Households squeezed by new rise in food prices

The prices of key food items have climbed significantly over the past couple of months, adding pressure on already cash-starved households.

A spot check of markets and industry interviews by the Business Daily found that the retail prices of household items including onions, wheat flour, cooking oil, bread and milk had all increased.

By Thursday, the wholesale price of onions was quoted at Sh55, up from Sh35 two weeks ago, with traders projecting it to retail at Sh70 by next week on low supplies.

The price of cooking oil has also risen, with a 20 litre container of the commodity selling at Sh3,600 compared to Sh3,000 previously.

“The international price of crude palm has gone up significantly and this coupled with a weakening shilling has had a huge impact on the cost of oil locally,” Rajul Malde, the commercial director at Pwani Oil Products said.

Global prices of palm oil prices have climbed since last year on demand and are projected to jump further the first half of 2021 as La Nina weather pattern hits key producers. Heavy rainfall brought on by La Nina has started to disrupt edible oil output in Southeast Asia lower soybean crushing in Argentina is expected to pile more pressure on global palm oil prices.

A report by Reuters shows that Malaysia’s benchmark crude palm oil price jumped six percent during the first week of the year, trading at $945.27 a tonne(Sh104,149.84), its highest in nearly a decade.

The cost of bread-- which tracks after international wheat prices-- has also gone up the first time in four years.

The prices of nearly all brands of bread have gone up, with a 400 gramme loaf averagely selling at Sh5 more.

“Since last year, we have witnessed a significant increase in cost of wheat and this, coupled with high cost of other ingredients that we use has necessitated the price increase on bread,” said Bimal Shah, the managing director of Broadway Group of Companies -- producers of wheat mill bread under the Broadways brand.

Households are also paying more for milk. For instance, a 500ml packet of milk now sells at Sh55, up from Sh50 previously, with processors citing the increase on the shortage of the commodity in the market.

The rise in the prices of food items is expected to pile fresh pressure on inflation. Data by the Kenya National Bureau of Statistics (KNBS) shows higher vegetable and wheat flour prices during the festive season pushed food inflation in the country to its highest level in six months in December.

The year-on-year rise in the cost of food stood at 7.2 percent last month, the highest since June 2020. Although the cost of food has been rising since September, the biggest month-on-month jump in the second half of the year was between November and December (6.1 percent to 7.2 percent).

“This food inflation was mainly attributed to increase in prices of particular food items, which outweighed the decreases,” said the KNBS in its December inflation report.

“For instance, retail prices of loose maize flour and capsicums (pilipili hoho) declined by 1.28 percent and 8.91 percent, respectively. On the other hand, prices of spinach, oranges and collard greens (sukuma wiki) rose by 8.09 percent, 6.18 percent and 5.61 percent, respectively.”

The price of wheat flour also rose in December by 4.75 percent compared to November, to retail at an average of Sh124 for a two-kilogramme packet.

Tony Watima, an economist, said the rise in commodity prices will have a negative impact on the economy given that most households are yet to recover from the financial shocks brought about by the Covid-19.

“A tax relief would enable households to have more disposable income that they can spend in the economy and help its recovery,” he said.