DR.NZUMA JONATHAN MAKAU

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.

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.

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.

Kenya’s agricultural sector has undergone various changes emanating from policy reforms over the years. These reforms, which occurred from the late 1980s to the early 1990s, were aimed at reducing government involvement in economic activity and allowing the economy to move towards a free market. Policy reforms covered monetary, fiscal and trade aspects and liberalization of the agricultural sector. This study analyses the impact of specific reforms on agricultural production, performance and trade, and therefore food security. The study uses secondary data from the Central Bureau of Statistics and the Ministry of Agriculture. Welfare Monitoring Surveys of 1982, 1992 and 1997 were used as sources of regional cross-sectional household data. Trends in production and trade are analysed, the impact of policy instruments such as prices and market access explained, household incomes and expenditures estimated, and food security trends are analysed using various indicators for both the pre- and post-reforms periods. The analysis indicates that agricultural prices and production have generally declined. The performance of the agricultural sector in the 1990s was dismal, with annual growth in agricultural GDP averaging 2% compared with 4% in the 1980s. Agricultural export growth after the reforms has shown mixed trends due to market access limitations for Kenyan exports. Market access for imports into the Kenyan market has improved since the reforms, occasioning tremendous import growth. However, the capacity to import food has declined, making the country more food insecure. The balance of trade between Kenya and the rest of the world has worsened against Kenya. After the reforms the country moved from broad self-sufficiency in production of most food staples to a net importer. The sources of food security for rural people are subsistence food production and purchases using farm or off-farm income, with a third of households receiving remittances. The linkage between the performance of the agricultural sector and household incomes indicates that when the performance of the sector is poor, household incomes are low. In the light of these challenges, the country needs to reconsider increasing the use of domestic support measures allowed within the World Trade Organization (WTO) agreement on agriculture to allow adequate development of the sector. However, implementation of liberalized policies should be harmonized and coordinated to avoid adverse effects on the sector.