The National Cereals and Produce Board (NCPB) is relying on the sale of old grains to raise cash to buy the current maize crop following delays in the release of Sh4.5 billion from the Treasury.
The board has raised Sh2 billion from the grain sales and is buying a 90 kilogramme bag at Sh2,300, offering relief to farmers who have been selling their crop at Sh1, 500 to middlemen.
This will allow it to buy about 800,000 bags, which is way below the more than two million bags NCPB bought last year.
A cash crunch in government, which has delayed critical expenditures like rural electrification, has seen the Treasury delay the release of the required funds to the board.
The NCPB managing director Newton Terer said he was hopeful the Treasury would release the funds in the coming days, giving the board financial muscle to dictate maize prices.
“We have Sh2 billion that we collected from the sale of old grains and this is what we are using to purchase maize from farmers at the moment,” said Mr Terer.
The board has been selling 2.4 million bags of old stocks to millers and government institutions from the strategic grain reserve in the last three months to create space to accommodate new crop from farmers.
The board is selling the old stocks at Sh2,300 for the best grade and Sh1,600 for the second best grade.
The State had purchased this maize at between Sh2,800 and S,000 per bag. Harvesting of the long rain crop has begun in the North Rift as farmers rush to get their crop out of the fields in the wake of heavy rainfall that poses the challenge of post-harvest losses.
The government projects maize harvest to hit 40.1 million bags this year, up from 38 million bags last year.
The Sh2,300 that the government is offering may not go down well with farmers who have been pushing for S,000, arguing that anything less than this amount subjects them to losses. A report by the Tegemeo Institute, a think tank of the Egerton University indicated that a farmer spends about Sh1,600 on average to produce a single bag of maize.
Last year farmers were paid Sh2,300 per 90 kilogramme bag with a rebate of Sh500 for the deliveries they made at the NCPB.
The move by the government to set the price of the staple has again opened new wars between it and the private sector which has always been against price fixing.
SOURCE: BUSINESS DAILY