Millers scramble for local wheat as global prices rise

Millers are scrambling for local wheat following the reintroduction of a 10 per cent duty on imports, sparking fears of a looming shortage.
High prices of wheat in the international market have forced millers to source wheat from Kenyan farmers , which is now cheaper.

In Eldoret, millers are being forced to buy the wheat from farms.

“Finally, millers are the ones looking for us. This is a trend that we have never witnessed before,” said George Kili, a large-scale wheat farmer in Uasin Gishu.

According to Mr Kili, his stock of 11,000 bags that he had been holding from the previous harvest was bought by Dolla Millers within three days.
The high demand in the local market comes at a time when wheat is in short supply globally following a drought that has stunted output in Russia and America, the major exporters.

“The drought that has ravaged major exporting countries of wheat in the world has seen the international price of the commodity go up significantly. This is going to affect the price of wheat flour unless the government removes the 10 per cent import duty,” said the chairman of Millers Association of Kenya, Diamond Lalji.

He said importing wheat had become expensive, with a 90-kilogramme bag of wheat costing Sh3,950 to reach Nairobi. Locally, farmers are selling a 90 kilogramme bag of wheat for Sh3,300 from Sh2,600 in the last few months. 

Previously, millers imported wheat from other countries as opposed to buying from local farmers, compelling growers to hold back their produce from the market because of low prices.

During 2012/2013 budget presentation, Finance minister Njeru Githae imposed a 10 per cent duty on imported wheat, raising the demand for local wheat.

Mr Lalji noted that the high international price coupled with plans to introduce a 16 per cent Value Added Tax (VAT) would push wheat flour and derived products beyond the reach of many consumers.

Cereal Growers Association of Kenya chief executive officer David Nyameino said uncertainty in the global market was driving up local prices.
Millers are foreseeing a shortage of the commodity between now and the next harvesting season in October.

According to Mr Lalji, the high demand is benefiting local farmers through higher prices.

The annual demand for wheat in Kenya is 900,000 tonnes, against a total production of 360,000 tonnes.
The deficit of 540,000 tonnes is filled through imports.