Retail Food Prices Fall as Exchange Rate Stabilizes and Fuel Costs Decrease

Kenyans are poised to experience a significant decline in food prices over the next three months, thanks to a convergence of favorable economic and environmental conditions. A recent agriculture sector survey conducted by the Central Bank of Kenya (CBK) highlights how stable exchange rates, decreased fuel costs, and favorable weather patterns have contributed to the downward trend in retail food prices across the country.

Factors Driving Price Decline

The survey conducted from July 18-22 reveals that the stability of the Kenyan shilling against major currencies has positively impacted the cost of imported agricultural inputs, leading to lower production costs for farmers. Moreover, reduced fuel prices have lessened the financial burden of transporting goods from farms to markets, a crucial factor given Kenya’s expansive agricultural supply chain.

Additionally, the ample rainfall received during the October-December 2023 and March-May 2024 rain seasons has led to a bumper harvest. This increase in food supply has directly contributed to the reduction of prices for key food items such as tomatoes, kale (sukuma wiki), spinach, traditional vegetables, carrots, onions, and potatoes. Cereals and cereal products, particularly maize flour, have also seen a notable price decrease due to the abundant harvests.

Survey Insights

The Agriculture Sector Survey involved 272 respondents, including wholesale traders, retailers, and farmers from diverse regions such as Nairobi, Kiambu, Kajiado, Machakos, and others. The survey confirms that the combination of favorable weather and economic factors has led to a marked decrease in the prices of loose maize flour, sifted maize flour, and fortified maize flour in July compared to June 2024.

Furthermore, the survey highlights that 60% of the sampled farmers benefited from subsidized fertilizer, a crucial input in crop production. However, this is a decrease from the 71% reported in the May 2024 survey. This suggests a potential gap in the accessibility of subsidized fertilizers that could be addressed to further stabilize food prices.

Recommendations for Government Action

The survey outlines several measures for the government to consider to support farmers and stabilize food prices further. Key recommendations include:

Extension of the Subsidized Fertilizer Program: Expanding the national subsidized fertilizer program to cover other essential inputs, such as seeds and pesticides, could lower production costs. The survey suggests reducing or zero-rating VAT on farm inputs to make them more affordable.
Quality Assurance: Enhancing surveillance and control mechanisms to ensure the highest quality of farm inputs. This includes bringing fertilizer collection centers closer to farmers and intensifying the provision of extension services, particularly from agronomists.
Standardization and Irrigation: Standardizing units of measurement for farm produce to protect farmers from exploitation by middlemen. Prioritizing irrigation projects to mitigate the impact of unpredictable weather patterns on agriculture.
Reducing Price Volatility: Allocating more funds to the National Cereals and Produce Board (NCPB) to purchase surplus produce during periods of excess supply, thereby stabilizing prices. This includes increasing storage facilities for cereals and other products and prioritizing the construction of food markets.

Conclusion

The CBK’s agriculture sector survey underscores the importance of a multi-faceted approach to maintaining food price stability in Kenya. As the country continues to navigate the complexities of global economic shifts and climate change, proactive measures by the government, such as those recommended in the survey, will be vital in ensuring food security and protecting both consumers and producers from price volatility. As Kenyans look forward to more affordable food prices in the coming months, continued efforts to support the agricultural sector will remain crucial for the nation’s economic well-being.