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Maize import trade impacts on Kenyan maize price

16 November 2014

According to reports in the East African press, imports of maize from neighbouring countries have led to maize prices in parts of the Rift Valley dropping “by more than 40 per cent”. In August, this saw the price offered by maize traders to farmers fall from KSh3,300 to KSh2,000 (from approx. €30 to 18) per 90-kg bag in a 1-month period. According to traders, maize millers were offering low prices because “the maize imports from mainly Uganda and Tanzania have flooded the markets in Eldoret, Kitale and other towns in Western Kenya.” Press reports cited Ministry of Agriculture officials stating that some 1.8 million bags of maize would be imported from the EAC area between August and October 2014.

The falling prices have created problems for the maize traders, many of whom have been left holding high stock levels, retained in the expectation of higher prices following earlier predictions of a maize deficit of 10 million bags.

However, other press reports suggest that imports may not be the sole reason for the price declines, arguing that “maize prices in the north Rift Valley have hit their lowest level in eight months as farmers release the produce they have been hoarding.” This release of stocks held by farmers took place in the expectation of increased levels of imports that would then further impact on prices.

In mid August 2014, press reports suggested that production would be at the lower end of the range cited by the Cabinet secretary – some 34 million bags, compared to a target of 42 million bags. The situation led Kenya’s National Drought Management Authority and the Kenyan Red Cross to issue warnings of “a looming famine following the prolonged drought”.

The Kenyan Agriculture Cabinet Secretary, Felix Koskei, denied reports of maize shortages. He commented that the country had a “reserve of 2.9 million bags” at NCPB depots, a figure expected to rise to 3.4 million bags (this compares to a reported optimum reserve level of 5 million bags). It was argued by Mr Koskei that affordability was a more important issue for food-deficit households.

Nevertheless, there remain uncertainties: decreased rainfall and a resurgence of the viral disease affecting maize continue to raise concerns. 

Editorial comment

The uncertain position in Kenya’s maize supply situation highlights a number of problems in the country’s maize sector. First and foremost is the lack of credit facilities for farmers, which forces them to sell their crop immediately after harvest to meet household needs and buy inputs. This causes a temporary maize glut in the market and leads to an immediate price collapse. Production diversification, in order to ensure a more regular flow of household income, could offer one solution to this problem, along with increased utilisation of efficient warehouse receipt system schemes.

A second issue faced is linked to the management of imports, which often arrive in country during or close to the start of harvesting periods. If deliveries of maize imports were better managed, then seasonal price fluctuations could be reduced. This would then reduce price pressures on consumers and income pressures on producers. However, the scale of informal cross-border trade in maize in East Africa poses serious challenges for any efforts to manage the maize trade.

The issue of maize trade management is closely linked to the issue of market information. Despite efforts made by the Eastern Africa Grain Council and its regional market information system, with dissemination through the Regional Agricultural Intelligence Network (RATIN), there is still a need to improve information on stock levels held by millers, traders, the National Cereals and Produce Board of Kenya and farmers. This is complicated by the absence of progress on a third issue, namely the need to strengthen the functioning of the maize supply chain. Currently there are few formal, mutually agreed contractual agreements between maize producers and maize millers. Establishing a more effective framework for contractual arrangements between maize producers and maize millers could go some way towards improving the functioning of maize supply chains and reducing price fluctuations.

The final difficulty in the maize sector – which partly explains why maize prices can drop so sharply in the face of a looming famine – is the business environment. Poor infrastructure, lack of trade finance and insecurity in famine-prone arid and semi-arid areas of Kenya make the commercial supply of maize to such areas largely non-viable, leaving the distribution of food in arid, drought-prone areas to government and NGOs. 

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