NAIROBI, 14 February 2012 (IRIN) - Almost all Kenyans eat maize - an average of almost 100kg each a year - but they pay a lot more for the staple than many of their regional neighbours. The poorest Kenyans now spend over a quarter of their income on the cereal.

High and volatile prices are especially hard on the poor, including the 98 percent of farmers in Kenya who, according to the World Bank, buy more maize than they sell.

Achieving lower and more stable prices, say the Bank and others, depends in large part on the government coming up with more permanent trade and marketing policies and on the East African Community reviewing its practices.

A recent paper by the Bank said "agriculture policy and trade policy distortions" in Kenya had aggravated the effects of the 2011 drought, which affected some 3.7m people there.

"Kenya is a food deficit country even in a bumper harvest year, yet the country levies import duty on food grains that are only suspended on an ad hoc basis in times of crisis," the Bank said in a recent report, The Drought and Food Crisis in the Horn of Africa: Impacts and Proposed Policy Responses for Kenya.

Kenya imposes a 50 percent duty on maize imports, except on those from fellow East African Community (EAC) members Uganda and Tanzania, which only attract a 2.75 percent inspection fee.

This duty tends to leave such imports beyond the reach of all but the largest Kenyan milling companies who, as a result, enjoy considerable influence on market prices of maize flour.

In lean times the government may create a duty-free window to encourage imports from outside the regional bloc, but this can fuel speculation.

Rules-based policies

According to a report by Egerton University's Tegemeo Institute of Agricultural Policy and Development, the government should consider adopting more systematic rules-based policies.

"Nurturing credible commitment in regard to trade policy is likely to promote market predictability and therefore lead to greater supplies and price stability in food markets during times of domestic production shortfalls," it says.

Meanwhile, Agritrade says "a more coherent policy, one less reliant on stop-gap measures such as export bans, could assist farmers in times of both surpluses and deficits, and could also facilitate the proper functioning of regional food supply chains."

NCPB's anti-poor interventions

High maize prices paid to producers in Kenya by the National Cereals Produce Board (NCPB) have also been blamed for benefiting just "a small but politically influential group of less than 2 percent of Kenya's farmers," who comprise households that are net sellers of maize, according to the World Bank report. These farmers benefit from economies of scale.

"NCPB's maize market interventions are generally anti-poor in the sense that high prices paid to large-scale farmers negatively impact consumers - especially poor urban households and the majority of poor rural households, which are net buyers of maize," the report said.

Cases of big farmers creating artificial shortages by hoarding, in the hope prices will rise, are also common.
Small farmers often have minimal interaction with the NCPB and tend to sell off their produce at low prices to middlemen, who sell on the produce to the NCPB at a profit. Over half of smallholder farms in Kenya are less than 1.5 hectares.

Disincentives to storage

Another problem is storage: "Certain behaviors by the government, most notably the sudden changes in the import tariff rates on maize imports through Mombasa as well as sudden changes in the NCPB's maize selling price, exacerbate the risks of storing grain," says the Tegemeo Institute report.

"These disincentives to storage contribute to a circuitous flow of maize out of surplus areas during harvest periods, only to move back in once deficits set in."

This leads to depressed maize prices right after harvests and because relatively little is stored through the season, less is available for consumption later in the season, which raises prices during these periods.

"In order to drive down the price of maize grain and meal to rural and urban consumers, there is need to address the disincentives to on-farm and trader storage," it says.

Poor rural infrastructure

Poor rural infrastructure and high transportation costs are both significant disincentives to individual farmers seeking to circumvent middlemen, adds a US Department of Agriculture (USDA) forecast for 2012.

"What Africa's rural farming and herding communities have needed, above all else, is increased agricultural research and development, with concomitant investments in rural roads, power, irrigation, clinics and schools," writes Jimmy Smith, director-general of the International Livestock Research Institute (ILRI), in a recent opinion piece.

A farmer in western Kenya's Kisii region, Eric Moseti, agrees: "Even if I produce more food, it can't be cheap because I transport it very expensively to where it is needed. This means I have to charge high prices to recoup money that I used in preparing my farm. Even farm inputs are very expensive... The government should provide us with farm inputs so that the food we produce can be affordable to ordinary people."

Recent attempts at providing subsidized fertilizer and certified seeds to small and medium farmers have been affected by late procurement.

Invest more in small farms

In a December 2011 paper Joseph Karugia, coordinator of the Regional Strategic Analysis and Knowledge Support System for Eastern and Central Africa (ECA), says that investing in smallholder agriculture is undoubtedly the most sustainable safety net for the ECA region.

He also says ECA member countries should take advantage of the considerable trade potential associated with small markets and the phenomenon of staggered harvesting, since surplus areas can supply food to deficit areas within and between countries.

But he also notes the problems: "The existing market imperfections are complicated by the existence of trade barriers within the ECA region. These barriers are unpredictable and make it risky for trading firms to invest in developing durable marketing networks across the ECA region.

"They also impose transaction costs on investors and traders which results in lower demand and lower prices for farmers, and higher prices for consumers," he says.

Source:  Integrated Regional Information Networks (http://www.irinnews.org )