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
400
800
1200
1600
2000
2400
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)
500
1000
1500
2000
2500
3000
3500
4000
4500
00 01 02 03 04 05 06 07 08 09
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)
1000
1500
2000
2500
3000
3500
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)
1000
1500
2000
2500
3000
3500
4000
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)
0
10
20
30
40
50
60
00 01 02 03 04 05 06 07 08 09
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
10
20
30
40
50
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)
15
20
25
30
35
40
45
50
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%
0
5
10
15
20
25
30
35
40
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%
0
10
20
30
40
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
40
80
120
160
200
240
280
320
00 01 02 03 04 05 06 07 08 09
white maize, SAFEX, South Africayellow maize, US Gulf
USD
per
met
ric
tonn
e
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