Markets & Finance
Millers propose subsidy to shield wheat farmers from cheaper importsWednesday June 22 2016
Millers want the government to introduce a subsidy for local wheat to make it cheaper and lower the cost of grain products.
Cereal Millers Association chairman Nick Hutchinson says a government-managed subsidy would bridge the difference between import and local prices to enable millers to procure domestic products at a lower cost.
Millers normally prefer imports as they are cheaper compared to local commodity that is highly priced.
“We want the government to start a managed subsidy programme for direct ‘make-up’ payments to farmers on differential between import price and targeted local price,” said Mr Hutchinson.
A 90-kilogramme bag of wheat from the international market is currently landing in Nairobi at Sh2,600, compared with Sh3,500 that local farmers are demanding for their grain, making it more attractive for millers to import.
The price of import is inclusive of the 10 per cent duty levied on wheat from outside the country as well as the cost of transport.
The millers also want the government to urgently address the high cost of production that has made Kenyan wheat costly.
A report by the Ministry of Agriculture indicates the minimum cost of producing a bag of wheat in the North Rift is Sh3,200. This can rise to Sh3,400 in areas such as Narok.
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The call by millers comes at a time farmers have started harvesting in Narok with concerns growing that relatively low international price will affect their produce.
Cereal Growers Association (CGA) says millers should buy all the local crop before going for imports.
“We are worried that the current low prices at the international market could see millers go for imports at the expense of the local wheat,” said Anthony Kioko, chief executive of CGA.
Narok is a major wheat belt that accounts for half of the total crop harvested locally.
Kenya is a net importer of wheat, bringing in two-thirds of its requirement to meet the annual consumption of 900,000 tonnes against the annual local production of 350,000 tonnes.