Trends and Patterns in Fertilizer Use by Smallholder Farmers in Kenya, 1997-2007

1. Trends and Patterns in Fertilizer Use by Smallholder Farmers in Kenya, 1997-2007 Joshua Ariga, T.S. Jayne, Betty Kibaara, and J.K. Nyoro Paper presented at the Egerton University Tegemeo Institute Agricultural Policy Conference, 17 September 2008, Nairobi, Kenya

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3. 3 Kenya fertilizer use, 1990-2008

4. 4 Objectives: Trends in fertilizer use on maize Factors driving the increase in fertilizer use, 1997-2007 Household characteristics associated with fertilizer use Impact on maize yields Policy implications in light of higher food and fertilizer prices

5. 5 Trends in Fertilizer Use on Maize Objective 1

6. 6 % of Small-scale Farmers Using Fertilizer on Maize

7. 7 Fertilizer Dose Rate (kgs/acre) on maize

8. 8 Factors driving the increase in fertilizer use, 1997-2007 Objective 2

9. 9 4 Reasons for the Upsurge in Fertilizer Use in Kenya GoK has maintained a stable fertilizer policy stance since 1990 Eliminated import licensing quotas Eliminated foreign exchange controls Eliminated retail price controls From 1990 to 2007, no market uncertainties introduced by large-scale subsidy programs

10. 10 Farmer fertilizer purchases, Malawi

11. 11 4 Reasons for the Upsurge in Fertilizer Use in Kenya In response to stable input policy environment, private sector investment in fertilizer distribution expanded rapidly 10-11 importers 500 wholesalers 8,000 retailers

12. 12 4 Reasons for the Upsurge in Fertilizer Use in Kenya In response to expansion of input stockists, small farmers’ are now much closer to fertilizer retailers 1997: 7.4kms 2000: 5.6kms 2004: 3.7kms 2007: 3.2kms

13. 13 Reasons for the Upsurge in Fertilizer Use in Kenya Greater competition among importers and wholesalers has led to declining fertilizer marketing costs

14. 14 Price of DAP (Di-Ammonium Phosphate) in Mombasa and Nakuru (nominal Shillings per 50kg bag)

15. 15 Price of DAP (Di-Ammonium Phosphate) in Mombasa and Nakuru (constant 2007 Shillings per 50kg bag)

16. 16 Why have real fertilizer marketing margins declined in Kenya? Greater competition has led to lower margins Emergence of brokerage services for exploiting opportunities for cheaper backhaul transport, e.g., linking upcountry fertilizer supply with trucks transporting cargo from Rwanda and Congo to the port of Mombasa; private importers are increasingly using international partners to source credit at lower interest and financing costs than are available in the domestic economy mergers between local and international firms in which knowledge and economies of scope are being passed onto local firms to achieve cost savings in local distribution (e.g., Mea partnering with CONAGRA)

17. 17 Objective 3 Household characteristics associated with fertilizer use

18. 18 Relationship between fertilizer use per acre and wealth

19. 19 Relationship between household wealth and fertilizer use

20. 20 % of Small-scale Farmers Using Fertilizer on Maize

21. 21 Objective 4 Impact on maize yields

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24. 24 Objective 5 Implications for policy under current world price conditions

25. 25 Profitability of using fertilizer: Farm-gate Maize Price ?kg maize ---------------------------------- * ------------ Farm-gate Fertilizer Price ?kg fert

26. 26 Reduce costs of supplying fertilizer to farm gate Port costs at Mombasa Improve rail / road infrastructure Promote viable farm extension / service provision to raise efficiency of fertilizer use What about input subsidies?

27. 27 Summary of research evidence about fertilizer subsidies in Africa: can help to raise production, but little sustained benefit after subsidies are withdrawn (e.g., Zambia, Malawi) Benefits tend to be disproportionately captured by better-off farmers, unless near universal coverage Costly – foregone payoffs from alternative public investments

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31. 31 Budget allocation to Agricultural Sector in Zambia: ZMK465 million in 2005

32. 32 IFPRI review of rate of return studies:

33. 33 If the decision has already been made to provide input subsidies: Four insights (from experience in Malawi and Zambia):

34. 34 Insight #1: Targeted input voucher program less likely to undercut commercial input distribution system

35. 35 Insight #2: Ensure that input subsidies are pro-poor by targeting the poorest farmers: Will generate greatest food security and poverty reduction impact No evidence that fertilizer use is more efficient on large farms than small farms Achieves more maize output per unit of subsidized fertilizer distributed (evidence from Malawi and Zambia)

36. 36 Insight #3: If subsidy programs are to be implemented, design them in ways that involve the full range of private importers, wholesalers, and retailers. Providing tenders to only 2-3 firms can: entrench their position in the market cause other firms to cease making investments in the system or drop out altogether lead to a more concentrated input marketing system and restricted competition when the input subsidy program ends

37. 37 Insight #4: Recommend reduced rates of fertilizer application – 100kg per acre is certainly not optimal in most parts of Kenya.

38. 38 Summary of Main Findings 1. nationwide, the % of farmers using fertilizer on maize has increased from 56% in 1996 to 70% in 2007 Fertilizer dose rates on maize (maize fields receiving fertilizer) have increased only slightly, from 56kg/acre in 1997 to 59kg/acre in 2007 Fertilizer use has increased especially rapidly on the intercropped fields, and less so on monocropped fields The dominant factor influencing smallholder households’ decisions to use fertilizer on maize is location: Over 90% of smallholders use fertilizer on maize in three of the zones surveyed: the High Potential Maize Zone; Western Highlands, and Central Highlands. Less than 30% use fertilizer on maize in Coastal Lowlands, Marginal Rain Shadow.

39. 39 Summary of Main Findings Total area under maize has remained largely constant over the decade maize yields increased by 20% between 1997-2007 period, which is correlated with the rise in fertilizer use. Paying attention to the different types of maize production technologies and maize cultivation techniques is important to carefully control for confounding factors when examining trends in maize yields in Kenya

40.  Thank you http://www.aec.msu.edu/fs2/

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