An Outlook into the Kenyan Maize Market

The African commodity market space is still very much a cash market although a few thoughts and conversations have revolved around a possible development of a future market to help manage price volatility and counterparty risk for both buy and sell sides of the market.

Maize is a crop that has a very healthy demand in Kenya on a daily basis. It occupies a central position in the diet of Kenyan people. In recent times, the volatility of maize prices has been a cause for concern, as it adversely affects both the producers and consumers. Producers are also affected by weather-induced volatility in production. If prices and production vary in opposite directions, then to the volatility in incomes is reduced at least to some extent.

Maize is the key food crop in Kenya, constituting 3 percent of Kenya’s Gross Domestic Product (GDP), 12 percent of the agricultural GDP and 21 percent of the total value of primary agricultural commodities. Maize is both a subsistence and a commercial crop, grown on an estimated at 1.4 million hectares by large-scale farmers (25 percent) and smallholders (75 percent).

The price of maize depends on both real factors (such as, production, which in turn depends on the area harvested and the yield) and on monetary factors which operate at the macro level. In view of this, the real side of the maize economy in Kenya is presented first, followed by a discussion of macro factors.

The market price for maize in the country’s major cities that it is traded includes Eldoret, Kisumu, Mombasa, Nairobi, and Nakuru vary from month to month.  On a yearly basis, the grain dropped in price an average of 29.46 percent in 2012, gained an average of 49.39 percent in 2013, gained an average of 11.72 percent in 2014, dropped an average of 9.05 percent in 2015 and as of Oct 30, 2016, has gained an average of 4.70 percent this year.

If one looks at the long-term price action of the grain, we see a 5-year average return of a gain of 6.76 percent in Eldoret, gain of 6.50 percent in Kisumu, gain of 7 percent, 6.7 percent in Mombasa, a gain of 2.55 percent in Nairobi, and finally a gain of 3.81 percent in wholesale price in Nakuru.

This being that season when maize is being harvested in the largescale producing regions in Kenya, the prices are expected to go down but here is a summary of the retail maize prices in the last five days of November in the country:

Related: Tomatoes Retailing Highest in Eldoret and Lowest in Nakuru