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East Africa: Prices of Maize, Beans to Continue Rising
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The East African (Nairobi)
12 May 2008
Posted to the web 12 May 2008
Philip Ngunjiri
Nairobi
Wholesale prices, especially for maize, are expected to rise still more around East Africa as the national stock position gets tighter in Kenya and Tanzania, according to the Regional Agricultural Trade Intelligence Network (Ratin).
The prices of most cereals in the monitored markets of East Africa remained high during March and early April this year, the organisation says. The high prices were attributed to a combination of reduced supply and higher demand coupled with rising transportation costs caused by expensive fuel.
Wholesale bean prices, while remaining relatively stable in Nairobi and Dar es Salaam, increased significantly in Kampala, from $495 per tonne to $639 per tonne in January.
Ratin is a collaborative effort comprising two USAid projects. These are the Famine Early Warning System Network Project (FEWS NET) that focuses on bringing in crop production and trade information and the Regional Agricultural Trade Enhancement Support Programme (Rates) that deals with changing trade policy to enhance regional trade in maize. The main activity of Ratin is regional trade analysis of maize, beans and rice using information from various sources.
In Kenya, maize prices are rising due to speculation as farmers hoard it in anticipation of higher prices caused by reduced long rains. According to some traders, farmers are reluctant to release maize to the markets, which has consequently led to supply shortages. Private millers are not able to find grain to purchase despite offering relatively high prices.
During the last week of March, most millers were offering an average of $260 per tonne in Nairobi and $226 per tonne in Eldoret, which is a producing area. However, it is predicted that prices will remain high for the next several months.
Short term relief is expected in July though the cross-border trade following harvesting in Uganda, Tanzania, parts of the Rift Valley and Western Kenya.
In Kenya, the best case scenario is that maize prices will rise during the third quarter of 2008. The speculation of a reduced maize harvest from the upcoming 2008/09 long rains season, the destruction of the surplus maize from the previous season and the possibility of a crop failure from the short rains season all point to this likelihood.
In the worst case scenario, maize prices could rise in the next several months if a rapid return to normalcy does not take place in the country.
At $169 per tonne, maize prices in Kampala are relatively stable but higher than the 5-year average of last year. Wholesale prices are believed to be high due to increased demand from institutions and neighbouring countries. High fuel prices and poor roads have also caused commodity prices to increase.
In Tanzania, high prices are attributed to low market supplies and increased transportation costs caused by high fuel prices. Commodity prices could ease in Tanzania when maize harvesting in the southern region of the country begins.
In Dar es Salaam, the wholesale price of maize rose from $294 per tonne in early January to $330 per tonne in the first week of February. The prices are expected to stay high as a result of the current tight domestic situation occasioned by the failure of the "mvuli" rains in some areas.
In Kenya, the long rains production season is underway. In Nyanza and Western province, land preparation and planting is about 80 per cent completed. In some of the areas, the maize crop is about knee high and looking healthy. In the grain basket areas, farm operations are slowly returning to normal after a slow start following the peace agreement and the forming of a grand coalition government.
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At least 50 per cent of the land has now been prepared compared with the February 2008 statistics showing only 20 per cent of the land being prepared. The government has also initiated some programmes with farmers to boost production for this season. The vulnerable farmers in Busia, Bungoma and Nakuru have been given one 50 kg bag of fertiliser and seeds each.
The Ministry of Agriculture has projected that 2.16 million metric tonnes of maize will be produced during the current long rains season. This is about 20 per cent lower compared with last year's long rains production and 15 per cent lower compared with the long rains average production of 2.5 million tonnes.
Statistics show that Kenya has adequate stocks to see it through the first half of the year, having carried forward huge stocks from the previous season. The Ministry of Agriculture says that maize being held by farmers, millers and the National Cereals and Produce Board (NCPB) by the end of March was 1.6 million tonnes, out of which the NCPB is holding 270,000 tonnes as strategic reserves.
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