Grain farmers reacted sharply to the government's announcement that it will buy maize at a price of Sh3,200 per bag of 90 kg this year, insisting that the amount was way below their expectation.
Agriculture secretary Willy Bett announced the price, which is six per cent more than last year's when the National Cereals and Produce Board (NCPB) paid Sh3,000 for similar quantity of maize.
Mr Bett said the government had set aside Sh7.1 billion to buy 2.4 million bags of maize to replenish the Strategic Food Reserve (SFR) beginning next week.
"Based on the cost of production and in consideration of the farmers' mark-up of 35 per cent (Sh790 per bag), the SFR Board has recommended that the producer price for a 90 kg bag of maize be Sh3,000," he said.
Of the Sh3,200 that the government will pay, Sh200 is rebate to the growers for the extra cost incurred during planting.
"Owing to the adverse weather conditions coupled with other numerous challenges such as outbreak of Fall Armyworm during the period, the government has provided a rebate of Sh200 per 90 kg bag of maize offered to NCPB," he added.
Egerton University-based think tank-Tegemeo Institute, however, faulted the price terming it high with very negative impact on consumer prices when the subsidy programme comes to an end this month.
"The new price is extremely high. The ideal cost of a 90 kilogramme bag of maize should be Sh2,700," said Miltone Ayieko, a director at the institute.
Mr Bett's announcement came only a week after Tegemeo released the findings of a study indicating that the cost of producing a 90 kilogramme bag of maize stood at Sh2,200 this year, meaning that farmers will make Sh1,000 for every bag sold to NCPB.
"After critical analysis and harmonisation of the cost of production reports from the Ministry of Agriculture and Tegemeo, the cost of producing a 90 kg bag of maize was determined to be Sh2,257," Mr Bett said.
Farmers, through their lobby, the Cereal Growers Association (CGA), said they expected Sh3,500 for a 90 kg bag.
"We had many challenges this year and were forced to incur extra cost in controlling Fall Armyworms. We find the price of Sh3,200 to be low," said Anthony Kioko, the chief executive officer CGA.
Mr Bett said a slight increase in production from 36.9 million bags last year to 37.9 million this year is expected.
That finding is in stark opposition to the July announcement that maize production would drop to 32 million bags this year.
Kenya faced a serious shortage of grain this year that pushed up the cost of maize flour to a record high of Sh153 per 2-kilo packet, and forced the government to intervene through a subsidy programme that lowered the price to Sh90 per 2 kilogramme packet.
Mr Bett said the government was watching the market keenly before exiting from the subsidy programme at the end of the month.
"The government is avoiding a situation where the subsidy will be stopped only for the cost of flour to retail above Sh90, we will not allow that, even if it means that we continue with the programme, we shall do that," he said.