Low grain prices renew hope of food security

The short season’s harvests have also reduced the number of food insecure Kenyans to 1.6 million— a 58 per cent drop from the 3.8 million people who required food assistance after the long season’s harvests.

Analysts however reckon that stringent quality standards, official red tape and information asymmetry has prevented the region’s farmers from taking advantage of the huge price differentials to trade beyond their immediate localities.

“Grain is the most traded and most regulated commodity in this region. The result is that we have created a distorted market where grain sells cheaply on one side of the border as the other side experiences acute shortage,” argues Mr Mainza Mugoya, a programmes officer at the East African Farmers Federation.

To import maize from Uganda where prices are lowest at the moment, for instance, a trader must wait at the border for a phyto-sanitary certificate, a document that comes all the way from Nairobi where the Kenya Plant Health Inspectorate Service (Kephis) offices are located.

Border points

“Things become worse at border points during the rainy season because the grains can stay in the open for close to three days before clearance,” Mr Joseph Achar, a Kenyan clearing agent at the Busia border told Business Daily in an earlier interview.

To eliminate the current information asymmetry in the region’s cereal markets, grain market players are working on the final details of launching a regional commodities exchange.

The Kenya Food Security Technical Working Group (KFSSG) warns in its latest assessment report that supply for cereals will remain tight in the run up to July when the current harvests are exhausted.

KFSSG’s report is in harmony with the thinking at Kenya’s finance ministry which declined to extend the duty free maize importation programme saying a lot of grains would be expected in the region after the short season’s harvest.

If the non-tariff barriers are removed on grain movement in the region, Kenya has a chance of bridging her production shortfall with imports obtained through formal and informal channels from Uganda and Tanzania.

However, just like Kenya, Tanzania banned cereal exports through her formal channels in 2008 leaving only Uganda’s short season’s harvests to be traded freely in the region.

Except for sorghum and millet that are largely produced in Tanzania, the other commodities are attracting higher prices in Tanzanian markets of Arusha, Dar-es-Salaam, Iringa, Mbeya and Songea.

If the Kenyan Government fails to utilise the existing price differentials to fill the national granaries, the country will be forced to apply for another duty exemption from EAC secretariat in order to import maize from other low cost destinations such as South Africa, Zambia and Malawi.

In South Africa, for instance, maize prices have fallen to levels as low as Sh1,080 per sack but existing barrier to trade with Kenya still pushes retail price of maize imported from the country to Sh2,500 per sack in Nairobi.

Unlike Malawi and Zambia which as Comesa Union members export maize to Kenya at only 25 per cent duty, South Africa’s maize attracts a 50 per cent tariff beside port handling charges.