The implications of grain market liberalization on on-farm maize storage in Kenya

Abstract

This thesis presents a financial analysis of on-farm grain storage from a farmers perspective in Kenya using storage investment and farm budget data from Nandi district. The study emphasizes the implications of the agricultural market liberalization process being undertaken by the government. To reduce operating subsidies to the National Cereals and Produce Board, the government has encouraged improved on-farm storage structures. The results show that improved storage structures jj nificantl increases income. However, the traditional store show a marginally profitable benefit/cost ratio equal to one possibly explaining the low adoption of improved structures by farmers. The small returns from the traditional stores could be a trade-off for the risk involved. Risk averse farmers might continue to use the traditional store. Although the postharvest losses for individual farmer are small, the country aggregate involves large losses. One recommendation would be to pursue extension programmes which will reduce the on-farm post-harvest losses for those farmers who continue to use traditional stores. Alternatively, a price premium for high quality grain could provide an incentive to use improved practices. Finally, the farmers could be encouraged to start cost-efficient cereal banks which will spread out storage costs amongst many farmers. The success of the market reform process depends on the government providing a favourable environment for private traders, for example improved infrastructure, market information systems, credit and reduced trade barriers. This could lead to more integrated local markets and the dampening of seasonal price differentials within the country hence the less the likelihood of non-competitive market situations arising.