Food Trade Bulletin for East Africa Jul 2005

HIGHLIGHTS

- Kenya’s early crop from South Western region delayed due to late planting.

- Wholesale maize prices to remain high in the third quarter in the capital cities of East Africa.

- VAT removed on maize flour in Kenya , VAT goes up in Uganda.

PRODUCTION AND HARVESTING

Kenya’s South Western early crop to be delayed: Recent reports from the Ministry of Agriculture indicate that the early crop from southwest region of Bomet, Bureti, Narok, and Kericho that comes in last half of July to first half August will be delayed to last half of September. The expected delay is as a result of the late onset of exceptionally heavy rainfall, forcing the farmers to wait for them to subside before finalizing the planting exercise or where destroyed, to replant. According to leading millers and traders, the delayed early crop harvest will exacerbate the current tightening domestic maize supply which has led to high consumer prices of USD 220/MT in Nairobi compared to USD 200/MT for same period last year. While millers and traders want the government of Kenya to waive duty until September so that they can import maize especially from South Africa, the timing of such imports would be ill-informed because it is expected that the long rains harvest is set to begin around the same time (It takes about 5 to 6 weeks to ship in maize from South Africa).

Although the early crop is expected to be delayed, a reasonably good harvest is expected in most parts of Kenya except in Eastern and Coast Provinces where rains were reported as below average causing maize to wilt or tassle prematurely. The Ministry of Agriculture projects that an estimated 2.33 million MT of maize will be harvested during the long rains season (7% above the normal production and 40% above last year’s production).

Normal production expected in most parts of Uganda: Uganda’s first season harvesting is ongoing in most parts of the country. Beans harvesting started in the first half of June in most parts of the country, in fact, “new” beans are already in Kenyan market through Busia border while dry maize will only be out in the market anytime after the second half of July 2005. The production is estimated as normal except in the northern parts, i.e. Gulu, Kitgum, Pader and Karamoja areas where planting was late.

Tanzania’s gets good harvest from the southern highland areas: Poor rainfall patterns in Dodoma, Tabora ,Shinyanga , Morogoro (in early January to February) as well as in Arusha, Manyara and Kilimanjaro areas (during March to June) affected maize crop production and yields may fall below average. However, the Ministry of Agriculture and Food Security preliminary forecast indicates a good maize and rice production as compared to last year because of the better yields from the southern highlands areas (about 3,288,000 MT as opposed to 3,232,400 MT last year).

PRICES AND TRADE PROSPECTS

Second quarter wholesale maize prices in Dar es Salaam have relatively shown a stable trend for the past three years around USD150 /MT. While in the third quarter of the year, since 2002 there has been an upward trend in price. However in Kampala, wholesale maize price trend is on the increase in both the second and third quarter (see figure 2).

In Nairobi, wholesale maize price has been quite high compared to the other cities in East Africa. Maize prices have recorded figures above USD210 /MT (above Ksh1500 per 90kg bag) since 2003 in both the second and third quarter period of the year. Nairobi maize prices are expected to remain high but stabilize towards late September. In the fourth quarter (beginning October) we envision a downward trend in wholesale maize price until March 2006.

REGIONAL TRADE FLOWS

The flow of beans into Kenya from Uganda through Busia doubled in June as compared to May. In June about 8,000 MT of beans and 6,000 MT of maize were exported into Kenya as compared to 4,000 MT of beans and 5,500 MT of maize in May 2005. We envision peak movement of maize into Kenya in the second half of July once the dry maize become available in Uganda.

At Isebania border, cross-border movement of maize and rice into Kenya is very low, only 1000 MT of maize and 900 MT of rice were exported in from Tanzania. As harvesting progresses in Tanzania, we expect to see an increased flow of maize into Kenya through the Kenya Tanzania borders. Already, volumes of maize of high moisture content from Tanga district (Handeni, Kiteto, Mbulu) are moving into Kenya through Holili (Taveta) border. There will be little maize in Arusha for trade due to the poor “masika” rainfall.

Table highlights ;

- Uganda has exported an estimated 103,000 MT of maize into Kenya from July 2004 to June 2005.

- Tanzania has exported an estimated 97,000 MT of maize into Kenya through Isebania, Namanga and Holili borders from July to June 2005.

- An estimated 177,350 MT of maize is available in Kenya.

POLICY NEWS

The budget reading was done in the three East African countries simultaneously on June 13th 2005. Kenya maize flour was among the other commodities zero rated and hence will not attract VAT. In Uganda, VAT went up from 17% to 18% this could perhaps affect prices of rice imports and processed maize flour after July. The removal of VAT on maize flour is good news to many Kenyans who would like to see the price of maize flour go down, but due to the high maize prices which are expected to stay for another couple of months, this is not likely to be felt immediately.

Contact:

RATES, RATIN office: Tel 254 20 4212245, www.ratin.net, email : ratin@ratescenter.org