Reuters News - Kenya sees stable food supply, global prices a concern

NAIROBI | Tue Aug 14, 2012 7:17am EDT

(Reuters) - Kenya expects a stable supply of food until December after its production of staple crops increased this year, but prices could rise due to pressure from soaring grain prices on international markets, the Agriculture Ministry said on Tuesday.

East Africa's biggest economy has benefited from a stable supply of food since the start of this year, aided by favorable weather. That has eased inflationary pressure and kept prices steady for staples including rice, maize and wheat.

"The food situation is relatively stable both in terms of supply and pricing, and we expect this (stable supply) to carry on for the rest of year," Agriculture Ministry Permanent Secretary Romano Kiome said in an interview.

"Crop production has been good in all parts of the country except the Northeastern area, where we have challenges of poor weather."

Year-on-year inflation fell to 7.74 percent in July, a 17-month low, from 10.05 percent in June, due to drops in the cost of food and transport, and is expected to fall further in coming months.

Maize prices, the east African nation staple food, have eased to an average 2,400 to 2,600 Kenyan shillings ($28.67-$31.06) per 90-kg bag this year on improved output, compared with last year's high of 3,600 shillings when poor weather affected production in some parts of the country.

"The (maize) supply outlook remains good because we have 8 million 90-kg bags as we enter a new harvest season in September, where we expect a significant build-up of stocks," Kiome said.

Kiome warned, however, that soaring food prices in international markets could hit the country in the short term.

Following a July surge in food prices due to drought in the United States and some other producers, the United Nation's food agency last week warned of a possible repeat of the 2007/08 crisis, when a spike in food prices triggered public demonstrations in Kenya and riots in some other countries.

A monthly global food price index by the Food and Agriculture Organisation (FAO), which measures price changes on cereals, oilseeds, dairy, meat and sugar, rose 6 percent in July to levels higher than in 2008.

"The drought conditions in the western countries such as the U.S. are affecting global food prices, and the pressures could be felt here," Kiome said. ($1 = 83.7000 Kenyan shillings)

(Reporting by Kevin Mwanza; editing by Jane Baird)