Economy

Cartel keeps wheat flour prices high despite glut

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Shoppers are yet to gain from low global wheat prices and oversupply. PHOTO | JOSEPH KANYI

Summary

  • A 2kg packet of wheat flour is trading at between Sh126 and Sh140 in the supermarkets, almost the same price at which it had been retailing whole of last year.

A cartel of traders has kept the price of wheat flour and bread high in the market despite “oversupply” of cheap imports that has forced local millers to stop buying farmers’ produce.

A two-kilogramme packet of wheat flour is trading at between Sh126 and Sh140 in the supermarkets, almost the same price at which it had been retailing whole of last year.

According to Cereal Growers Association (CGA), a lobby for local farmers, millers have shunned their produce in favour of imports as oversupply in the international market has driven down wheat prices by more than 30 per cent since last year.

“The price of wheat products has remained high in the country despite sufficient supply in the market resulting from low imports,” said chief executive Anthony Kioko.

He accused the millers of refusing to pass the benefits of cheap wheat to consumers, noting that the price of the produce is not in tandem with the cost of wheat flour and bread.

Hundreds of farmers in the Rift Valley are stuck with more than 165,000 bags of wheat from last season’s crop as millers say that their stores are full and cannot absorb more of the commodity at the moment.

“Millers are no longer buying wheat from farmers and when you look at the imports, you realise that the bulk of goods coming in is wheat,” said Mr Kioko.

In a letter to the CGA, Cereal Millers Association chief executive Paloma Fernandes said it was unfortunate that they had received complaints from farmers that millers are not buying their wheat.

“We will endeavour to do our best to ensure that all local wheat is bought by millers immediately and hope that the situation can be solved amicably as possible,” said the CEO in a statement copied to government officials.

Statistics on the cargo handled through the Mombasa port in the last two weeks indicated that the bulk of it was wheat implying that millers have been importing more of the grain.

READ: Imports choke wheat farmers

The report from the Kenya Ports Authority indicates that direct discharge of wheat bulk through the conveyor belt accounted for 42,640 tonnes, dominating the sectional operations.

According to a report by the United States Department of Agriculture released in September, world wheat production is forecast to reach a record 732 million tonnes outstripping what was produced in 2014/2015 by 16 million tonnes.

Millers have been lobbying to import wheat at duty-free after they exhaust what’s available from local farmers.

They argue the move will keep prices of wheat products low when the duty is set aside as the country imports up to 75 per cent of wheat yearly. Kenya is a net importer of the grain, producing 350,000 tonnes against an annual consumption of 900,000 tonnes.

Millers have said that high quantities of local wheat from farmers this year has created unusual pressure, making it difficult for them to accommodate all local produce, a move that has left growers stranded with their crop.

“Due to the rains, local harvest is available sooner and in greater quantities than has been in the past, this is placing unusual pressure on the buying end of the value chain,” said the millers in an earlier communication.