Impact of increasing fertilizer prices on maize production in Kenya, September 2022

Executive summary
• Fertilizer supply shocks started in 2020 due to multiple factors including COVID-19 related supply chain disruptions, high input prices (e.g., natural gas), lower production in Europe, and export restrictions from China. As a result, fertilizer prices increased globally, and in Kenya fertilizer prices increased by 50–60% (2020–2021).
• Maize production (accounts for roughly 85% of total cereal production in Kenya) in 2020– 2021 dropped by an estimated 550,000 metric tons (MT) due to fertilizer price increases (resulting in lower application rates), persistent failed rainfall (the most severe drought in 40 years), among other factors. Accounting for time from farm to mouth, this resulted in a price increase for 1 kg maize flour of 30-65% in 2022 (before the Government of Kenya – GoK subsidy announced in July 2022, which was later suspended in August 2022), and the release of all national maize reserves in May 2022.
• As a result of the Ukraine-Russia conflict and sustained high energy prices, fertilizer prices in Kenya have risen further by approximately 70% nationally from 2021–2022.
• The World Food Programme (WFP) and Boston Consulting Group (BCG) estimate that the fertilizer price increase of approximately 70% (2021–2022), keeping all other factors constant, could result in a further drop in maize yields in 2022 by an estimated 400,000 MT nationally, representing a decline of 12% compared to 2021 (or an estimated 22% decline if compared to average production between 2016-2020). This combined with the drop seen in 2020-2021 accounts for approximately 950,000 MT reduction in production of Maize over 2 years.
• The drop in 2021-2022 reflects the annual maize consumption of 4–5 million Kenyans per year , the impact of which will not be seen until 2023 after the harvest cycles of 2022 and accounting for transportation and processing time for conversion to flour.
• Declining production due to rising fertilizer prices, drought and other factors is estimated to result in an additional 3 million people (total 4.1 million – approximately 30% higher than the previous assessment in February 2022) facing high levels of acute food insecurity especially in Arid and Semi-Arid lands (ASAL) by June 2022 in Kenya.
• Top 7 counties of Trans Nzoia, Uasin Gishu, Bungoma, Narok, Nakuru, Kakamega, and Nandi combined account for approximately 50% of the national volume of maize production and are expected to exhibit the largest production declines, ranging from 13% to 18%.
• The counties that report high levels of vulnerable populations—namely Mandera, Marsabit, Samburu, Turkana, Tana River, Isiolo, Wajir and Garissa (ASAL regions in Kenya)—remain the lowest maize producers and will likely be home to the most vulnerable populations given the impact of drought in these regions and dependence on other counties for food imports.
• There are multiple factors that impact maize yields such as rainfall, seed and soil quality, mechanization, and farmer training etc. Lack of rainfall, in particular, could further reduce yields by up to approximately 30%. Our approach, however, holds all factors constant to isolate the impact of fertilizer.
• Given market projections for fertilizer prices to continue to remain high in 2023 (less than 2022 but still about 1.5 times higher than the 2019-2020 average), depreciating currency (against US Dollar) and predicted below average rainfall in next season, to sustainably increase maize yields going forward, food-system actors will need to focus support on transforming agricultural productivity and efficiency and increasing resilience for smallholder farmers to climate change and external price shocks.

Source: World Food Programme