NCPB managing director Gideon Misoi inspects offloading at the Eldoret depot: The cereals board is offering Sh1,800 for a bag of maize. Photo/JARED NYATAYA
The new government scheme of stabilising prices of cereals will be put to the test as farmers are paid for maize delivered under the warehouse receipting system in a glut.
The National Cereals and Produce Board (NCPB) is paying farmers a fixed Sh1,800 per 90kg bag in their stores amid queries of fair compensation.
The government settled for the fixed producer price two months ago in response to widespread complaints that middlemen were taking advantage of the recent bumper harvests to offer as low as Sh800 a bag.
When it adopted WRS in October, farmers would deposit their produce and get receipts that can be used as collateral for short-term loans.
They would keep the receipts until prices improved, sell to willing buyers like relief agencies, and pay the board for grain handling services.
Weekly market data prepared by the Agriculture ministry indicates the prevailing prices have dropped to Sh1,600 in Mombasa, Sh1,300 in Nakuru and Malindi and Sh1,200 in Eldoret.
The NCPB’s managing director Prof Gideon Misoi said they are paying from a float of Sh500 million the government released to boost the strategic grain levels.
“Farmers have no reason to be afraid of incurring losses through this system. Most of our depots are now receiving maize under this system and we will make payment immediately we get the funds,” said Prof Misoi.
NCPB chairman Jimnah Mbaru told the Business Daily on Thursday: “By accepting Sh1,800, the seller loses ownership of his stock under WRS and surrenders the receipts to the buyer which in this case is the Ministry of Special Programmes.”
Farmers are expected to flock the NCPB stores considering that middlemen are offering them a paltry Sh800 per bag of maize.
They are, however, in a difficult position as schools reopen in a few days’ time, meaning they need quick cash.
Mary Kamanda, who was the first farmer to deliver her maize to the board, said her resolve to take risks had borne fruit.
“I delivered on November 4, and am surprised the payment is ready quite earlier than what I expected,” she said, vowing to increase acreage under the crop.
Prof Misoi said the board has received 70,000 bags under the system, about 25 per cent of the 277,777 units that Sh500 million can buy under the fixed price.
Under the direct purchase, NCPB was mandated to buy in bulk during harvest and later release the stocks gradually when supply drops.
This was meant to ensure stable price throughout the year. It did not work because of the shortage of funds.
On Thursday, board officials said they were considering extending the system to cover other cereals starting with wheat and urged bulk buyers of grains such as World Food Programme, millers and traders to buy the receipts from farmers
Critics, however, argue that the system is only preying on the seasonal glut that it sought to address.
Booker Owuor, a researcher at Sower Solution and a member of the taskforce on NCPB’s grain warehouse system, said the system is likely to turn unpopular after the glut season because prices offered by the government are not sufficient to cover cost of production
“NCPB silos will continue to receive maize as long as the seasonal glut lasts but farmers will ditch the system immediately thereafter for any direct buyer who offers better prices,” said Mr Owuor.
Heavy rains
According to Prof Misoi, farmers from Eldoret are leading in deliveries with over 45,000 bags followed by Narok, which has delivered 23,000 bags.
Farmers from Kitale and Moi’s Bridge, he added, have delivered about 13,000 bags but are expected to catch up since farmers delayed to harvest due to recent heavy rains that pounded the area.
This is in sharp contrast to the standoff last year when farmers in North Rift declined to deliver their maize to NCPB at government’s fixed price of Sh2,300 per bag.
“To restore confidence in its price stabilisation role, the government either needs to go back to direct maize purchases or set region-based producer prices taking care of cost of producing maize in different parts of the country,” said Mr Owuor.
In its 2010 outlook, the World Bank said Kenya has the highest maize price in Africa due to past policies of NCPB that alienated small scale farmers, allowing plantations to fix prices.
