Department of Agricultural, Food, and Resource Economics Food Security Group

Introduction

The current international food, fertilizer, and fuel price crisis began in late 2020, as the world economy began to recover from the early stages of the COVID-19 pandemic. A surge in the global demand for many commodities at that time was not met by sufficient global supply because of supply chain constraints. This led to significant increases in international prices of food, fuel, and fertilizers throughout 2021. Following the Russian Federation’s invasion of Ukraine on 24 February 2022, economic sanctions were imposed against Russia and Belarus, and Russia self-imposed export restrictions in response. This further increased these international prices to inflation-adjusted levels not observed since the 2007/08 international food and fertilizer price crisis (Laborde, 2022). Because Kenya imports all its oil and fertilizer, about half of its cooking oil, and some of its maize and wheat, the dramatic increases in these international prices have been transmitted partially or fully to Kenya’s domestic markets. The magnitude and duration of domestic price increases in Kenya to date are estimated to have decreased real household consumption by 2.5 percent on average and by 3.8 percent among poor households, which in turn are estimated to have increased the national poverty headcount rate by 2.5 percent (Breisinger et al., 2022).

Poorer Kenyan households are likely to be more vulnerable to the surge in food prices in 2022 than they were during previous spikes in food prices in 2007/08 and 2010/11 for two main reasons. First, more than 70% of urban and rural households in Kenya reported a loss of income over the first 10-12 months of the COVID-19 pandemic, and a similar percentage of households reported sales of assets as a coping strategy (Olwande et al., 2021; Alvi et al., 2021)1. Reductions in assets typically make households less resilient to future adverse price, market, climatic, and/or health shocks. Second, much of Kenya and East Africa has experienced severe drought in the past three consecutive seasons, which has led to lower household and national food production and significant losses of livestock weight and numbers. In this brief, we investigate how domestic prices of food, fuel, and fertilizer in Kenya have been affected by the on-going crises. We then discuss strategies and policy options to help mitigate the adverse effects of increased prices on household incomes and food security in the short term, and household and market-level resilience to future price and climatic shocks in the longer term. These strategies are based on existing empirical research from Kenya as well as from other sub-Saharan Africa countries.