Testing for Oligopoly Power in the Kenyan Seed Maize Processing Industry

In the recent past, the concentration of seed maize processing and marketing in Kenya has raised serious public concerns. The inability of this industry to ensure affordable prices of certified seed maize for the farming community has led policy makers to question its market behaviour. In spite of these concerns, the performance of agricultural markets in Kenya has received little attention. This study evaluates the market conduct of the industry using the New Empirical Institutional Organization framework and tests the hypothesis of price taking behaviour. A system of five equations was used to estimate conjectural variations elasticity while a Lerner index was constructed to measure market power using data from Kenya's Central Bureau of Statistics. The estimated average conjectural variations elasticity of 0.702 was significantly different from zero and therefore the hypothesis of price taking was rejected. The degree of market power as measured by the difference between price and marginal cost was estimated at 0.450. In general, the estimated own price demand relationships conformed to economic theory except in the case of labour and capital where unexpected positive own price relationships were reported. The estimated conjectural elasticity and Lerner index indicated that the sector was anticompetitive in the period under analysis. These findings give compelling evidence to conclude that the assumption of price-taking behaviour is inappropriate for the seed maize processing industry in Kenya.Seed Maize, Market power, Lerner index, Oligopoly, Crop Production/Industries, Industrial Organization, D4, L66,

An Error Corrected Almost Ideal Demand System for Major Cereals in Kenya

Despite significant progress in theory and empirical methods, the analysis of food consumption patterns in developing countries, particularly those in Sub Saharan Africa has received very limited attention. An attempt is made in this article to estimate an Error Corrected Almost Ideal Demand System for four major cereals consumed in Kenya employing annual data from 1963 to 2005. The model performs well both on theoretical and empirical grounds. All own-price elasticities are negative and statistically significant and all cereals are necessities both in the short-run and in the long-run in Kenya.Error Correction Model, AIDS, Cereal Consumption, Kenya, Demand and Price Analysis,

Assessing the Effects of NAFTA ON Canada/US Agricultural Trade

While there seems to be an agreement that Canada-US Free Trade Agreement (CUSTA)/North American Free Trade Agreement (NAFTA) have benefited member countries, some analysts have argued that the agreements had little effect on the bilateral Canada/US agricultural trade as many other factors have contributed to the increased trade flows. Results from this study reveal that the aggregate bilateral agricultural trade flows have generally experienced a steady growth since the implementation of NAFTA with trade flows seemingly favoring Canada more than the US since 1992. At the industry level, the impacts of NAFTA on Canada/US agricultural trade were varied with the sub-sectors analyzed responding differently to the bilateral trade liberalization.CUSTA/NAFTA, agricultural trade, liberalization, integration, trade flows, International Relations/Trade,

Who are the Real Gainers of Trade Liberalization in Kenya's Maize Sector?

In Kenya, trade policy reforms in the cereals sector were initiated as a key component of the economy-wide structural adjustment programmes (SAPs) during the mid 1980s. The SAPs were later strengthened and made irreversible by Kenya’s commitments at the multilateral trade negotiations. However, the welfare effects of these trade policy reforms remain controversial. This paper to quantifies the market and welfare impacts of trade liberalization in Kenya’s maize sector using a partial equilibrium model with market interrelationships at the farm, wholesale and retail levels. The model is calibrated to simulate a 24 percent reduction in maize import tariffs and a complete abolition of tariffs. The simulations results suggest that tariff reductions yield price decreases across the three market levels. The declining prices increase maize consumption but reduce domestic production. Consequently, consumer surplus increases while producer surplus decreases. However, the gain in consumer surplus is not sufficient to compensate the loss in producer surplus. Thus, the implementation of the multilateral agricultural trade agreement is likely to leave Kenya’s maize sector worse off and cannot be considered as a viable policy based on the compensation principle.Trade liberalization, maize, partial equilibrium analysis, welfare effects, Crop Production/Industries, International Relations/Trade, F14, F16, I32, C68, O24, Q12,

Reality or romantism? Potential of Jatropha to solve energy crisis and improve livelihoods

This paper evaluates the potential of Jatropha curcas Linnaeus (Jatropha) as an alternative source of energy for rural households. The plant is said to have potential to diversify rural incomes, reclaim unproductive lands, reduce importation of fossil fuels, and consequently accumulation of green house gases in the atmosphere. A cost benefit analysis was employed to evaluate the feasibility of producing Jatropha as a biodiesel feedstock in relation to other crops in Kwale district. An IRR of 11 percent, BCR of 0.62 and a NPV of (28267.56) showed that production of Jatropha is not feasible at the moment. However we conclude that the plant has a potential to achieve its intended purpose if there is coordination in research and development along the Jatropha value chain and if technical and financial support is accorded to actors at the production level of the chain.Crop Production/Industries,

Strategies for adapting to climate change in rural Sub-Saharan Africa

The ten ASARECA member countries (Burundi, Democratic Republic of Congo, Eritrea, Ethiopia, Kenya, Madagascar, Rwanda, Sudan, Tanzania, and Uganda) have adopted, or are planning to adopt, a range of climate change adaptation strategies in agriculture (see Table 1 for a summary). Of the 26 strategies mentioned, only two are common to all 10 countries, while five more are common to five or more. The strategies common to all member countries include the development and promotion of drought-tolerant and early-maturing crop species and exploitation of new and renewable energy sources. Most countries have areas that are classifiable as arid or semiarid, hence the need to develop drought-tolerant and early-maturing crops. Strangely, only one country recognizes the conservation of genetic resources as an important strategy although this is also potentially important for dealing with drought. Biomass energy resources account for more than 70 percent of total energy consumption in ASARECA member countries. To mitigate the potential adverse effects of biomass energy depletion, ASARECA countries plan to harness new and renewable energy sources, including solar power, wind power, hydro and geothermal sources, and biofuels. Eight of the 10 countries cite the promotion of rainwater harvesting as an important adaptation strategy, either small scale with small check dams or large scale with large dam projects. The five measures that are common to more than five countries are (a) the conservation and restoration of vegetative cover in degraded and mountain areas; (b) reduction of overall livestock numbers through sale or slaughter; (c) cross-breeding, zero-grazing, and acquisition of smaller livestock (for example, sheep or goats); (d) adoption of traditional methods of natural forest conservation and food use; and (e) community-based management programs for forests, rangelands, and national parks. The promotion of environmentally friendly investments and Clean Development Mechanism (CDM) projects that can be funded through carbon trading is a feature of only one country. Three examples of strategies that warrant greater region wide collaboration are the conservation of genetic materials, development and promotion of drought-tolerant species, and soil conservation. To date, the national adaptation policies of only three countries have indicated that they carry out these strategies.Adaptation, ASARECA, Climate change, NAPA, Natural resource management, PRSP,

A review of agricultural, food security, food systems and climate change adaptation policies, institutions and actors in East Africa

Agricultural production systems in East Africa are mainly rain-fed and highly vulnerable to climate change and variability. Moreover, the smallholder subsistence production base increases the vulnerability of the agricultural sector in East Africa to climate risks. The frequency and severity of climate shocks such as drought, heat and cold stress as well as floods are increasing and likely to lead to major food crises. Governmental and nongovernmental actors in East African countries have instituted policies and programs aimed at increasing agricultural productivity, improving food security and enhancing adaptation to climate change. This paper examines the various policies, institutions and actors related to climate change adaptation, food security, food system and agricultural development in East Africa—focusing on Ethiopia, Kenya, Tanzania and Uganda. The paper combines a review of literature with key informant interviews from various actors in the four countries

Effects of Market Reforms on Irish Potato Price Volatility in Nyandarua District, Kenya

This paper evaluates the effects of market reform policies on the volatility of Irish potato prices in Kenya through an analysis of a 20 year monthly time series data set from Nyandarua district using an autoregressive econometric approach. The empirical results show that there has been a rise in Irish potato prices and lowering of price volatility after the implementation of market reform policies. The real prices exhibit seasonal variations around an upward trend with the prices being depressed during the harvesting period. The price risk premia is found to be negative revealing that the cost of carrying out Irish potato business declined, and farmers were better off with the implementation of the reforms. The collection and distribution of price information, storage of Irish potatoes during periods of glut, improvement in productivity and use of commodity exchange markets can help to reduce price volatility. Keywords: Price volatility, Market reforms, Autoregressive mode