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RR RUEHWEB

DE RUEHNR #0255/01 0420919
ZNR UUUUU ZZH
R 110919Z FEB 09
FM AMEMBASSY NAIROBI
TO RUEHC/SECSTATE WASHDC 8448
INFO RUCPDOC/USDOC WASHDC 3177
RUEATRS/DEPT OF TREASURY WASHDC
RUEHRC/USDA FAS WASHDC 1746
RUEHXR/RWANDA COLLECTIVE
RUEHBS/USEU BRUSSELS

UNCLAS NAIROBI 000255 
 
STATE ALSO FOR AF/E AND AF/EPS 
 
STATE PASS USTR PATRICK COLEMAN 
 
STATE PASS USAID/EA 
 
STATE PASS USITC FOR ALAN TREAT, RALPH WATKINS, AND ERLAND 
HERFINDAHL 
 
TREASURY FOR REBECCA KLEIN 
 
COMMERCE FOR BECKY ERKUL 
 
SENSITIVE 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EAGR ETRD EAID BEXP PINR PGOV KE
SUBJECT:  Kenya's Developing Food Crisis 
 
REFS:  (A) FAS GAIN Report KE8023 (B) 08 Nairobi 2605 (C) 08 Nairobi 
2864 (D) FAS GAIN Report KE8024 (E) FAS GAIN Report KE8031 (F) 08 
Nairobi 2878 
 
This cable is not/not for internet distribution. 
 
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Summary 
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¶1. (SBU) A shortfall of white maize (Kenya's staple food crop) has 
left an estimated 3.2 million Kenyans in need of emergency food 
assistance.  Millions more - particularly in urban areas - are food 
insecure due to rising maize prices.  The forces contributing to the 
shortfall include:  reduced production due to the post-election 
violence, inadequate rainfall in much of the marginal agricultural 
areas, the Government of Kenya's (GoK) mismanagement of maize 
purchases and distribution, and restrictive (anti-GMO), 
protectionist agricultural trade policies. Insider deals and 
improper sales of maize from the Strategic Grain Reserve to private 
individuals with political connections have frustrated both Kenyans 
and donors.  The conventional wisdom here is that Kenya will 
experience a 600,000 metric ton maize shortfall by the end of August 
¶2009.  The GoK has declared a national disaster and appealed for KSh 
37 billion (about USD 480 million) to mitigate the shortages.  In 
the short-term, both continuing international food aid and 
commercial imports of white maize (possibly through the use of U.S. 
Department of Agriculture GSM-102 credit guarantees) will be 
necessary to feed Kenyans and help stabilize prices.  To prevent 
additional crisis in the mid-to-long term, Kenya will need to 
liberalize and diversify its market, reform its agricultural and 
trade policies, and develop its basic (e.g., road) infrastructure. 
We remain concerned that white maize flour shortages and continuing 
high prices, especially in urban areas, may spark unrest.  End 
summary. 
 
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The Problem 
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¶2. (SBU) A convergence of factors over the past year has intensified 
food insecurity in Kenya, leaving an estimated 3.2 million people in 
need of emergency food assistance.  This figure represents a more 
than 100 percent increase in the CY08 caseload of nearly 1.4 million 
Kenyans receiving emergency food assistance.  Stakeholders point to 
three consecutive low-rainfall seasons; disruption of the planting 
cycle in many of the food growing areas due to the post-election 
violence; reduced use of fertilizer due to cost; high transport fuel 
prices; and insufficient rainfall during the recent short rains 
season in Kenya's North Rift Valley and Eastern Province as causes 
for an estimated deficit of 600,000 MT by August 2009.  Note:  This 
600,000 MT estimate is consistent with calculations by the Embassy's 
Foreign Agricultural Service.  End Note.  In addition, the GoK's 
inefficient management of the production and distribution of grain 
has further complicated food availability. 
 
¶3. (SBU) The Ministry of Agriculture has reported that the national 
maize output is 2.16 million MT, 20 percent lower than the 
short-term average.  Analysis by the Kenya Food Security Network 
suggests that there will be no maize in the market from May until 
the onset of the harvest in the middle of July, and if long rains 
perform poorly, the actual deficit through August will be larger 
than originally projected. 
 
¶4. (SBU) GoK efforts in late 2008 to mitigate the rising price of 
maize flour further aggravated the distribution of maize in the 
market.  Market interventions such as price subsidies, export bans, 
and prohibition on direct sales from farmers to millers negatively 
affected normal market mechanisms.  In an effort to encourage 
farmers to sell their maize to the National Cereals and Produce 
Board (NCPB), the GoK recently increased the farm-gate price of 
90-kg bags of maize from 1950 KSh to 2300 KSh; however, farmers 
reportedly continue to withhold maize (1-2 million bags) in the 
hopes of higher prices.  Additionally, the distribution of imported 
maize will likely face delays and bureaucratic challenges, 
especially in the Port of Mombasa, hindering the effective 
distribution of maize to the market.  Note:  U.S. Department of 
Agriculture is set to offer a GSM-102 credit guarantee program that 
would help Kenya import U.S. white corn.  However, the GoK has 
failed, thus far, to provide a credit guarantee assurance and notice 
that it will accept U.S. white corn at 14.5 percent moisture content 
(13.5 maximum required currently).  End Note. 
 
¶5. (SBU) Shortages of maize flour on the market shelves coupled with 
high food and non-food prices have diminished Kenyans' ability to 
purchase maize flour.  Also aggravating the problem, corruption of 
personnel in the NCPB and members of government has resulted in the 
misallocation of an estimated 140,000 90-kg bags from the country's 
Strategic Grain Reserve (SGR).  The maize scandal has diminished the 
willingness of some donors to provide direct food assistance to the 
GoK.  At a recent Embassy town hall meeting, Prime Minister Odinga 
raised the specter of food riots if maize prices were not contained. 
 Note: The price of maize flour is currently 100 percent higher in 
many parts of Kenya compared to this time last year.  End note. 
 
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Short-Term Mitigation 
--------------------- 
 
¶6. (SBU) To help increase maize supplies, the GoK has temporarily 
lifted the fifty percent ad valorem import tariff for maize.  In an 
effort to restore the credibility of the NCPB and allay fears of 
potential donors, GoK announced that a private international firm 
will be conducting a forensic audit of all financial transactions of 
the NCPB since July 1, 2008, and that the management of buying and 
selling grains by the NCPB will be outsourced to an international 
firm beginning September 2009.  Moreover, in an effort to boost 
future production, the GoK has announced that it will supply 
low-income farmers with free fertilizer to relieve the cost of 
production. 
 
¶7. (SBU) According to the Eastern Africa Grain Council, to address 
the current crisis the GOK will need to import maize from outside 
the region as there is currently a general shortage of maize in the 
region.  To facilitate importation from the two potential suppliers 
of white maize, the United States and South Africa, the GoK needs to 
relax the maximum moisture content standards for U.S. white maize 
and the GMO adventitious presence for South African maize.  The 
Biosafety Bill, recently passed by Parliament, but not yet signed by 
President Kibaki, should allow importation of GMO maize once 
implementing regulations are in place. 
 
¶8. (SBU) The World Food Program (WFP) is preparing to assist 3.2 
million people with emergency food and nutrition assistance under 
the ongoing Emergency Operation Program (EMOP), up from 1.4 million 
last year.  WFP may revise the level of assistance based on an 
on-going assessment.  In addition, WFP will increase its school 
feeding program by 850,000 children (in addition to the current 
750,000 million children under their country assistance program). 
To that end, WFP projects that it will need at least 226,000 MT of 
food to assist the most affected populations over the next six 
months (February through July).  GoK's Ministry of State for Special 
Programmes is providing assistance to one million people who are 
food insecure in areas not covered by EMOP. 
 
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Long-Term Solutions 
------------------- 
 
¶9. (SBU) Long-term causes of Kenya's food insecurity include the 
inability of agricultural production to keep pace with population 
growth (2.9 percent), ongoing drought and inadequate economic 
opportunities in the county's arid and semi-arid lands, and poor 
infrastructure to facilitate distribution of food to the market. 
Reforms to increase the supply of maize in the country and to 
address the long-term challenges of the chronically food insecure 
populations include, but are not limited to: 
-- Modification of agricultural policy to facilitate the production 
of diversified crops (drought-resistant, short-cycle) and to 
mitigate chronic water shortages in part through irrigation; 
 
-- Restructuring of the strategic grain reserve and famine 
mitigation mechanisms through the NCPB; 
 
-- Modification of the means by which the GOK transmits market 
signals to producers will be necessary to encourage additional 
production.  In addition, the purchase, payment and distribution 
mechanisms, currently administered through the NCPB, must be 
modified; 
 
-- Market liberalization, including the permanent elimination of the 
50 percent ad-valorem import tariff, the modification/reversal of 
market-based interventions such as price controls, restrictions on 
farmers' ability to market crops to private traders, and the 
elimination of white maize export bans. 
 
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Comment 
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¶10. (SBU) The GoK appears to have taken some positive steps to 
address the current foo shortage.  Corruption within the maize 
distribution system has further eroded the credibility of GoK and 
confidence in the reform agenda, contributing to a sense of unease. 
Food insecurity will continue to undermine Kenya's economic and 
social progress until short, medium and long-term solutions are 
embraced. We remain concerned, however, that continuing high maize 
prices, especially in urban areas, may spark unrest.  End comment. 
 
RANNEBERGER