An economic analysis of maize marketing in Kenya: a case study of Nandi district

Abstract

The main objective of government intervention in the maize industry is to ensure self sufficiency in maize production. However, indicators of the government's inability to meet this objective have been observed in the past. The memories of national maize crises of 1961, 1971, 1979 and 1984 are sti II fresh in Kenyans' minds. Moreover, Kenya is currently (1992) facing a shortfall in domestic maize supply forcing it to import the commodity which is the dominant staple food of its people. These setbacks have made the government to embark on a liberalization programme of this vital industry. Liberalization of the maize industry involves reduction in government control of maize marketing, thereby increasing the activities of private maize traders. This study analyzed the efficiency of p r Lv a t e t ma i z e trade ill Nandi District. Nandi District has a high potential for maize production and remarkable activities of private framework maize traders. A Policy Analysis Matrix (PAM) was used in the study. The deviation from efficiency is given by the difference between the profits prevailing in the control led maize market and the profits that would emerge on liberalization of the market. This study found that in the period between July 1990 and March 1991, the prevailing profits in private maize trade ranged between Ksh. 2.70 and Ksh. 77.85 per bag10f maize. If the maize market w a s liberal ized the private traders would have made profits of between Ksh 232.00 and 1 1 Bag = 90 kg. Ksh. 284.10 per bag. This excess profit would in the longrun be passed to maize farmers in form of higher producer prices. Thus, governement policy reduced returns to participants in private maize trade by between 264 and 2203 percent. The study concluded that private traders can handle maize marketing efficiently. The role of the government in maize trade should be provision of infrastructure like roads and storage facilities, which would enhance technical efficiency and reduce losses in private maize trade. The government traders in should offer order to credit facilities to private maize assist them to cover purchasing, marketing and storage costs. If the government is to set maize prices, then the ceiling consumer price should reflect or approach the cif price in periods when importation is necessary. The floor producer price should reflect the price likely to achieve the food security objective being pursued by the government. If NCPB is to engage in maize trade, then it should be allowed to compete with other traders.