The price of eggs, poultry and milk in Kenya are skyrocketing. Between 2022 and 2023, the price of eggs nearly doubled and continues to remain high at about KES 590 (about US$4.50) today. A kilo of chicken costs twice as much in Kenya compared with South Africa. This explains why 75 percent of the population is unable to afford a healthy diet which is especially detrimental to the 40 percent of Kenyans living under the poverty line.
Why does Kenya face these high prices? The simple answer: the high cost of feed for hens and dairy cows. Between 2020 and 2023 poultry and dairy feed increased between 30-50 percent, and the Competition Authority of Kenya undertook a market inquiry to understand why.
Our inquiry into the animal feed market shows discouraging results.
Poultry and dairy farmers in Kenya pay exorbitant prices for animal feed. Compared with Brazil and South Africa, poultry farmers in Kenya paid 54 percent and 42 percent more for their feed, respectively, between 2021 and 2023. Farmers in Kenya paid even more than poultry farmers in Malaysia in 2021 where prices were controlled by a cartel.
The low number of commercial feed suppliers is a key reason for the high price. The feed market is concentrated, with the four largest companies accounting for well over 50 percent of commercial feed sales. We estimate that in some feed categories, these four companies account for up to 75 percent of the national supply.
Kenyan small and medium enterprises (SMEs) have been squeezed out of the market. The rising costs of the inputs used to make the animal feed have disproportionately affected smaller and medium-sized feed producers who paid up to 90 percent more compared with a few large producers. As a result, smaller feed producers have been forced to either increase their prices, making them uncompetitive, or stop supplying certain products to avoid operating at a loss. This resulted in job losses, higher feed prices, and poor nutrition for many Kenyans who can’t afford to buy eggs.
In addition, animal feed producers in Kenya are charged significantly higher prices in concentrated and uncompetitive markets for the inputs needed to make animal feed compared with international benchmark prices. As with the animal feed market, this sub-sector is dominated by four companies operating at the national and regional levels. The costs of this concentration are high: according to our inquiry, a competitive regional input market would have allowed savings of over US$23 million per year.
Our market inquiry has found that the animal feed sector in Kenya is uncompetitive, incumbent players are entrenched, and farmers are overpaying for their animal feed. These higher prices place a heavy burden on the poorest households. Farmers overpay for feed reducing their margins, and consumers ultimately foot the bill through unaffordable prices for dairy, eggs, and poultry.
But a different outcome is possible. Collective action is needed to dismantle unfair market practices. For this reason, we recommend the following:
There is a need for appropriate action to intervene in markets where conduct is anti-competitive. To realize the full benefits of the animal feed industry and enable its growth will require addressing factors that make it uncompetitive and prevent new producers from entering this market. We need to make sure that this is a market that can create value and create employment.
We need continued monitoring of feed prices domestically and regionally. National authorities, regional bodies and research institutions should collaborate to monitor and assess the animal feed markets—and their key inputs—to ensure that prices are aligned at the regional and international levels. This can provide us with the appropriate data to intervene if necessary.
And regional regulatory authorities, such as the Common Market for Eastern and Southern Africa (COMESA) Competition Commission and the East African Community Competition Authority should investigate the soybean and sunflower market. The high prices paid for these inputs in Kenya compared with neighboring countries, and the lack of incentive to supply the Kenyan market, could indicate regional coordination between key market players to restrict supply and inflate prices. Opaque trading conditions are particularly harmful to small animal feed producers.
Tackling anti-competitive behavior in the Kenyan animal feed sector, and the market for animal feed inputs in neighboring countries, will not only make the sector more competitive but ultimately enable Kenyan households to afford the essential foods that they need for a healthy diet. Beyond our national borders, it will have a positive impact on the region and help neighboring countries to also improve nutrition.
Taking action against this power concentration is possible. But we need collective support from the global community to recognize the problem and endorse our efforts. Let’s do it.
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Photo courtesy of Manny Becerra, Unsplash
