Discussion Paper No. 61 of 2006 on Determinants of Seed Maize Pricing in Kenya

Abstract

Kenya has been experiencing declining use of certified seed maize. About 30 percent of Kenyan maize farmers use either traditional seeds or recycled hybrids, mainly due to high cost of certified seed maize and other inputs. Seed has the greatest ability of increasing on-farm productivity and enhancing food security. It largely influences the upper limit of crop yields and the productivity of all other agricultural inputs. The major factors determining seed maize retail price are the overhead costs of seed companies and cost of raw seed purchased from growers. Other important cost components include seed company's profit margins and margins going to seed merchants (agents, sub-agents and stockists). Seed companies control growers and seed retail prices. The study indicates that the Kenyan seed maize market is still characterized by oligopolistic market tendencies. Although there are 55 registered seed companies, 13 are actively engaged in seed maize business, with Kenya Seed Company controlling over 86 percent of the seed maize market share. The company generally acts as a price setter for the rest of the industry, particularly for local seed companies. Any efforts towards reducing cost of seed must necessarily focus on restructuring this public institution. Although the government liberalized the seed sector in 1996, many of the laws and regulations have not been revised to reflect changes in the seed industry. The regulatory body, Kenya Plant Health Inspectorate Services (KEPHIS), is still heavily involved in seed testing, inspection and certification services at all levels of seed production, marketing and processing. This has in some cases introduced inefficiencies in the seed maize industry. There is need to revise the Seeds and Plants Varieties Act (Cap 326) in order to accommodate accreditation of private seed inspectors to facilitate self-regulation of the seed industry and to complement activities currently being carried out by KEPHIS; reduce unnecessary bureaucracy in seed variety release procedures; remove cumbersome import restrictions on seed; harmonize seed regulations within the region; and allow for compensation of farmers to whom may have been sold poor quality seed. There is also need for the government to revitalize the Seed Regulation Committee and establish the Seeds and Plants Tribunal, as per the requirements of the Seeds and Plants Varieties Act (Cap 326), for arbitration of any disputes arising within the industry.