Effects of government maize Marketing trade Policies on maize Market Prices in Kenya

Abstract

Introduction:

Maize is the main staple food in Kenya and is an important source of calories to a large proportion of the population in both urban and rural areas. Maize consumption is estimated at 98 kilograms per person per year, which translates to roughly 30 to 34 million bags (2.7 to 3.1 million metric tons) per year. Maize is also important in Kenya’s crop production patterns, accounting for roughly 28 percent of gross farm output from the small-scale farming sector (Jayne et al., 2001). Kenyan policy makers have been confronted by the classic “food price dilemma.” On the one hand, policy makers are under pressure to ensure that maize producers receive adequate incentives to produce and sell the crop. Rural livelihoods in many areas depend on the viability of maize production as a commercial crop. On the other hand, the food security of the growing urban population and many rural households who are buyers of maize depends on keeping maize prices at tolerable levels. For many years, policy makers have attempted to strike a balance between these two competing objectives – how to ensure adequate returns for domestic maize production while keeping costs as low as possible for consumers. Maize marketing and trade policy has been at the center of debates over this food price dilemma, including discussions over the appropriateness of trade barriers and the role of government in ensuring adequate returns to maize production. The government has pursued its maize pricing and income transfer policies through (a) the activities of the National Cereals and Produce Board (NCPB), which procures and sells at administratively determined prices, and (b) restrictions on external maize trade through a variable maize import tariff. The effects of the NCPB’s activities, and government maize trade policy more generally, on maize market price levels and volatility are both controversial and poorly informed by existing analysis. Given the importance of maize as an income source and as an expenditure item for both rural and urban households, there is a pressing need to understand the effects of government maize marketing and trade policies on 3 market price levels in order to begin to understand the welfare implications and distributional effects of these policies.