The Price Menace

The price question appears to be a huge threat to Kenya’s competitiveness in the country’s fresh veg sector. In fact much more worrying than the EU MRL concern in the recent years.

Over the last three or so years of our encounter in the industry, we have seen (and indeed suffered, after) market prices of beans and peas fall to as low as $0.1 per kilo and rise to as high as $3.3 per kilo.

It appears to be some kind of a spring ball that keeps bouncing back into the scene ever so often. One moment the prices are low and importers are happy; the next, well, importers and their suppliers are completely unable to tame raw material prices.

This continues to drown Kenya’s competitiveness, losing to neighbouring African countries, and facing stiff competition from the much lower priced products coming from such sources as Peru and Guatemala.

As far price control is concerned, the importer blames the Kenyan supplier. The Kenyan supplier blames the importer. In real sense, the system is to blame.

Fact is, Kenya is an extremely free market society. This always reflects in the way farmers deal with Kenyan exporters/suppliers when raw material demand is high and how suppliers deal with farmers when the demand is low. The forces of demand and supply will continue to affect the horticultural trade, as long individual suppliers do not take initiative to fully control their production.

And no matter how much Kenyan suppliers want to control their production, without importers’ commitment, the control of prices could become difficult to achieve. It’s simple, investors will invest in a realistically secure future. But in a scenario where the investor has zero demand guarantee, he will naturally transfer the substantial risk. Unfortunately in this system, even the most basic unit (the Kenyan farmer) operates in the same extremely free market environment in which he is often given an opportunity to gain from selling his harvest proceeds to the highest bidder.

And that’s how raw material price control in the horticultural industry continues to be a wild goose chase.