High food prices: Region pays for poor farming methods

Recently, the Kenya Red Cross Society warned that over 2.1 million people in the country faced the risk of death from starvation. Its secretary general, Abbas Gullet blamed the situation on lower-than-normal long rains and inter-clan and inter-tribal skirmishes that resulted in the displacement of persons.

Other reports show that some 20 million people are facing acute food insecurity in East and Central Africa. Besides Kenya, other affected countries are Somalia, Uganda, South Sudan, Ethiopia, Central African Republic, Sudan, the Democratic Republic of Congo and Tanzania.

READ: East Africa and Horn in dire need of food aid

In the midst of all these developments is a rise in food prices, with the Famine Early Warning Systems Network warning that food prices will continue to be high well into December. Already, prices of some food items have shot through the roof with a 50kg box of tomatoes selling at Ksh8,000 ($92).

It is now a foregone conclusion that each time East Africa experiences rain shortage or drought, hunger and sharp rise in food prices follow. The World Bank has described this situation as a “silent crisis” that has been building up for the past several years.

“It is a crisis because this is still a poor region, where half the population and more live on less than $2 a day… they spend on average half of their income on food. And obviously if prices go up, then they reduce the food intake,” said Wolfgang Fengler, the Bank’s lead economist.

But in most cases, food prices in the region have remained higher than global averages, with or without droughts. For example, although the price of maize had risen the world over, it rose much higher in Kenya.

“If Kenyans would buy at international prices, they would buy at something like $30 per bag of maize – now they pay $45 per bag,” said Mr Fengler.

In Uganda, the situation is about the same. According to the Uganda Bureau of Statistics, the country’s consumer price index (CPI) decreased to 214.10 in July from 214.30 in June. The CPI reached an all-time high of 218.50 in April. The CPI measures changes in the prices paid by consumers for a basket of goods and services.

High food prices are not taken to be necessarily bad for developing countries that depend on agriculture as they give smallholder farmers an opportunity to increase their income. But this argument is countered by those who say that only a small minority of farmers have enough land and capital to produce a significant surplus to make the most of higher prices.

According to Challiss McDonough, senior spokesperson for East, Central and Southern Africa for the World Food Programme, only a few food producers are profiting from the current high prices in Kenya.

But the more often overlooked fact is that although most farmers in East Africa are ready to make efforts to boost production, the institutional set-up, governance as well as management of land and other resources create conditions that inherently make farming an inefficient enterprise.

To a large extent, agriculture is in the hands of mainly small-scale farmers who use rudimentary tools of production and methods passed down across generations, resulting in low crop yields, despite their high commercial and export potential.

Economists argue that if farmers use more units of input to produce the same volume of output, or if they produce less output from the same level of inputs as other more efficient farmers, then they are not operating efficiently.

Seasonal variations

There are those who say that what helps most farmers in the region realise profits from their effort is not efficiency but seasonal variations in output.

For example, a study to assess the profitability of potato and pineapple enterprises in southwest Uganda revealed that because of seasonal variations in output, pineapple prices in low season rose by 350 per cent over those in peak season.

The researchers established that all potato farms in the area were operating inefficiently. They concluded: “The low efficiency… observed in the study area generally highlights the relative inefficiency that characterises smallholder agriculture in developing countries.”

Even where irrigation is used, inefficiency still reigns. For example, Tanzanian smallholder farmers, particularly those in the country’s two largest river basins — Rufiji and Pangani — have routinely irrigated their farms through traditional, highly inefficient techniques, that lead to unwarranted loss of the water.

Most farmers in the region lack what economists call “technical efficiency” or the ability to maximise output from a given level of inputs. Lack of such efficiency has resulted in low productivity, a near-stagnation of rural economies and persistent poverty.

A study done in 2008 in Tanzania to explain productivity differences among farmers established that the productivity of the 233 smallholder maize farmers studied was very low, ranging from 0.01 tonnes per hectare to 6.7 tonnes per hectare. In Tanzania, maize constitutes 31 per cent of total food production and 75 per cent of cereal consumption.

However, what was interesting about the study was that the farmers could have raised their output by 40 per cent by utilising the resources and technology at their disposal then. But, as the researchers found out, the farmers were not able to do so because of low levels of education, lack of extension services, limited capital, land fragmentation, unavailability of inputs and high input prices.

The researchers recommended a review of Tanzania’s agricultural policy with the aim of revamping the agricultural extension system, and improving market infrastructure.

The same case applies to sugar production in Kenya, where thousands of smallholder farmers produce amidst gross inefficiencies that result in Kenya’s sugar being uncompetitive when compared with sugar from other international sources.

While the country produces an average of 60 tonnes of sugarcane per hectare, Zambia, for example, produce 113 tonnes. This is largely because Kenya still depends on a rain-fed production system and smallholder farmers with parcels that are about one hectare — which makes it impossible for the attainment of economies of scale or to increase productivity.

As a result, the country has experienced a persistent annual sugar deficit of about 300,000 tonnes while the price of a kilo of sugar has remained high — at times double the international price. Kenyan sugar prices are said to be 39 per cent higher than Comesa’s average.

To raise productivity and keep prices low, East African countries have introduced different forms of subsidies. The aim, as highlighted in July by Kenya’s Agriculture Secretary Felix Koskei, has been to boost production, bring the cost of production down through provision of fertilisers and reduce the use of uncertified seed.

In this regard, Kenya – whose subsidy programme was inspired by the “Malawi Success” – has been ambitious, pledging to raise fertiliser subsidies from 150,000 tonnes to 300,000 tonnes and seed price subsidies from Ksh50 ($0.57) to Ksh30 ($0.34). This was expected to reduce the cost of a 50kg-bag of fertiliser from Ksh6,000 ($69) to Ksh2,500 ($28), with the government spending Ksh6 billion ($69 million) on fertiliser and Ksh1.8 billion ($20.6 million) on seed subsidy.

However, Kenya’s ambitious fertiliser plan appears not to have been a well-thought out one. For soon after it was rolled out, corrupt cartels entered the picture. At one point, the cartels hoarded thousands of bags of the fertiliser in a godown in Athi River, near Nairobi.

At the same time, the country has not put in place an effective mechanism to ensure that farmers benefit as opposed to fertiliser dealers or get the fertiliser shortly before the planting season.

Further, there are reports that some seed companies involved in the rolling out of the programme did not trust the government would honour its promise and opted to sell their seed at market rates. For example, in early August, the Kenya Seed Company raised its maize seed prices by Ksh30 ($0.34) a kilo to address a Ksh1.3 billion ($15 million) debt it had incurred following the government’s failure to remit funds to subsidise its seed products.

Economists believe that the very use of fertiliser subsidies in East Africa and elsewhere appears to have been informed by impressive yields registered in experimental farms and the big productivity difference recorded in farms with different levels of fertiliser use.

However, this contention is disputed by those who point out that fertiliser use may not have the same returns on “real-world farms” as on experimental plots and that to achieve high returns requires complementary inputs.