BEEF, BREAD, AND BUTTER GETTING SCARCER AND PRICIER IN

UNCLAS SECTION 01 OF 04 NAIROBI 000521

SIPDIS

STATE ALSO FOR AF/E AND AF/EPS
STATE PLEASE PASS USTR BILL JACKSON AND USAID/EA
TREASURY FOR VIRGINIA BRANDON
COMMERCE FOR BECKY ERKUL AND USITC RALPH WATKINS
STATE PLEASE PASS DEPARTMENT OF LABOR FOR BOB SHEPARD, SUDHA HALEY,
AND MICHAEL MURPHY
AGRICULTURE FOR USDA/FAS/OFSO FRANK LEE, USDA/FAS/OCBD PATRICIA
SHEIKH, USDA/FAS/OCRA CHUCK ALEXANDER, AND USDA/FAA RON VERDONK
LONDON, PARIS, ROME FOR AFRICA WATCHERS

SENSITIVE

SIPDIS

E.O. 12958: N/A
TAGS: ECON EAGR ETRD ELAB PGOV KE
SUBJECT: BEEF, BREAD, AND BUTTER GETTING SCARCER AND PRICIER IN
KENYA AS A RESULT OF POST-ELECTION VIOLENCE

REFS: (A) NAIROBI 0405 (B) NAIROBI 0358
(C) NAIROBI 0353 (D) NAIROBI 0352 (NOTAL)
(E) NAIROBI 0336 (F) NAIROBI 0192

NAIROBI 00000521 001.2 OF 004


SENSITIVE BUT UNCLASSIFIED. PLEASE PROTECT ACCORDINGLY. FOR
INTERNAL USG DISTRIBUTION ONLY.


1. (U) Summary. Agricultural analysts predict that Kenya may
suffer food shortages by late 2008 if post-election violence does
not stop. Government stockpiles of corn will suffice for the next
seven months, but observers note that many farmers in the upper Rift
Valley have been unable to work their fields ahead of the late
rains, which usually begin in mid-March. Other farmers are unable
to purchase higher priced fertilizers, herbicides, insecticides, and
diesel fuel. Consumers are confronted with higher prices for
virtually everything off the farm. End Summary.


2. (SBU) Adding to the woes cited in ref D, Kenyan agriculture is
now faced with a bushel of problems making beef, bread, butter -
virtually everything off the farm - less available and more
expensive. Illegal roadblocks set up by militant gangs continue to
disrupt transportation, thus hindering movement of people,
agricultural inputs, and farm products. The roadblocks also add to
the expense of bringing product to market as transport companies
have had to hire extra security. The new director of the Kenya Meat
Commission (KMC),Vincent Nguarare, confided January 28 that the
agency's abattoir outside Nairobi is slaughtering only 200 animals a
day (in comparison to a normal number of 500 per day) because
pastoralists either cannot get cattle to the KMC or find the
transportation costs prohibitive. According to the Livestock
Marketing Society of Kenya (LTMSK),ranchers, pastoralists, and
traders are suffering a daily loss of about KSh20 million
($285,700).

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"Foreign" Farmers Flee Their Farms
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3. (U) More ominously, inter-ethnic violence triggered by the
disputed December 27 presidential election drove many Kikuyu farmers
and their families off their land in the upper Rift Valley, which is
Kenya's breadbasket and the epicenter of the crisis. Marauders
wantonly burned Kikuyu homes, farm equipment, and corn and wheat
crops. Kikuyus, many of whom had lived in the region since
independence, were derided as "foreigners" and told to return to
their ancestral lands in Central Province - or else. Indigenous
Kalenjin farmers and dairymen also suffered and are now confronted
with markedly increased prices for diesel, fertilizer, herbicides,
and insecticides. The cost of land preparation by tractors has
skyrocketed from $53/hectare to $103/hectare. General insecurity is
making farmers leery of working their fields or letting their
harvested corn dry out. Upwards to one million bags (90,000 tons)
of corn are believed to be left on fields, inaccessible to farmers,
buyers, and millers. Another 300,000 tons of corn ready for
harvesting went unpicked.

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Corn Crop Collapse
--------------


4. (U) Agricultural analysts and the Kenya National Federation of
Agricultural Producers (KENFAP),an umbrella organization for 1.4
million farmers, are concerned that Kenya may suffer a food shortage

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in 2009. Supply, particularly from Western Province, where an
estimated 40% of farmers have been displaced, has been interrupted,
resulting in shortages and spiraling prices for milk, maize flour,
and vegetables. Because so many farmers have fled, observers
predict a significant shortfall in this year's corn harvest. In
their estimation, government stockpiles of maize held by the
National Cereals and Produce Board (NCPB) and expected 2007-2008
production of three million tons are sufficient to meet domestic
demand for much of 2008 - at least for the next seven months. But
they worry that the insecurity will prevent farmers from planting
before the long rains which usually begin in mid-March (ref D),a
scenario which would imperil food security for many Kenyans in 2009.
Because of the instability, 100,000 hectares might not be
cultivated before the rains begin.


5. (U) According to the most recent "Kenya Food Security Update,"
Kenyan maize production will likely decline by 15% in 2008-2009
because of the unrest and below average rainfall in some areas of
Kenya. The Regional Agricultural Trade and Intelligence Network
(RATIN) predicts Kenya will become a net importer of maize in 2009.
The most recent survey by the Food and Agricultural Organization
(FAO) shows that prices of cereals such as maize have been
increasing mainly due to inadequate rains and displacement of
farmers in key growing areas of Kenya following the recent violence.
The survey reported that the price of a ton of maize maintained a
relatively stable price between $199 and $202 within the period of
May to September 2007 but began to rise gradually between
October-December to an average of $211. There was a further rise to
$219 a ton in January.

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Bleak Food Security Situation
--------------


6. (SBU) Analysts with USAID's "Famine Early Warning System
Information Network" (FEWS NET) and the "Arid Lands Resource
Management Project" (ALRMP) during a February 12 Kenya Food Security
Meeting reported a "bleak food security situation throughout the
country," especially in the Maasai rangelands. Only the eastern
pastoralists' area is in good shape. Conversely, there is evidence
of high malnutrition in the northwest pastoralists' area. In what
was their most worrisome appraisal, the analysts estimate that less
than 10% of the land in Kenya's grain basket, the Rift Valley, has
been prepared for planting. By now, 60% of the land would have
normally been tilled. With respect to conditions in northern and
northeastern Kenya, they blame severe water shortages for rapid loss
of pasture. In the coastal and southeastern lowlands, they
calculate that 60% of the maize crop has been lost with food
insecurity exacerbated by rising food and commodities prices. In
the Lake Victoria city of Kisumu, where the worst looting and
destruction took place and where roads remain barricaded, prices for
eggs, potatoes, onions, and other staple foods have doubled or even
tripled since the election.

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Dairy in the Dumps
--------------


7. (SBU) Dairy farmers, too, have suffered. Last winter, Kenya's
dairy industry appeared on the verge of becoming a significant
foreign exchange earner, with prospects of lucrative sales of
powdered milk and other dairy products to South Africa, Egypt, the
Arab Gulf states, and Malaysia in the offing. In 2007 Kenya

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exported 13.9 million liters of milk, mostly to neighboring Uganda
and Tanzania. Now, officials from Land O'Lakes, Brookside Dairy,
Spin Knit Dairy, New Kenya Cooperative Creameries (KCC),and other
milk producers bemoan the loss of Rift Valley dairy farms and
creameries, destroyed by looters.


8. (SBU) As a result of their mayhem and thievery, milk production
is down over 20%, according to the Kenya Dairy Board (KDB). A
January 21-24 assessment conducted by the World Food Program (WFP),
Food and Agriculture Organization (FAO),and Ministry of Agriculture
suggested as many as 52,500 farm families in the Rift Valley have
been displaced. Two major milk processors have closed. Unable to
get their raw milk processed, farmers have had to dump milk. The
industry lost an estimated KSh1 billion ($14.3 million) in January
2008, when production fell from 36.4 million liters in December 2007
to 28.4 million liters. KCC Chairman Matu Wamae reports his company
faces a deficit of over 200,000 liters per day and is unable to meet
both local and international demand. Kipkorir Menjo, one of the KCC
directors, acknowledged February 13 that low milk deliveries
"threaten the future of external markets for our products." (Note:
according to the KDB, Kenya has 34 active milk processing plants
with an installed processing capacity of 2.9 million liters per day.
Annual production in 2007 was 3.74 billion liters, up from 3.59
billion liters in 2006 and 2.8 billion liters in 2004. Because of
the violence, the daily milk intake in the formal sector has shrunk
from 1.2 million liters in December 2007 to 850,000 liters in
January 2008, a drop of over 29%, amounting to a loss of over KSh1
billion ($14.3 million) in revenue for processors. There are an
estimated one million smallholder dairy farmers in Kenya. The dairy
cattle industry accounts for about 4% of GDP, with an estimated
cattle population of 3.5 million head. End Note.)


9. (SBU) Wamae said that the KCC has appealed to the government to
beef up security because "transporters still fear that their
vehicles might be attacked and burned." Beyond the hardships raised
by the illegal roadblocks which prevent milk producers from
delivering to creameries, KDB Chairman Reuben Cheshire commented to
the press in early February that the violence had even interfered
with breeding programs and access to animal feeds, which could
result in a long-term decline of milk production. He said
protracted violence would jeopardize the livelihoods of close to one
million dairy farmers. Even if a political resolution is soon
achieved, an official with Land O'Lakes foresees a long-term
reduction in milk production because of the number of dairy cattle
stolen or slaughtered and because of disruptions in the provision of
artificial insemination services. Wamae openly lamented the
likelihood that most farmers will default on their loans since they
are unable to deliver their milk. If calm is not soon restored, he
predicted dairy farmers may elect to start slaughtering their cattle
to raise money.

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All Agricultural Sub-sectors Affected
--------------


10. (SBU) In mid-February, KENFAP declared that Kenya's food
security is set to worsen. Fifty-seven members from various
agricultural sub-sectors from the country's eight provinces warned
in an advertisement that food prices are soaring because of the
political impasse. Expressing their concerns according to regions,
the agricultural reps said Nairobi is experiencing spiraling milk,
maize flour and vegetable prices, which have increased 50% to 100%.
Those from Western Province complained about the displacement of

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about 40% of farmers from their farms and the burning of food in
stores. Nyanza Province's major problem, they said, remains blocked
roads and destroyed bridges, leaving it cut off from the rest of the
country. In Rift Valley Province, farmers are faced with high costs
in production inputs. Coast Province is dealing with hotel closures
and the lack of horticultural produce due to supply interruptions.
Eastern and Northeastern Provinces are confronted with decreasing
food stocks; there are fears that the two provinces might not
receive enough rainfall, threatening the fragile food security which
characterizes both. Livestock marketing has been hampered by
insecurity and high transportation costs.


11. (U) Comment. As the country's staple food, maize is a telling
barometer for food security and affordability. Before the crisis, a
two-kilogram bag of milled maize flour cost KSh50. In Nairobi, it
now goes for KSh80 - nearly $1.15; in Kisumu and other western
cities it costs KSh120 or $1.70. A 500-gram packet of milk has
jumped from KSh15 to KSh40 in western Kenya. When one contemplates
that nearly 50% of the Kenyan people live on less than $1/day
(KSh70),it is abundantly clear that putting bread and butter on the
table will be increasingly difficult for most Kenyans. End
Comment.

Ranneberger