
time, this demand may cause some upward pressure on rural wage rates, though as yet there is
little evidence of such a development.

 As with all major changes, there are likely to be winners and losers, though market
liberalization is by no means a zero-sum game. In the medium term, most households should gain
from increased opportunities. Other households, however, are likely to bear some short-term
costs as they adjust to changing market conditions.

 Surveys in Zomba in the initial period of market liberalization, 1986 1993, show that
smallholders who had switched into tobacco growing had made substantial gains over the period
(Peters 1992, 1993). The gains, in turn, were increasing demand for local goods and services.
However, households in the bottom 25 percent of the sample appeared to have had to work harder
to maintain their average supply of maize.

2.3 Smallholder Profile

 Since 1993, relative prices have changed dramatically, due to devaluation and input market
liberalization. Profiles of five smallholder households have been developed to show the impact
that changes in relative prices have had on different household types. These profiles are not
statistically representative, but they have been developed to illustrate the main combinations of