State intervention to blame for high maize prices

A restocking programme meant to forestall a grain deficit has left Kenyan consumers with some of the highest maize prices in East Africa, shifting attention to the State’s role in grain market stability.

Last month, the National Cereals and Produce Board (NCPB) began to buy excess maize in the market at a cost of Sh2,300 per bag with the Treasury promising farmers additional rebate of Sh500 per bag to help farmers cover their losses.

The Sh2.7 billion programme to be finalised this month can only buy 1.174 million bags or 2.5 per cent of the estimated 46 million bags harvested last year for strategic purposes.

But it has disrupted market forces, ending the rock-bottom prices that consumers usually enjoy immediately after the harvesting period.

Weekly data gathered by Regional Agricultural Trade Intelligence Network indicates that consumers are paying an average of Sh2,584 for a bag of maize in Nairobi, second only to Bujumbura’s Sh2,900.

By comparison, the recent harvests have pulled down the cost of maize to Sh1,514 in Kampala, Sh1,530 in Dar es Salaam and Sh2,325 per bag in Kigali.

Data prepared by the Agriculture ministry indicates that by last week, consumers were paying Sh3,200 for dry maize in Kisumu, Sh2,500 in Mombasa, Sh2,100 in Nakuru and Sh2,000 in Eldoret.

READ: State offers farmers Sh2,700 per bag of maize delivered to cereals board

Before NCPB intervened last month, prices had fallen to record lows of between Sh1,200 to Sh1,500 per bag.

“Many factors, including the cost of production as well as the cost of flour, were put into consideration before arriving at our price,” Agriculture secretary Felix Koskei told journalists when he announced the new producer price.

The high prices once again highlight downsides to the State’s intervention programmes that organisations like the World Bank have criticised in the past for subjecting Kenyans to the world’s highest prices for commodities like maize and sugar.

The steep costs have attracted Ugandan suppliers who frequently encounter market access barriers as Kenyan officials fight to protect domestic producers.

The government had initially ruled out direct intervention in the market with a promise to invest in storage facilities and promote structured sales such as warehouse receipting systems, initiatives that are yet to take root.

Tegemeo Institute, an agricultural policy think-tank of Egerton University, says a farmer spends between Sh1,400 and Sh1,741 to produce maize in Kenya.

Local millers shunned recent calls to bring down flour prices, currently retailing above Sh100 a packet, to Sh75 as demanded by the Agriculture ministry citing wide margins that farmers enjoy.