Unnamed traders who have cornered the market are setting exorbitant prices for animal feed raw materials including soymeal, sunflower cake and maize, leading to high costs for farmers.
The Competition Authority of Kenya (CAK) has established that local feed manufacturers have been overcharged for inputs in contrast to other markets including South Africa.
This is despite the inputs being readily available from the source markets which include Malawi, Uganda and Tanzania.
The inquiry report, however, does not disclose the reasons behind the mispricing between markets.
“We found that the pricing of soymeal to Kenyan feed companies neither reflect supply and demand conditions in competitive markets, nor does it reflect the somewhat higher world prices for this traded product,” the report states without naming entities behind the price gouging scheme.
“At the same time, as prices to Kenyan feed companies doubled from early 2021 to over $1,100 per tonne or Sh120 per kilogram in Q4 of 2021, soymeal was being exported from Zambia to South Africa at $470 a tonne net of transport costs, and by Malawi in large volumes to countries outside Africa at lower prices than prevailing in Kenya.”
The report also establishes market concentration risks where the top four companies in each broad category of feed supply account for about 75 percent of the national supply in Kenya.
Higher levels of concentration have been identified in narrower geographic and product market segments.
The overpriced input costs and market dominance by a handful of players has resulted in steeper prices for animal feed dairy and poultry feeds.
The price of dairy and chicken feed for instance increased by between 30 and 40 percent between 2020 and 2022 mainly due to the high cost of key inputs such as maize, wheat, sunflower cake and soybean meal.
This saw Kenyan consumers pay an average of Sh516 for a kilogram of chicken meat in contrast to a lower Sh258 in South Africa.
The cost of inputs for poultry feed was estimated to be 42 percent in South Africa and 54 percent in Brazil.
The competition watchdog estimates that poultry producers would have saved upwards of Sh3 billion per year while passing the savings to consumers in the form of lower egg and poultry meat prices.
“Findings on input markets indicate that efficient competitive markets would have meant much lower prices for Kenyan feed companies.
It is estimated that lower input prices from competitive regional markets for key inputs would have meant savings of over Sh3 billion per annum for producers of poultry feeds which could have been passed onto egg and poultry meat consumers,” the report adds.
CAK has recommended the improvement of cross-border markets and consistent regulations to ensure competitively priced inputs and the facilitation of trade across Comesa and the EAC as part of remedies to correct the adverse pricing of inputs.
The competition watchdog’s animal feed market inquiry stemmed from concerns regarding high animal feed prices in Kenya which has undermined livestock production and resulted in high food prices.
