Kenya’s Maize Pricing Situation: Challenges and Opportunities

TEGEMEO INSTITUTE OF AGRICULTURAL POLICY AND DEVELOPMENT

September 18, 2009

Trends in local and import parity grain prices in selected markets

in the 2000-2009 period

Wholesale grain prices in selected markets (2000-2009)

General upward trend since 2002 with sharp increases from 2008

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800

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2800

3200

00 01 02 03 04 05 06 07 08 09

N air obiM o m b as a

N a k u r uEld or et

Ksh

pe r

90 k

g

Wholesale grain prices in selected markets (Jan - Aug 09)

General decline for Mombasa & Kisumu pricesPrices in other markets increasing

Nairobi local and import parity prices (2000-2009)

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4500

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Ksh

per

90k

g

wholesale, Nairobi

import parity with 50% tariffsuspended January 2009

import parity assuming no tariff

Local vs. import parity prices in selected markets (2009)

Source: MoA/RATINLocally produced maize cheaper up to Feb/March 2009Gap between local and parity prices reducingProportion of imports in the stocks held by traders increased in most markets (80% in Nakuru)Posho mills account for 40% of maize milled in rural areas

Mombasa local vs. import parity prices (2008-2009)

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4000

2008:01 2008:07 2009:01 2009:07

Ksh

per

90k

g

50% import tariffwaived Jan 2009

Wholesale, Mombasa

Import parity, Mombasa

Nairobi local vs. import parity prices (2008-2009)

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4500

2008:01 2008:07 2009:01 2009:07

50% import tariffwaived Jan 2009Import parity, Nairobi

W holesale, Nairobi

Import cost build-up for maize imported from South Africa

Exchange Rate (Ksh/USD) - July 09 77.80

Year - July 09 $ GBHL Conventional

Maize FoB Ex-Durban 210 210

Freight Charges Per ton ($40-50) 45 45

Insurance (1.5% of Fob) 3.15 3.15

Cif Mombasa - June USD 258 258

KSH (C & F Mombasa) per bag 1,808 1,808

Tariffs Payable to GBHL USD/ton- (Ksh)/bag

Stevedoring (Vessel Discharge) 6.50 45.52

Terminal handling 4.50 31.51

GBHL – Delivered to W/hse (Bagged) 4.00 28.01

Transport to Miller (Ksh 380/MT) 34.20

KPA Charges

Stevedoring 1.50 10.50 28.01

Wharfage 2.00 14.01 35.01

Clearing/Agency Fee ($1 - $3/ton) 2.00 14.01 14.01

Warehousing Charges (Ksh 500/ton) 4 wks 45.00 45.00

IDF $ per ton (2.25% Cif ) 40.67 40.67

Bagging 5.00 35.01

Shorehandling 1.00 7.00

Transport to Miller (Ksh380/MT) 34.20

Diff

Landed Mombasa - June Ksh per 90 kg bag 2,071 2,047 (25)

Transport cost to Nairobi 225.02 225.02

Handling 10.00 10.00

Landed Nairobi (Ksh per 90 kg bag) 2,306 2,282 (25)

Cargo Handled

2008 (12 months) 2009 (6 months)

GBHL Conventional GBHL ConventionalBulk Wheat 703,788 109,291 433,169 44,388Bagged Rice 71,264 19,883Bulk Maize 177,521 11,857 509,558 186,164Bulk Sorghum 130,165 91,252 18,850 49,864Bulk Salt 173,858 52,348

Bagged Sugar 27,578 6,207Relief Cargo 106,364 106,522Sim Sim 1,748 -Fertilizer 256,987 251,755

Total 1,011,474 850,199 961,577 717,131

Cargo Handled (MT) at the Port (GBHL & Conventional) 2008-2009

Source: KPAUnused capacity at GBHLImporters use facility as a warehouse when there are large import volumes due to constrained transportation

Trends in maize grain and flour prices

Trend in maize grain/flour prices (2000-2009)

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Ksh

per

kg

wholesale, Nairobi

retail sifted maize flour, Nairobi

wholesale, Eldoret

Similar trends in grain and flour prices

Comparison between grain and flour prices in the 2008-2009 period

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60

2008:01 2008:07 2009:01 2009:07

Ksh

per

kg

retail sifted maize flour, Nairobi

wholesale, Nairobi

wholesale, Eldoret

Increase in price of maize meal higher than that of grainLate 2008, grain prices declining while flour prices increaseOther factors besides grain price associated with increase in flour prices are uncertainties in grain markets in terms of policy, energy cost, poor infrastructure

Farm-gate & wholesale grain prices vs. retail flour prices (2008-2009)

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55

2008:10 2009:01 2009:04 2009:07 2009:10

Ksh

per

kg

retail sifted flour, Nairobi

wholesale, Nairobi

farm-gate, Nakuru

Share of retail sifted maize flour price to:

45.7%

14.0%

40.3%

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45

50

farmer traders miller/retailer

Pe

rce

nta

ge

of r

eta

il pr

ice

Production and marketing costs have not been deductedFarmers get a relatively higher share of sifted meal retail price

Share of retail posho maize flour price to:

58.1%

12.8%

29.1%

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20

30

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50

60

farmer traders miller/retailer

Pe

rce

nta

ge

of r

eta

il pr

ice

Policy implications

• Emphasize on strategies to reduce cost of producing maize locally– Domestic maize is cheaper

• Use short-term and long-term measures to deal with soaring food prices– High food prices hurt even producing households

• Duty removal has had a moderating effect on local grain and flour prices

Policy implications

• Suspension of duty earlier would promote more timely availability of grain in times of domestic shortfall

• Facilitate sourcing of grain from the region by streamlining custom clearance procedures

• Poor road/railway infrastructure hampers capacity to transport grain

• Unutilized capacities increase cost

Thank you

World maize prices

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white maize, SAFEX, South Africayellow maize, US Gulf

USD

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met

ric

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