MICROECONOMIC ISSUES IN KENYAN AGRICULTURE Input Use and Productivity Mary W. K. Mathenge Presentation made during the Workshop on Modelling Impacts of National Policies on Kenyan Economy, Fair View Hotel, Nairobi, April 28, 2016
Outline Introduction Microeconomic Issues/Challenges in Kenyan agriculture Agricultural Input Use in Kenya Fertilizer Hybrid Seed (Maize) Options for addressing challenges Conclusion & Policy Implications
Status of Kenyan agriculture Low and stagnating agricultural productivity Food and cash crops Overreliance on rain-fed agriculture Exposure to weather changes Climate Change High post-harvest losses and diseases incidences of aflatoxin Lack of competitiveness Regional Limited budget allocation to agriculture and research
Status of Kenyan agriculture contn Undesirable market interventions Adhoc and inconsistent policy decisions uncertainty/distortions Inefficient monitoring and forecasting system Food situation assessments Overemphasis on supply/ production Demand/Consumption? Increasing land constraints Uneconomical units Soil health issues acidity, organic matter, etc
Status of Kenyan agriculture contn State of infrastructure/public investments Rural areas impassable roads, inaccessible markets, etc Poor access to agricultural information Extension -devolution? Poor monitoring of interventions/investments Impacts and learning Recurrent Food Insecurity ASALs Regional imbalances
Input Use and Productivity in Kenya
Input Use and Productivity in Kenya Increased ag productivity key to food security & poverty reduction Stimulation/development of the non farm sector thro growth linkages Economic growth and development However, farmers face multiple challenges: Consequently, agricultural productivity low and stagnating esp in SSA Major impediment is lack of /low use of productivity enhancing inputs e.g chemical fertilizer, improved seed & pesticides due to: unavailability of liquid cash to finance purchases Risk averse nature of small-scale farmers Low returns to input use Information
Input Use and Productivity in Kenya Yet both credit & crop insurance markets are missing in most of SSA Food crops most affected as they lack institutional support available to cash crops Implications on food security
Input Use and Productivity in Kenya Tegemeo Data Trends in key agricultural input use Fertlizer Hybrid Seed (maize) Fertilizer and Hybrid Seed Use Patterns
Fertilizer Use in Kenya
Quantity (MT) Price/50kg bag (Ksh) Fertilizer Imports and Prices in Kenya 800,000 700,000 600,000 500,000 400,000 300,000 200,000 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 Source: MOALF Imports Consumption Mean prices
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Prices/50kg bag (Ksh) 5,500 4,500 3,500 2,500 1,500 Trend in Fertilizer Prices by Type NPKs DAP CAN UREA Mean prices 500 Source: MOALF Year
Quantity (MT) National Fertilizer Use by Type 600,000 500,000 400,000 300,000 200,000 100,000 0 Almost half of fertilizer consumed is basal (planting & top dressing) Consumption of specialized fertilizer rising gradually Year Planting Top-dressing Tea Coffee Specialized crops Overall Source: MOALF Fertilizer used in tea slowly declining
FARM LEVEL DATA
Fertilizer by Agro-regional Zone (%) Agro regional zone 1997 2000 2004 2007 2010 Coastal Lowlands 2.7 6.8 8.0 12.3 12.0 Eastern Lowlands 35.2 48.3 56.6 56.6 55.4 Western Lowlands 5.9 11.8 15.0 30.5 25.6 Western Transitional 58.1 77.0 85.8 87.8 82.7 High Potential Maize Zone 86.1 90.5 90.5 93.6 91.7 Western Highlands 91.5 89.9 92.2 94.6 93.5 Central Highlands 99.2 99.6 97.1 97.9 87.7 Marginal Rain Shadow 27.0 35.1 32.4 54.1 29.5 Overall sample 63.9 69.9 71.9 76.3 73.3 Source: Tegemeo Panel Data
Fertilizer Intensity(Kgs/acre) Agro ecological zone 1997 2000 2004 2007 2010 Coastal Lowlands Eastern Lowlands Western Lowlands Western Transitional High Potential Maize Zone Western Highlands Central Highlands Marginal Rain Shadow Overall sample 18.1 2.3 4.5 5.6 10.5 27.5 13.8 11.0 16.5 53.3 59.3 42.5 9.8 18.7 22.3 37.4 69.8 51.6 54.4 80.9 63.4 62.8 66.9 70.9 91.2 30.4 44.5 51.1 46.7 93.0 105.9 121.4 103.2 96.1 83.8 26.1 31.7 33.4 28.6 32.0 64.8 72.1 64.8 63.2 72.3 Source: Tegemeo Panel Data
Proportion using fertilizer Rate (kg/acre) Fertilizer Use & Application Rates on Maize 80 60 40 20 0 Source: Tegemeo Panel 1997 2000 2004 2007 2010 2014 Maize (% using) Maize (kg/acre) 64 62 60 58 56 54 52 50
Proportion using fertilizer Rate (kg/acre) Fertilizer Use & Application Rates on Coffee 60 50 40 30 20 10 0 1997 2000 2004 2007 2010 2014 Source: Tegemeo Panel Coffee (% using) Coffee (kg/acre) 400 350 300 250 200 150 100 50 0
Proportion using fertilizer Rate (kg/acre) Fertilizer Use & Application Rates on Tea 100 95 90 85 80 75 1997 2000 2004 2007 2010 2014 Source: Tegemeo Panel Tea (% using) Tea (kg/acre) 500 400 300 200 100 0
Classification of Households by Fertilizer Use Patterns Consistent users Non-consistent users Consistent non-users
ZONE Fertilizer use patterns by Agro-Regional CONSISTENT USERS Zone NON-CONSISTENT USERS CONSISTENT NON-USERS Coastal Lowlands 1.4 25.7 73 Eastern Lowlands 39.7 33.3 27 Western Lowlands 2.7 44.3 53 Western Transitional 62.8 34.5 2.8 High Potential Maize Zone 82.5 15.7 1.8 Western Highlands 81.6 17.6 0.8 Central Highlands 92.9 7.1 0 Marginal Rain Shadow 5.9 61.8 32.4 Overall 60.8 23.7 15.5 Source: Tegemeo Panel
Reasons for not using inorganic fertilizer Reason 1997 2007 2010 Unaffordable 47.6 44.8 51.5 Unavailable - - 0.8 No need to use (returns) 10.6 21.0 32.8 Uses organic fertilizer 21.3 24.7 11.9 Others reasons 20.5 9.6 3.0 Total 100.0 100.0 100.0 Source: Tegemeo
Fertilizer Use Patterns by Selected Market Access Indicators Type of household Distance to fertilizer seller Distance to extension agent Distance to motorab le road Distance to tarmac road Consistent users 2.5 3.9 0.4 6.5 Non-consistent users 3.6 4.8 0.7 7.4 Consistent non-users 5.9 6.4 0.8 11.7 Total 3.4 4.6 0.5 7.6 Source: Tegemeo Panel data
Improved Seed Use in Kenya The Case of Maize
Quantity (MT) Hybrid Maize Seed Consumption 40,000 35,000 30,000 25,000 20,000 15,000 Source: MOALF 2005 2006 2007 2008 2009 2010 2011 2012 2014 Year
Adoption rates by Agro Regional Zone ZONE 2000 2004 2007 2010 Coastal Lowlands 27.7-33.8 38.2 Eastern Lowlands 35.5 17.1 51.4 87.0 Western Lowlands 21.6 16.9 29.7 41.0 Western Transitional 75.2 75.0 86.1 89.0 High Potential Maize Zone 89.1 89.4 93.9 97.7 Western Highlands 79.7 75.0 82.7 81.9 Central Highlands 87.7 78.8 83.3 90.2 Marginal Rain Shadow 73.5 50.0 61.8 88.9 Overall 68.1 61.1 73.1 82.1 Source: Tegemeo
Seed Use Patterns by Agro Region Zone ZONE CONSISTENT USERS NON-CONSISTENT USERS CONSISTENT NON-USERS Coastal Lowlands 0.0 72.5 27.5 Eastern Lowlands 5.6 80.3 14.1 Western Lowlands 3.4 54.1 42.6 Western Transitional 61.1 31.3 7.6 High Potential Maize Zone 78.7 21.0 0.3 Western Highlands 59.4 34.1 6.5 Central Highlands 68.6 27.6 3.8 Marginal Rain Shadow 32.5 62.5 5.0 Overall 49.7 39.6 10.7 Source: Tegemeo Panel
What will drive-up input use in Kenya? Stable marketing environment and policy Increased private sector participation Enhance input availability at the local level Reduction of the distance to the nearest input dealers Institutional innovation in fertilizer-seed technologies Voucher schemes, starter packs Streamline the demand-side factors Information, technical training, market access factors
Options for Addressing Challenges Improving Agricultural Productivity and Competitiveness Encourage more widespread and intensive use of modern farming technologies (e.g. improved seeds, breeds, fertilizers) Input cost reducing measures Bulk purchasing and transport (Fertilizer) Alternative means of transport -Rail transport Support Programs to poor and vulnerable producers Targeted subsidies (e.g. NAAIAP) Farmer empowerment to sustain input use beyond subsidy regime Develop input and output markets encourage agribusiness Incentive for investment in input and food distribution Taxation VAT, cess??
Options for Addressing Challenges Need to reduce dependence on rain-fed agriculture through investment in irrigation. Increased budget allocation for irrigation Water harvesting/storage Expand the scope of the emerging crop and livestock insurance services to cushion farmers against risks from climate change and extreme weather conditions Increased and innovative models of public-private partnerships Agricultural insurance policy Reduction in post-harvest losses and incidences of aflatoxin. Store during periods of oversupply Adoption of improved storage technologies Warehouse receipt systems
Options for Addressing Challenges Increased efforts and budget allocation to boost and maintain adequate strategic food reserves Help stabilize domestic prices (times of shortages) Emergency purposes local purchases of food staples during times of surplus Government playing a regulatory role rather than active participation in the market to deal with distortions/artificial shortages in the market allowing price setting through supply and demand dynamics Providing an enabling environment for private sector/businesses Good disaster management plans should be in place always important in managing potential effects of drought, floods, fluctuations in international food prices, etc Ensure efficient distribution of food if/when needed
Options for Addressing Challenges Need for appropriate and well coordinated trade policies that take into account the domestic supply and demand for food at any given time Establish a more efficient monitoring and forecasting system more responsive to agents/institutions with better market and weather information and intelligence Improve road infrastructure: poor quality roads Increase costs of transportation hinder effective distribution of available stocks from surplus to deficit areas Expand off-farm employment in rural and urban areas o Provide income to meet food and other needs Recognize food security a regional issue comparative advantage Monitoring and Impact assessment of programs /interventions to learn what works
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