Wheat consumers pay the price for taxman’s war with importers

One tonne of wheat delivered at Mombasa now costs $250 (Sh20,000) meaning that at the rate of 10 per cent the importers are paying an average of Sh2,000 for every tonne of wheat shipped in down from Sh7,000 in May.

The UN’s Food and Agriculture Organisation (FAO has discounted fear of acute wheat shortage saying the market remains far more balanced than at the time of world food crisis in 2007/08.

Unfavourable weather reports have however forced FAO to cut its global wheat production forecast for 2010 to 651 million tonnes, from 676 million tonnes in June.

Severe drought in the Russia, the main global wheat producer, coupled with anticipated lower outputs in other major producers markets such as Kazakhstan and Ukraine have raised fears of a looming supply shortage during the 2010/11 marketing season.

More recently, wild fires in Russia have decimated huge tracks of land under wheat crops forcing the Russian government to ban the exports of grains.

Downgrading production

International wheat prices have jumped by over 50 per cent since June raising fears of a possible repeat of the 2007/08 food crisis that sparks riots in various parts of the globe.

FAO has allayed such fears saying that two consecutive years of record output have replenished world inventories and that the buffer stocks being held by traditional wheat exporters against unexpected supply shortage is enough to cover any anticipated production shortfall.

“External factors, including the macro-economic environment and developments in other food markets that were major drivers of the surge in international prices in 2007/08, are not posing a threat so far,” FAO said.

In downgrading the global wheat production forecast for 2010 FAO points to a tighter supply situation and increases the likelihood of higher wheat prices compared to the previous season.

On the other hand, should the drought in the Russian Federation continue, it could pose problems for winter plantings in that country with potentially serious implications for world wheat supplies in 2011/12.