I have for long observed from far the issue of government buying maize from farmers at a given price (set price) but never got into my mind the effect to the farmers, consumers, other Kenyans, the government, etc.
Is this buying of maize of any good to the economy? To answer this let me give you a simple scenario. Today morning I bought eggs 3 eggs for 20 bob (imported all the way from Uganda) and 1 liter of milk (adulterated milk) for 60 bob from Kiambu. This is the effect of dictating the maize price, trickles down all the way to the consumer who carries the biggest burden in the name of being cushioned.
In the name of safeguarding the consumer from expensive Ugali, the government has adopted an uncouth solution that only results in toppling the economic balance. The government reduced the price of ugali just to transfer it to other products that use maize as the raw material (dairy meal, chicken feed, and other animal feed) and this trickle down back to the consumer (in terms of animal products price).
What doesn’t trickle down to the consumer it benefits the foreigners (foreigners and importers make a profit at the expense of the farmer, for example, the eggs from Uganda) So how is it possible to import an egg all the way from Uganda and sell it cheaper than the local eggs? The answer is simple, the government bought maize at a very high price than the regional price that the cost of maize and maize product in the market becomes so high. As a result, a vast maize and maize products price difference emerges between Kenya and Uganda such that a Uganda’s farmer can produce an egg at the cost of KShs 5-6 and make a profit while Kenyan farmers cannot make any profit selling his/her egg at KShs 8.
Eggs from Uganda to Kenya
Unforeseen trap – To safeguard the maize farmers the government banned the importation of maize, right? But eggs, milk and other animal products still can be imported into the country. So the wise Ugandan farmers instead of exporting maize which is more of a raw product to many other products are adding value to maize and importing the maize inform of eggs at even a bigger profit. All the government efforts trickle down to benefit Uganda’s farmers.
Back to our milk from Kiambu, am sure you are asking why isn’t Uganda exporting milk too? Fortunately to the maize farmers and unfortunately to the consumer, milk is highly perishable, and Uganda doesn’t have much milk to export for now but soon with the trend I won’t be surprised.
Don’t Misunderstand me – I didn’t say cushioning the consumer from high Ugali prices is bad, I didn’t say NCPB buying maize from farmers is bad. The government is only doing it wrong, buying at a set price instead of the regional or at-least national market price. Buying a 90kg bag of maize at 2500 – 3200 while in the local market it costs barely 1500 – 2000 is a wrong move and only sets an imbalance.
Solution – If the maize production cost is so high that farmers cannot make a profit selling the product at region market price this is the problem the government should be addressing. If the maize is in shortage in Kenya, controlled importation of duty-free or subsidized maize until the farmers are back in production is all that is needed.
Worse scenario – if maize uptake at a set price higher than the market price continues, I am sorry to the dairy farmers in Kenya your business will barely be profitable anymore as your product will be too costly for the consumer and they will start looking for a cheaper source or cheaper alternative. Poultry farmers am even sorrier, poultry farming will be history by then. Consumers of maize product especially Ugali the government will be lying to your face, they will be making you buy a product worth 40-60 in the regional market at 70-80 in the name of cushioning you from buying it at a 100. For Uganda’s farmers, they will be celebrating all the way to the bank, Uganda’s economy will be booming.
KILELE 254... 