Agriculture plays a big role in Kenya’s economy, but supply problems with maize, the staple diet of most of the country’s inhabitants, have made the grains sector a major political issue. Short supplies mean that Kenya will have to rely on its neighbors for food.

It has to be maize, since wheat remains a luxury. "Wheat is still unaffordable to the majority of Kenyans," Paloma Fernandes, executive officer of the Cereal Millers Association, told World Grain.

According to the Regional Agricultural Trade Intelligence Network (RATIN), which covers Eastern Africa, Kenya produced 2.88 million tonnes of maize in 2007, compared with 3.15 million in 2006. It puts 2008 maize production at 2.394 million tonnes and total maize imports for 2008-09 at 445,000 tonnes, with 120,000 coming from Uganda, 140,000 from Tanzania and 185,000 from outside the region. With 359,100 tonnes predicted to go to industrial uses and post-harvest losses, that leaves an availability of just under 2.88 million. With exports of 4,000 tonnes and national consumption of 3.234 million tonnes, Kenya ends up with a shortfall of 358,100 tonnes of maize.

"Kenya will rely on neighbors Tanzania and Uganda for maize to increase the domestic stocks," RATIN said in an analysis published in its Food Trade Bulletin in January. "Ordinarily, Kenya imports about 250,000 tonnes (2.7 million 90-kilogram bags) from Uganda and Tanzania during one production year, from July to June of the following year. It is projected that the figure could go down this year due to the regional demand for maize.

"The RATIN border statistics show that Kenya has already imported about 110,000 tonnes maize (1.2 million 90-kilogram bags) from both Uganda and Tanzania since July 2008. It is projected that not more than 50,000 tonnes of maize will be imported between January and June 2009. Consequently, Kenya will have to source maize from outside the region to boost its supply."

The International Grains Council (IGC) noted in its January Grain Market Report that the government banned exports of maize flour on Dec. 30. "Severe drought has affected northern parts of the country and helped drive up food prices," it said. "Exports of grain maize were already banned. On January 27, the Finance Minister issued a formal notice scrapping duties on maize imported between January 16 and July 16."

The IGC predicted imports of wheat of 800,000 tonnes for 2008-09, compared with 500,000 the year before. In a published report, the U.S. Department of Agriculture (USDA) predicted imports of 670,000 tonnes based on a figure for 2008 production of 280,000 tonnes.

MAIZE CRISIS

Kenya’s government declared a food emergency on Jan. 9. According to a recent USDA attaché report, it said that about 10 million Kenyans, approximately 25% of the population of Kenya, are or soon will be at severe risk of food shortages.

"Among the measures authorized by the GOK (government of Kenya) as a result of the food emergency is the importation of an additional five million bags (about 450,000 tonnes) of corn," it said. "With improved freight rates for delivery to east Africa, U.S. corn farmers may be in a position to help alleviate the corn supply shortage in the Kenyan domestic market."

According to RATIN, the government has approved the importation of 10 million bags (900,000 tonnes) of duty-free maize.

"This will be done by both the government and the private sector," it said. "The government will import seven million bags for its strategic grain reserves while the millers and traders will import three million bags."

The government has also banned the export of maize grain and flour.

"In November last year, due to the rising price of maize flour, the government of Kenya announced that it would make available maize flour at a subsidized price," it said. "Under this arrangement, the millers would source subsidized maize grain for processing from the NCPB. NCPB would buy maize directly from the farmers at 1,950 Kenyan shillings (KES) per bag ($277 per tonne) and resell the same to the millers at 1,750 KES per bag ($250 per tonne)."

According to an article on the maize situation in Kenya prepared by Diamond Lalji, the chairman of the Cereal Millers Association, the problem goes back to violence which followed the election on Dec. 27, 2007. He also blamed a delayed decision to import grain and delays in putting the decision into action as well as the export of significant quantities of maize before the export ban was put in place. Adverse weather conditions at harvest had an effect on the quantity and quality of maize available, while he said that some farmers were holding onto stocks because of their reluctance to sell to the National Cereals and Produce Board (NCPB) due to lower prices and delayed payments and their expectation that prices would rise.

Lalji also looked at the reason behind the sharp rise in prices.

"Initially, NCPB was unable to allocate adequate maize to the millers at a subsidized price of 1,750 to 1,830 KES per bag, which was intended to stabilize maize prices," he said "Recently, NCPB’s inability to allocate any maize to millers, due to building up their strategic reserves, has resulted in millers buying maize directly from farmers at higher prices ranging between 2,200 and 2,300 KES at farm gate per bag, or buying from brokers who were availing rNCPB Lalji at between maize was sharply and 2,200 offering critical and 2, it 500 of to the the KES policy mill ." - of building up stocks. "Building of strategic reserves at a time when the country is in dire need of maize is hard to comprehend," he said.

Maize flour prices have also been driven up by higher production costs. "Increased electricity and fuel costs have impacted tremendously on the cost of production and transportation," he said. Because the millers could not obtain adequate maize stocks, they were running below capacity, which also increased the cost of production per bag.

MILLING INDUSTRY

There are now two associations covering the milling industry in Kenya, Paloma Fernandes, executive officer of the Cereal Millers Association, explained. "The bigger one is the Cereal Millers Association, which includes 25 of the largest millers," she said. "The United Millers and Farmers Association came up during the maize crisis. They felt they weren’t getting enough allocation."

The millers are based in all regions of the country. "The capacity of the millers is something like 1.3 million bags a month," she said, referring to the members of the Cereal Millers Association."

If millers were running at capacity, which is not the case, this would equate to 117,000 tonnes a month. In his article, Lalji put capacity at 1.5 million bags a month, but pointed out that actual milling was running at 30% to 40% of capacity.

The Cereal Millers Association is keen to defend the industry in the face of the maize crisis. "The blame game is what we are trying to clarify," she said. "(After the election), about three million bags of maize were burnt. The government knew they had to import, but there was a delayed decision to import. The government tried to impose informal price controls, but it failed."

Kenya’s agriculture is highly fragmented, but the larger farmers produce the great majority of the output. Paloma Fernandes used the example of the wheat sector to make the point. "Twenty percent of the farmers control 80% of the output," she said. "Small-scale farmers are many, but their production is small."

NCPB

The National Cereals and Produce Board (NCPB), which was established by the government in 1979, has origins which go back to the early 20th century. It was originally given monopoly powers to purchase, store, market and generally manage cereal grains and other produce in Kenya. NCPB regulated the whole grain chain with a controlled price system.

"However, due to increased food production, the cost of managing such a subsidized cereal marketing system turned out to be a heavy burden on the exchequer," its website explains.

The government started a reform program in 1988, leading to the full liberalization of the grains sector in 1993. "Grain marketing is currently fully liberalized in Kenya, allowing producers to dispose their produce to willing buyers at market-driven prices for different regions depending on supply and demand," according to the NCPB. "Commercialization has given the NCPB a new charter and vision that focuses on a commercial business role."

Chris Lyddon is World Grain’s European editor. He may be contacted at: