The impact of agricultural trade support in developed countries on maize prices in Kenya

Abstract

This study analyses the impact of agricultural trade support in developed countries on maize prices in Kenya, by assessing how maize imports from developed countries affect domestic maize prices. A simulation is carried out to estimate the cost of maize imports if the trade distorting support was removed from developed countries. It is evident from the study, that maize import and simulated import prices are cointegrated with domestic maize prices. This implies that in the long run maize prices in Kenya tend towards prices of maize imports from developed countries. The study also shows that maize prices from developed countries granger cause domestic maize prices. There is therefore need for producers in Kenya to be empowered so that they can compete effectively. Local producers need to have access to market information, credit facilities, improved infrastructure and marketing institutions. There is also need to protect the farmers from unfair competition especially where domestic production is undermined. Finally, there is need for reduction of agricultural support in developed countries especially trade distorting support.