THE MAIZE MARKET HAS totally collapsed. There is not enough maize in the country. Worse, activity by farmers at National Cereals and Produce Board depots in the Rift Valley is at an all-time low.
Compounding the problem is the fact that there is not enough white maize in the international market. Just the other day, the Government invited international commodity traders to put in letters of intent to buy imported maize on its behalf. Just 52 applicants put in bids to bring in white maize while 42 bid to bring in yellow maize.
We were all surprised when the big international commodity traders were left out of the deal. I had expected to see names like Cargill, Glencore, Louis Dreyfuss, and Hollburd coming up with offers to bring in maize. We ended up with names that are not too well-known in the business.
The upshot is that more than a month later, the importers who won the deal for white maize have not done even as much as make a physical booking with the grain handling terminal at Mombasa Port. All indications are that what will arrive soon is yellow maize used as feed.
Those who say that the decision by the government to dismantle import duties on maize will lead to the flooding of the local market with imported maize have totally missed the point. There is not enough white maize anywhere.
When word went round recently in international maize trading circles that a commodity house in the East London region of South Africa had one cargo of white maize in its silos, there was a scramble as never witnessed before.
The Grains Council, the lobby for traders, has predicted that the shortage will worsen towards March and April. What can the Government do? The situation the Government now finds itself in is what economists refer to us the “food policy dilemma”.
As a government, you must ensure that maize farmers have an incentive to keep producing and selling maize. On the other hand, you also have an obligation to ensure the urban population is protected from volatile and consistently high maize-meal prices. You have to strive to strike a balance between these two competing interests all the time.
Urban dwellers command more political influence than farmers. They will threaten the political elite with food riots. Scenes of hordes of the urban poor demonstrating in the streets inflict more damage to the image of the country than farmers demonstrating in some sleepy town in the corner of the Republic.
This phenomenon explains why the government is not too keen to increase producer prices. It is not politically correct at this point in time to do so. The circumstances have left Agriculture minister William Ruto walking a tight-rope.
WHILE THE REST OF THE COUNTRY wants cheap maize-meal, farmers in Rift Valley, Mr Ruto’s power-base, want higher producer prices. If he does not employ dexterity in his footwork, the minister may find his political fortunes slipping.
What the economists within government should do is design a better formula for implementing subsidies. Subsidies that create parallel markets and that are applied in the context of an oligopolistic milling industry are a recipe for disaster. You end up opening up opportunities for millers to engage in rent-seeking behaviour.
The Government should allow Rift Valley farmers to sell their maize to whomever they choose on a willing-buyer willing-seller basis — at the best prices they can get.
Let the National Cereals and Produce Board compete with middlemen for maize. Rift Valley farmers must be allowed to take maximum advantage of the current maize scarcity.
If you insist on buying from the farmer at NCPB prices, which are set and decreed by bureaucrats in Kilimo House, you will end up creating artificial shortages.
Do we really want to do so when white maize is in short supply in the whole region? The situation in Rift Valley is ripe for a robust underground maize-buying at prices which reflect the prevailing scarcity.
If the government is worried about food riots, let it design better methods of delivering subsidies and safety nets for the urban poor. It is grossly unfair to force one segment of society to subsidise the consumption habits of the majority.
In any event, a policy that favours consumers at the expense of producers is not in the country’s interests in the long run. Policy-makers should focus on how to deliver incentives to maize farmers so that we can achieve the production levels we used to in the 1980s.
There was a time in those years when we used to produce 1.8 million bags of maize annually. Production has stagnated ever since. We must go back to focusing on how to make agriculture a worthwhile economic activity.
Compounding the problem is the fact that there is not enough white maize in the international market. Just the other day, the Government invited international commodity traders to put in letters of intent to buy imported maize on its behalf. Just 52 applicants put in bids to bring in white maize while 42 bid to bring in yellow maize.
We were all surprised when the big international commodity traders were left out of the deal. I had expected to see names like Cargill, Glencore, Louis Dreyfuss, and Hollburd coming up with offers to bring in maize. We ended up with names that are not too well-known in the business.
The upshot is that more than a month later, the importers who won the deal for white maize have not done even as much as make a physical booking with the grain handling terminal at Mombasa Port. All indications are that what will arrive soon is yellow maize used as feed.
Those who say that the decision by the government to dismantle import duties on maize will lead to the flooding of the local market with imported maize have totally missed the point. There is not enough white maize anywhere.
When word went round recently in international maize trading circles that a commodity house in the East London region of South Africa had one cargo of white maize in its silos, there was a scramble as never witnessed before.
The Grains Council, the lobby for traders, has predicted that the shortage will worsen towards March and April. What can the Government do? The situation the Government now finds itself in is what economists refer to us the “food policy dilemma”.
As a government, you must ensure that maize farmers have an incentive to keep producing and selling maize. On the other hand, you also have an obligation to ensure the urban population is protected from volatile and consistently high maize-meal prices. You have to strive to strike a balance between these two competing interests all the time.
Urban dwellers command more political influence than farmers. They will threaten the political elite with food riots. Scenes of hordes of the urban poor demonstrating in the streets inflict more damage to the image of the country than farmers demonstrating in some sleepy town in the corner of the Republic.
This phenomenon explains why the government is not too keen to increase producer prices. It is not politically correct at this point in time to do so. The circumstances have left Agriculture minister William Ruto walking a tight-rope.
WHILE THE REST OF THE COUNTRY wants cheap maize-meal, farmers in Rift Valley, Mr Ruto’s power-base, want higher producer prices. If he does not employ dexterity in his footwork, the minister may find his political fortunes slipping.
What the economists within government should do is design a better formula for implementing subsidies. Subsidies that create parallel markets and that are applied in the context of an oligopolistic milling industry are a recipe for disaster. You end up opening up opportunities for millers to engage in rent-seeking behaviour.
The Government should allow Rift Valley farmers to sell their maize to whomever they choose on a willing-buyer willing-seller basis — at the best prices they can get.
Let the National Cereals and Produce Board compete with middlemen for maize. Rift Valley farmers must be allowed to take maximum advantage of the current maize scarcity.
If you insist on buying from the farmer at NCPB prices, which are set and decreed by bureaucrats in Kilimo House, you will end up creating artificial shortages.
Do we really want to do so when white maize is in short supply in the whole region? The situation in Rift Valley is ripe for a robust underground maize-buying at prices which reflect the prevailing scarcity.
If the government is worried about food riots, let it design better methods of delivering subsidies and safety nets for the urban poor. It is grossly unfair to force one segment of society to subsidise the consumption habits of the majority.
In any event, a policy that favours consumers at the expense of producers is not in the country’s interests in the long run. Policy-makers should focus on how to deliver incentives to maize farmers so that we can achieve the production levels we used to in the 1980s.
There was a time in those years when we used to produce 1.8 million bags of maize annually. Production has stagnated ever since. We must go back to focusing on how to make agriculture a worthwhile economic activity.
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