Explainer: Why Cheaper Maize Doesn't Always Mean Cheaper Kenkey, Banku And Corn Flour

Many Ghanaians have welcomed the recent decline in maize prices, hoping it would translate into lower prices for processed foods such as kenkey, banku and corn flour. Yet, despite the falling cost of maize, many vendors and processors continue to charge the same prices or even more for these staple foods.

Why does this happen?
According to Ghanaian Economics PhD student Elvis Anaba, the price of maize is only one component of the total cost of producing processed foods. Although maize is the main raw material, processors and food vendors must also pay for labour, transportation, electricity or fuel, packaging, storage and distribution before the product reaches consumers.

If these other costs remain high or continue to increase, any savings from cheaper maize may be too small to reduce the final selling price.

Another reason is that many processors may still be using maize purchased when prices were much higher. Since they already incurred those costs, they are unlikely to reduce prices until they begin processing newly purchased, cheaper maize.

Market conditions also influence pricing. In areas with limited competition, processors and vendors may have little incentive to lower prices immediately because consumers have few alternative suppliers.

Inflation expectations can also play a role. Businesses often adjust prices upwards quickly when production costs rise, but they may reduce prices more slowly when input costs decline, especially if they expect costs such as transport or energy to increase again.

Ultimately, the prices consumers pay for processed foods are determined by the total cost of production rather than the price of maize alone. This explains why a significant drop in raw commodity prices does not always result in cheaper kenkey, banku or corn flour.

For consumers, falling maize prices are a positive development, but they represent only one part of a much larger pricing equation. Until other production costs also decline, the prices of many processed foods may remain largely unchanged.

By Elvis Anaba, Research assistant at Parliament and PHD in Economics student