More headache for Kenyan households as cost of living is expected to rise


costofliving

Kenya’s maize production fell by one third in the current harvesting season, signalling a possible sharp rise in consumer prices that could hit low-income households the hardest. Poor rains, delay in planting and low use of fertiliser slashed the country’s maize output by 33.4 per cent, according to an assessment by Egerton University’s Tegemeo Institute.

The shortfall means consumers should prepare for high food prices ahead, especially because the weatherman has forecast depressed rains in the last quarter of the year.In a report released last Thursday, researchers at Tegemeo Institute said farmers harvested 28.9 million bags of maize during the long rains season, against an initial projection of 43.4 million bags for the 2013/14 crop season.

This level of performance leaves the country with a shortfall of 14 million bags, given an annual national consumption of between 40 million and 43.5 million bags. Only four to five million more bags are expected out of the short rains harvests, leaving the country with an overall shortfall of up to 20 per cent that must be met by stock from the volatile international market.

The huge production shortfall looks set to end three years of stable maize prices that has seen wholesale prices for the commodity stay around Sh3,000 per 90kg bag since August 2010.

“While the food security situation looks positive in the short term, there is need to closely monitor the 2013/14 maize crop performance and food stocks to guard against price volatility or supply shortfalls that could threaten food security in the medium-term,” said Tegemeo Institute’s managing director, Mary Mathenge.

The report said maize prices have remained stable for most part of the year due to large stocks from the previous season, sustained inflows from neighbouring countries and reduced activity by the National Cereals and Produce Board (NCPB) as a buyer of maize.

Ms Mathenge named Kisumu, Nyeri, Bomet, Kitui and Makueni as counties already grappling with maize shortage while Uasin Gishu, Nakuru, Trans Nzoia, Narok and Bungoma have a surplus. Kenya last experienced maize shortage in the wake of the 2007 post-election violence and the subsequent drought of 2008/9, which nearly caused food riots. The then coalition government was forced to subsidise food imports to avert social unrest.

The World Bank group reported that a total of Sh24 billion was lost in forgone import duties and flour subsidy that the government offered to manage the deficit. The Meteorological Department last month said that it expects most parts of the country to experience depressed short rains (October-November-December), meaning that a serious food shortage may ensue by next year’s long rains harvests.

The expected rise in flour prices could form another layer of burden on basic consumer goods prices that have only recently shot up with the enactment of a new VAT law that removed exemptions from a wide range of goods. South Rift, Nyanza and parts of Western regions are expected to harvest two million bags of maize, according to Tegemeo Institute.

Another 26 million bags is expected from Lower Rift Valley with additional imports of 1.8 million from the region. Tegemeo’s food experts expect Kenya to open the New Year with a stock of 12 million bags. “There is need to closely monitor the maize situation especially with regard to the period after May next year,” said Francis Karin, a researcher at Tegemeo Institute.

Tim Njagi, another Tegemeo researcher, said that the VAT Act 2013 had not only increased the price of animal feeds by a similar margin but also cut farmers’ profits by between 70 to 100 per cent. The tax has eroded competitiveness of the sub-sector, exposing the country to poverty, malnutrition and unemployment in the long run, he said.

“The increase in the price of feeds coupled with the decline in the prices of outputs (eggs and culls) has forced many small-scale poultry farmers out of the enterprise in the face of declining profits,” Mr Njagi said as he called for zero-rating of the inputs.

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Categories: Africa, Business

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