MAIZE SUPPLY RESPONSE IN KENYA: A FARM-LEVEL ANALYSIS

ABSTRACT 
Maize is the main staple food crop in Kenya and the government policy objective is to increase maize production in order to achieve food self-sufficiency and security. The government has been applying import tariffs on maize, procuring maize at support prices, and imposing non-tariff barriers on maize imports as measures aimed at motivating farmers to produce more maize. Maize production has not, however, substantially improved in the last 13 years, and consumption demand has remained above domestic supply. This study aimed to assess maize supply response to price and non-price factors and how sensitive fertilizer and labour demand are to prices and non-price factors. The study used cross-sectional farm-level data pertaining to 2003/2004 cropping year for 1187 maize producing households in Kenya. Normalized restricted translog profit function was used to estimate maize supply and variable input demand elasticities. Results showed that own-price elasticity of maize supply is less than unity, implying that maize support price is an unattractive policy for expanding maize supply. Fertilizer use was found to be particularly important in the decisions on resource allocation in maize production. Of the fixed inputs, land area was found to be the most important factor contributing to the supply of maize. Market access and educational endowment of the household head seemed not to have much influence on maize supply. It is suggested that since high maize support price may not be feasible, making fertilizer prices affordable to small holder farmers by making public investment in rural infrastructure and efficient port facilities and promoting standards of commerce that provide the incentives for commercial agents to invest in fertilizer importation, wholesaling and retailing would be desirable. Encouraging more intensive use of other productivity enhancing inputs in addition to fertilizer is also suggested, since land consolidation to achieve economies of scale seems untenable in the light of the existing extensive fragmentation of land parcels into uneconomical units.

CHAPTER 1 
INTRODUCTION 
Background information 
Maize is a major staple food for over 80% of Kenya’s population (Nyameino, Kagira, and Njukia, 2003) and shortage in maize supply is, to a large extent, synonymous with food insecurity. It supplies 40% to 45% and 35% to 40% of the calories and proteins, respectively, consumed by an average Kenyan (Mghenyi, 2006). It is grown in virtually all agro-ecological zones of the country, ranging from highlands to semi-arid areas and humid coastal lowlands. It is estimated that maize accounts for 20% of all agricultural production and 25% of agricultural employment (Republic of Kenya, 2003). About 3.5 million small-scale farmers account for about 75% of the total maize produced in the country, while large-scale farmers account for the remaining 25% (Nyoro, 2002). Large-scale commercial farms, however, contribute a significant amount of total marketed maize output. 

Due to the importance of maize for food security, the government of Kenya has over the years pursued policies that influence maize production and marketing. The policies, which have gone through several reforms, have been based mainly on the objective of self- sufficiency in maize. Prior to 1987, the government held full control of maize trading environment, as well as that of maize-inputs delivery system. Prices of maize and maize meal were set pan-seasonal and pan-territorial. Prices of inputs such as inorganic fertilizers and seeds were also controlled. The government also controlled inter-district movement of maize. Regulations were effected through the National Cereals and Produce Board (NCPB), which held monopoly of maize marketing. 

This strict policy regime changed in 1987 when the country embarked on a Cereal Sector Reform Program (CSRP) as part of its overarching structural adjustment policies. The reform process intensified in the early 1990s when, under pressure from international lenders, the government eliminated movement controls on maize trading, deregulated maize and maize meal prices, and eliminated direct subsidies on maize sold to registered millers (Jayne and Kodhek, 1997). By the end of 1993, the market for maize was fully liberalized. The NCPB, however, remained active in the liberalized market, but its role was reduced from that of a sole trader to an agency buying maize for the purpose of building national strategic reserves. 

These reforms, however, received mixed reactions. Farmer lobby groups argued that lower maize producer prices as a consequence of liberalization were a disincentive to production and, therefore, a direct threat to national food security. Consequently in 1999, the government reinstated the NCPB to procure maize at fixed support prices. Currently the government intervenes in the maize market in three ways: variable import tariffs on imports; maize procurement at support prices through the NCPB; and non-tariff barriers on imports. These policies are aimed at maintaining stabilized and reasonably high maize prices as incentives for producers to produce more maize. 

With respect to controls in the input delivery systems, the government was involved mainly in the fertilizer market. Between 1974 and 1984, the government provided fertilizer importation monopoly to one firm, Kenya Farmers Association (KFA) (Ariga, Jayne and Nyoro, 2006). The monopoly position of KFA was later viewed as an impediment to the development of the fertilizer market, and during the rest of the 1980s, the government tried to encourage other firms to enter the market albeit under very tight controls. It determined which firms to operate, through licensing requirements and allocation of foreign exchange (Argwings-Kodhek, 1996). The government set official fertilizer prices to which the licensed firms and traders were to adhere. There was also donor fertilizer aid, accounting for over half of total imports during the late 1980s, over which the government was responsible for coordinating with the commercial imports. The government increasingly recognized that its controlled pricing structure did not ensure adequate margins for retailers to supply the relatively distant rural areas. While the controlled pricing structure was designed to improve farmers’ access to fertilizer, it had the opposite effect in the more remote areas. These concerns led the government to reform the fertilizer marketing system (Ariga, Jayne and Nyoro, 2006). By 1993, fertilizer prices were decontrolled, donor imports dwindled to 5 % of total fertilizer consumption, and small-scale farmers have hitherto relied exclusively on the private sector and cooperatives for fertilizer supply.

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Item Type: Kenyan Postgraduate Material  |  Attribute: 63 pages  |  Chapters: 1-5
Format: MS Word  |  Price: KSh900  |  Delivery: Within 30Mins.
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