CAEE 5131 - Agricultural Marketing and Price Analysis
Case Study
Case Study 7-Structure and Conduct in fertilizer marketing.
This story is on leakages of government subsidized fertilizer from government stores for repackaging in the private sector stores.
STORY 1
The East African
$157m fertiliser subsidy worries EA
Massive diversion of subsidised fertiliser into Uganda, Tanzania and Rwanda is now feared as Kenya rolls out the largest import programme of the commodity in years. This comes hot on the heels of Agriculture Minister William Ruto’s announcement that the government was planning to import more than 150,000 tonnes of fertiliser to be sold to farmers at a 40 per cent discount. The exercise is expected to cost the government more than Ksh11 billion ($157 million). Fertiliser stockists are predicting increased activity in diversion especially through the North Rift districts of Trans Nzoia and Uasin Gishu, which border Uganda and around the Tarime area on the Kenya-Tanzania border. Traders say that the quantities being imported could be enough to destabilise the fertiliser business in the region. The smuggled fertiliser business is going to be lucrative especially in Uganda where prices have shot through the roof — rising by over 105 per cent in recent months. Smuggling has been rife at the Kenya-Uganda border. In June, police arrested a number of traders who were reselling subsidised fertiliser from the National Cereals and Produce Board (NCPB) at huge margins. More than 800 bags of calcium ammonium nitrate used for top dressing were recovered. “It beggars logic to hear our farmers complaining about increased fertiliser prices and other farm inputs when they buy and then resell them,” said NCPB managing director Prof Gideon Misoi. However, speaking to The EastAfrican, the executive director of Tegemeo Institute of Agricultural Policy and Development James Nyoro said offering farm input subsidies and distributing free fertiliser to small scale farmers is the best ways to reduce poverty and “kick-start” productivity growth. But, Mr Nyoro pointed out, such programmes are always bogged down by the problem of effective targeting and may in the long run stymie the development of sustainable commercial input delivery systems.“Their potential benefits for farmers are also vulnerable to being dissipated by corruption and divisive political battles.”Fertiliser smuggling has been a major problem in the region. A month ago, a Rwanda Ministry of Agriculture employee was arrested trying to sell two tonnes of fertilisers illegally. To avert the diversion crisis, Mr Nyoro says good governance should be put in place for “it is critical for fertiliser promotion and agricultural development in general. According to Mr Ruto, more than 60,000 tonnes of the imported fertiliser will be sold to tea farmers in South Rift, Central and Eastern Provinces. Mr Ruto says the government is already in talks with a mining company in Kenya for the construction of a fertiliser company in the country. African Development Bank has already shown its intentions to finance the construction of the fertiliser plant, which is expected to serve the East African region. Currently, Kenya’s annual demand for fertiliser stands at more than 370,000 tonnes a year, with maize, coffee and tea consuming the better share of it. The government move to massively import fertilisers is expected to drastically reduce prices due to importation of additional tonnes of fertilisers. “We expect the price of CAN fertiliser to drop from the current Ksh2,200 ($31) to Ksh1,700 ($24),” Mr Ruto said. Already, the Ministry of Agriculture has purchased more than 80,000 tonnes of fertiliser from local market, which was expected to be distributed from Friday last week to farmers through NCPB depots countrywide. Farmers will pay Ksh4,000 ($57) for a 50kg bag of di-ammonium phosphate instead of the current market price of Ksh6,400 ($91). Mr Nyoro has however criticized the move to have NCPB distribute them arguing “NCPB has played a very marginal role in providing fertilizer or credit for fertilizer since 1990 in Kenya. A survey commissioned by Tegemeo Institute on fertilizer distribution in Kenya reveals that less than one per cent of small-scale farmers obtained fertiliser from government parastatals — mostly tea farmers through Kenya Tea Development Agency. Meanwhile, Kenya has received Ksh840 million from African Development Bank to help lower the cost of fertiliser to farmers ahead of the short rains planting season. The bank said the money will be used to buy and distribute fertilizers to farmers to ease their food production costs during the current cropping season. The money was raised after the bank restructured two non-agricultural Bank-funded projects - the Roads 2000 Project and Education III Project -, which made it possible to free up significant amounts of money
The Nation September 24, 2008
STORY 2
The Nation September 24, 2008
Kenya to build fertilizer manufacturing plant
The Kenyan government is planning to build a fertilizer manufacturing plant to cushion farmers from expensive and exploitative suppliers, Agriculture Minister William Ruto has said. Ruto said the Government had set aside Sh11 billion for importation of fertilizer, which would be cheaply supplied to farmers in the next two months. The minister said the African Development Bank (ADB) would facilitate construction of the proposed factory."We are committed to rescuing farmers from conmen, who have refused to reduce the cost of fertilizers," said Ruto. He accused certain investors of conspiring to exploit farmers.Ruto said that new factory would serve as the main outlet for the East African region and will be among three factories whose construction will be funded by ADB in Africa.
The Standard October 23, 2008
Kenya fertilizer subsidy stokes fears of smuggling
As Kenya rolls out the largest import programme of fertilizer in years, massive diversion of subsidized input into Uganda, Tanzania and Rwanda is now feared. This comes hot on the heels of Agriculture Minister William Ruto’s announcement that the government was planning to import more than 150,000 tonnes of fertilizer to be sold to farmers at a 40 per cent discount. The exercise is expected to cost the government more than Ksh11 billion ($157 million). Fertilizer stockists are predicting increased activity in diversion especially through the North Rift districts of Trans Nzoia and Uasin Gishu, which border Uganda and around the Tarime area on the Kenya-Tanzania border. Traders say that the quantities being imported could be enough to destabilize the fertilizer business in the region. The smuggled fertilizer business is going to be lucrative, especially in Uganda where prices have shot through the roof — rising by over 105 per cent in recent months. Smuggling has been rife at the Kenya-Uganda border. In June, police arrested a number of traders who were reselling subsidized fertilizer from the National Cereals and Produce Board (NCPB) at huge margins. More than 800 bags of calcium ammonium nitrate used for top dressing were recovered. “It beggars logic to hear our farmers complaining about increased fertilizer prices and other farm inputs when they buy and then resell them,” said NCPB managing director Prof Gideon Misoi. However, the executive director of Tegemeo Institute of Agricultural Policy and Development James Nyoro said offering farm input subsidies and distributing free fertiliser to small scale farmers is the best ways to reduce poverty and “kick-start” productivity growth. But he pointed out that such programmes are always bogged down by the problem of effective targeting and may in the long run stymie the development of sustainable commercial input delivery systems.
STORY 1
The East African
$157m fertiliser subsidy worries EA
Massive diversion of subsidised fertiliser into Uganda, Tanzania and Rwanda is now feared as Kenya rolls out the largest import programme of the commodity in years. This comes hot on the heels of Agriculture Minister William Ruto’s announcement that the government was planning to import more than 150,000 tonnes of fertiliser to be sold to farmers at a 40 per cent discount. The exercise is expected to cost the government more than Ksh11 billion ($157 million). Fertiliser stockists are predicting increased activity in diversion especially through the North Rift districts of Trans Nzoia and Uasin Gishu, which border Uganda and around the Tarime area on the Kenya-Tanzania border. Traders say that the quantities being imported could be enough to destabilise the fertiliser business in the region. The smuggled fertiliser business is going to be lucrative especially in Uganda where prices have shot through the roof — rising by over 105 per cent in recent months. Smuggling has been rife at the Kenya-Uganda border. In June, police arrested a number of traders who were reselling subsidised fertiliser from the National Cereals and Produce Board (NCPB) at huge margins. More than 800 bags of calcium ammonium nitrate used for top dressing were recovered. “It beggars logic to hear our farmers complaining about increased fertiliser prices and other farm inputs when they buy and then resell them,” said NCPB managing director Prof Gideon Misoi. However, speaking to The EastAfrican, the executive director of Tegemeo Institute of Agricultural Policy and Development James Nyoro said offering farm input subsidies and distributing free fertiliser to small scale farmers is the best ways to reduce poverty and “kick-start” productivity growth. But, Mr Nyoro pointed out, such programmes are always bogged down by the problem of effective targeting and may in the long run stymie the development of sustainable commercial input delivery systems.“Their potential benefits for farmers are also vulnerable to being dissipated by corruption and divisive political battles.”Fertiliser smuggling has been a major problem in the region. A month ago, a Rwanda Ministry of Agriculture employee was arrested trying to sell two tonnes of fertilisers illegally. To avert the diversion crisis, Mr Nyoro says good governance should be put in place for “it is critical for fertiliser promotion and agricultural development in general. According to Mr Ruto, more than 60,000 tonnes of the imported fertiliser will be sold to tea farmers in South Rift, Central and Eastern Provinces. Mr Ruto says the government is already in talks with a mining company in Kenya for the construction of a fertiliser company in the country. African Development Bank has already shown its intentions to finance the construction of the fertiliser plant, which is expected to serve the East African region. Currently, Kenya’s annual demand for fertiliser stands at more than 370,000 tonnes a year, with maize, coffee and tea consuming the better share of it. The government move to massively import fertilisers is expected to drastically reduce prices due to importation of additional tonnes of fertilisers. “We expect the price of CAN fertiliser to drop from the current Ksh2,200 ($31) to Ksh1,700 ($24),” Mr Ruto said. Already, the Ministry of Agriculture has purchased more than 80,000 tonnes of fertiliser from local market, which was expected to be distributed from Friday last week to farmers through NCPB depots countrywide. Farmers will pay Ksh4,000 ($57) for a 50kg bag of di-ammonium phosphate instead of the current market price of Ksh6,400 ($91). Mr Nyoro has however criticized the move to have NCPB distribute them arguing “NCPB has played a very marginal role in providing fertilizer or credit for fertilizer since 1990 in Kenya. A survey commissioned by Tegemeo Institute on fertilizer distribution in Kenya reveals that less than one per cent of small-scale farmers obtained fertiliser from government parastatals — mostly tea farmers through Kenya Tea Development Agency. Meanwhile, Kenya has received Ksh840 million from African Development Bank to help lower the cost of fertiliser to farmers ahead of the short rains planting season. The bank said the money will be used to buy and distribute fertilizers to farmers to ease their food production costs during the current cropping season. The money was raised after the bank restructured two non-agricultural Bank-funded projects - the Roads 2000 Project and Education III Project -, which made it possible to free up significant amounts of money
The Nation September 24, 2008
STORY 2
The Nation September 24, 2008
Kenya to build fertilizer manufacturing plant
The Kenyan government is planning to build a fertilizer manufacturing plant to cushion farmers from expensive and exploitative suppliers, Agriculture Minister William Ruto has said. Ruto said the Government had set aside Sh11 billion for importation of fertilizer, which would be cheaply supplied to farmers in the next two months. The minister said the African Development Bank (ADB) would facilitate construction of the proposed factory."We are committed to rescuing farmers from conmen, who have refused to reduce the cost of fertilizers," said Ruto. He accused certain investors of conspiring to exploit farmers.Ruto said that new factory would serve as the main outlet for the East African region and will be among three factories whose construction will be funded by ADB in Africa.
The Standard October 23, 2008
Kenya fertilizer subsidy stokes fears of smuggling
As Kenya rolls out the largest import programme of fertilizer in years, massive diversion of subsidized input into Uganda, Tanzania and Rwanda is now feared. This comes hot on the heels of Agriculture Minister William Ruto’s announcement that the government was planning to import more than 150,000 tonnes of fertilizer to be sold to farmers at a 40 per cent discount. The exercise is expected to cost the government more than Ksh11 billion ($157 million). Fertilizer stockists are predicting increased activity in diversion especially through the North Rift districts of Trans Nzoia and Uasin Gishu, which border Uganda and around the Tarime area on the Kenya-Tanzania border. Traders say that the quantities being imported could be enough to destabilize the fertilizer business in the region. The smuggled fertilizer business is going to be lucrative, especially in Uganda where prices have shot through the roof — rising by over 105 per cent in recent months. Smuggling has been rife at the Kenya-Uganda border. In June, police arrested a number of traders who were reselling subsidized fertilizer from the National Cereals and Produce Board (NCPB) at huge margins. More than 800 bags of calcium ammonium nitrate used for top dressing were recovered. “It beggars logic to hear our farmers complaining about increased fertilizer prices and other farm inputs when they buy and then resell them,” said NCPB managing director Prof Gideon Misoi. However, the executive director of Tegemeo Institute of Agricultural Policy and Development James Nyoro said offering farm input subsidies and distributing free fertiliser to small scale farmers is the best ways to reduce poverty and “kick-start” productivity growth. But he pointed out that such programmes are always bogged down by the problem of effective targeting and may in the long run stymie the development of sustainable commercial input delivery systems.
“Their potential benefits for farmers are also vulnerable to being dissipated by corruption and divisive political battles.”
Fertiliser smuggling has been a major problem in the region. A month ago, a Rwanda Ministry of Agriculture employee was arrested trying to sell two tonnes of fertilisers illegally. According to Mr Ruto, more than 60,000 tonnes of the imported fertiliser will be sold to tea farmers in South Rift, Central and Eastern Provinces. He says the government is already in talks with a mining company in Kenya for the construction of a fertiliser company in the country. The African Development Bank has already shown its intentions to finance the construction of the fertiliser plant, which is expected to serve the East African region.
Currently, Kenya’s annual demand for fertiliser stands at more than 370,000 tonnes a year, with maize, coffee and tea consuming the better share of it.
The government move to massively import fertilisers is expected to drastically reduce prices due to importation of additional tonnes of fertilisers.
“We expect the price of CAN fertiliser to drop from the current Ksh2,200 ($31) to Ksh1,700 ($24),” Mr Ruto said. Already, the Ministry of Agriculture has purchased more than 80,000 tonnes of fertiliser from the local market, which was expected to be distributed from last week to farmers through NCPB depots countrywide. Farmers will pay Ksh4,000 ($57) for a 50kg bag of di-ammonium phosphate instead of the current market price of Ksh6,400 ($91).
Mr Nyoro has however criticised the move to have NCPB distribute them arguing “NCPB has played a very marginal role in providing fertilizer or credit for fertiliser since 1990 in Kenya.
A survey commissioned by Tegemeo Institute on fertiliser distribution in Kenya reveals that less than one per cent of small-scale farmers obtained fertiliser from government parastatals — mostly tea farmers through Kenya Tea Development Agency.
Meanwhile, Kenya has received Ksh840 million from African Development Bank to help lower the cost of fertiliser to farmers ahead of the short rains planting season. The bank said the money will be used to buy and distribute fertilizers to farmers to ease their food production costs during the current cropping season.
The Nation September 25, 2008
Kenya promises farmers subsidized fertilizer
Government subsidized fertilizer will be available to Kenyan farmers by late October. Tenders for the supply of the 180 thousands tonnes of the fertilizer will be floated this month. Agriculture minister William Ruto says the government has set aside eleven billion shillings for the exercise which is expected to force the cost of fertilizer to come down. The move comes as farmer's hue and cry persists over the high cost of the commodity.The price of a fifty kilo bag of fertilizer is trading at an all time high of 4500 shillings from less than 2000 thousand shillings a few months ago. This has been blamed on the high cost of energy and the high demands from China and India. In an effort to cushion farmers against high cost of farming the government promised to import subsidized fertilizer on a 30 to 70 basis. Ruto says in an effort to address the issue effectively the government is in talks with Athi River Mining Company over the construction of a multi billion shillings fertilizer company in the country. He further revealed that African Development Bank is willing to finance the construction of a regional fertilizer company.
The East African December 31, 2008
Government subsidy to reduce fertliser prices in Kenya
By Sammy Cheboi
The price of fertilizer in Kenya is set to come down significantly in the next one month following government intervention. Farmers will buy a 50kilogramme bag of double ammonium phosphate (DAP) at Sh2,700; down from Sh6,000, when a new consignment arrives in January 2009. Agriculture minister William Ruto... also disclosed that the government had successfully negotiated to have the price of calcium ammonium nitrate (CAN) reduced to Sh1,400 per 50kg bag. It was retailing at Sh2, 700 last planting season. “We have good news for our farmers. We have successfully negotiated and confirmed a reduction in prices of fertiliser which should be in the country by end of January.”The minister said the government would continue making sure that farmers have access to affordable farm inputs to effectively engage in food production. At the same time, the minister, through a gazette notice, has banned the export of maize flour from the country in an effort to stem the current food crisis being witnessed in the country. Mr Ruto said despite the maize export ban the government imposed last month, some unscrupulous businessmen were circumventing it by exporting maize in form of maize flour. “I have signed a gazette notice to ban the export of maize flour from the country. Some businessmen are exporting maize in form of maize flour, thus defying the ban we had imposed on maize export.”He said arrangements for the importation of five million bags of maize had been finalised and expressed confidence that this would lead to a significantly drop in cost of maize in the country. He said a 90kg bag would cost Sh1,800, down from about Sh3,000 that imported maize previously cost. Last month, the government announced plans to import five million bags of maize to stem a shortage and skyrocketing prices of the staple food commodity in the country. The maize importation would be undertaken jointly by the government and the private sector. Mr Ruto also revealed that the Government has opened an avenue for consumers to access maize directly from the National Cereals and Produce Board depots countrywide.
KBC March 31, 2010
Fertiliser price reduced in Kenya
ByJohnNjagi
The price of a bag of subsidised fertiliser has been reduced to Sh2,000 for all varieties in Kenya. This is welcome news to farmers who have been buying the input at Sh2,500 a bag at National Cereals Produce Board (NCPB) stores. The price cut was meant to boost yields, said Agriculture minister William Ruto while touring the NCPB depot in Kirinyaga. The gesture has, however, been overshadowed by reports that thousands of bags of fertiliser meant for small-scale farmers were being repacked and sold at a higher price. The scandal came to light when workers were found repackaging thousands of bags of fertiliser stamped “Government of Kenya” in a private firm’s go-down in Athi River. Mr Ruto also announced that the government would buy maize from farmers at Sh2,300 a bag, up from Sh1,400. This will shut out brokers who have been buying the maize for as little as Sh900 per 90kg bag.
From the above case studies and your own experiences identify shortfalls in the fertilizer subsidy programme. Then explain in your opinion how the shortfalls will hinder implementation of the subsidy programme. suggest possible measures for improving the programme.
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This module was developed by Moi University, Department of Economics and Agricultural Resource Management with support from OER Africa and Bill & Mellinda Gates Foundation