Food crisis loom as price of fertiliser spike

A dockworker off-loads some of the consignment consisting of 38,000 metric tonnes of DAP [PHOTO BY GIDEON MAUNDU/STANDARD].

A dockworker off-loads some of the consignment consisting of 38,000 metric tonnes of DAP [PHOTO BY GIDEON MAUNDU/STANDARD].

The country is staring at yet another food crisis following a spike in the cost of fertiliser, a critical input in the production of various food crops.

A sharp rise in the cost of fertiliser coupled with dry weather ahead of the next planting season expected from March could leave farmers in limbo and negatively impact the country’s food security.

In North Rift, the country’s food basket, a 50kg bag of planting fertiliser is going at between Sh5,200 and Sh6,000 weeks before demand starts to rise at the onset of the long rain season.

Experts expect this to keep rising and hit a high of Sh7,000, given, following a mix of factors including a sharp increase in cost of inputs used for the production of fertiliser.

Fertiliser from China

“We are confronted by a major challenge ahead of this year’s planting season. There is a shortage of fertiliser across the outlets. The little that is available is not affordable, retailing at between Sh5,200 to Sh6,000,” said Thomas Boen, a maize farmer in Uasin Gishu County.

Mr Boen notes that the high cost of fertiliser coupled with the increased price of fuel will push farmers out of maize production.

Already, food prices have been soaring, by 8.89 per cent in January and 9.09 per cent in December 2021, according to official data.

The food crisis will be aggravated by an increase in the cost of fertiliser, hitting the pockets of millions of poor Kenyans who spend close to 40 per cent of their income on food.

“We can’t tell when the prices will start softening,” said Eustace Muriuki, the chairperson for the Fertiliser Association of Kenya.

The fertiliser crisis has been fomented by developments beyond the Kenyan borders.

China and Russia, two of the largest producers of fertiliser, have clammed up with their input. China, which exports almost a third of the world’s Diammonium Phosphate (DAP), will not be releasing its fertiliser to the outside market up to the end of June 2022 as they seek to satisfy their local demand amidst food security concerns, says the World Bank in a blog.  

There are also the surging prices of natural gas prices in Europe that have hit the production of ammonia which is used for nitrogen fertilisers. 

A farmer looks at CAN fertilizer at the National Cereals and Produce Board (NCPB) Eldoret depot. PHOTO BY: KEVIN TUNOI

A farmer looks at CAN fertilizer at the National Cereals and Produce Board (NCPB) Eldoret depot. PHOTO BY: KEVIN TUNOI

Cost of production

The World Bank also noted that the global market of potash (a type of fertiliser) may be subjected to further volatility following the imposition of sanctions on Belarus in August 2021 by several countries. The countries that slapped Belarus with sanctions include the European Union in June, and the United Kingdom, the United States, and Canada.

All these have had the effect of reducing the supply of this critical input to the global market, including Kenya. This has pushed up the price of a tonne of DAP to $672.9 (Sh76,441) the highest since July 1,2008 when it was $1,075 (Sh74,175).

By the end of September last year, a tonne of chemical fertilisers landed in Kenya- mostly from Saudi Arabia- at a cost of Sh48,971, an increase of almost a third, compared to Sh37,788 in December 2020.

This means increased cost of production to farmers as fertiliser takes up a huge chunk of material inputs at an average of 23.5 per cent over the last seven years, according to data from the Kenya National Bureau of Statistics (KNBS).

The high cost of production to farmers means increased retail prices. For example, the retail price for both loose maize grain increased sharply in 2017 when farmers’ spending on fertiliser was the highest in seven years, according to calculation by Smart Harvest. 

Margaret Seur, a mother of seven who lost her husband during the 2017 banditry attack weeding her maize crops at Mukutani Irrigation scheme in Mukutani village ,Baringo south on July 14,2019.The Scheme brings together two warring communities in the area .Photo:Kipsang Joseph/Standard

Knock down effect

It might be time for farmers to cry, but soon, experts warn, it will be consumers. And it will come at a bad time. When the country is preparing for the general elections.

“By the time farmers will be harvesting, there will be an upward pressure on consumers,” says Timothy Njagi, a research fellow at Tegemeo Institute, an agricultural policy think-tank.

Millers have projected a jump in price of maize flour due to high prices of the cereal that have now hit Sh3,200 when delivered to their factories in Nairobi, from Sh2,800 previously, according to a local daily.

Muriuki notes that the re-opening of most economies pushed up the demand for foodstuff translating into increased prices of food. This then put a lot of pressure on fertiliser as a lot of people rushed to cash in the booming food market.

Dr Bimal Karantai, the Managing Director of Elgon Kenya, explains that the spike in freight prices had also added to the increase in the cost of fertiliser.

He estimates that the freight prices have dramatically shot up adding to the sharp increase in the retail price of fertiliser. 

In Kenya, says Karantai, the increase in diesel price has also pushed up the cost of fertiliser which is moved around on diesel-powered trucks.

Zero rated vs tax exempt

Moreover, the decision by the Government to shift fertiliser from being zero-rated to tax exempt has led to an increase in their final price as manufacturers pass on the cost of inputs to farmers.

With zero-rating, the manufacturer would claim the 16 per cent value added tax (VAT) on the input rather than pass it on to the consumer. Yields have also not been going up due to poor quality of fertiliser and agronomic practices. As a result, despite increased use of fertiliser in the seven years to 2020, productivity has hardly gone up.

Use of fertiliser in the country has increased by 82 per cent in seven years to 2020. However, the yield of maize, which uses the most fertiliser in Kenya, has barely increased. One of the reasons, said Mr Karantai, is the direct involvement of the Government in the buying of fertiliser which led to a distortion in the prices of the input.

Fertiliser subsidy programme

Food production in the country has not improved despite the Government pumping Sh6.5 billion into buying cheap fertiliser for farmers, new data show.

Official data indicate production of cereals - maize, wheat and rice - which are critical for food security in the country, barely improved between 2009 and 2020. Tegemeo Institute, in a household survey, found that yields were still low despite use of the fertiliser. 

A dockworker off-loads some of the consignment  [PHOTO BY GIDEON MAUNDU/STANDARD].

Tarnished by politics

 The survey found that one of the challenges farmers face with regard to accessing the cheap fertiliser included farmers incurring high transport costs the National Cereals and Produce Board (NCPB) depots are situated far from their farms.

 The survey by Tegemeo also cited diversion of the fertiliser and adulteration as some of the reasons for low yields. This means there is a need for both short and long term solutions to the fertiliser menace.

However, for the last two years, the Government stopped the fertiliser subsidy programme.

To address the short term price shock of fertiliser, the Government has unveiled an e-voucher system where registered farmers pay for 60 per cent of the cost of fertiliser triggering the payment of the remaining 40 per cent by the Ministry of Agriculture.

Dr Njagi notes that while the idea was noble it risks being tarnished by politics, especially when it comes to registration of farmers.

“Of course, the list is not normally clean,” says Njagi, noting that there might be imposters, including traders who will buy the input at a subsidised rate and sell at market price.

 “On paper it is a very good initiative. You are trying to help those who can’t afford it (fertiliser) completely,” he adds.  The alternative to the e-voucher, explains Njagi, is to waive taxes on imported fertiliser. This will significantly reduce the landing price of the fertiliser. The Government can then monitor the input’s market price.

“Those (traders) who do not comply can be knocked out of the subsidy programme,” explains Njagi.

Importance of soil testing

But the long term solution lies in improving agronomic practices, including ensuring that fertiliser is matched with soil. To this end, it is important that soil mapping is done to determine the nutrient deficiencies in various soils around the country.

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