Rising maize prices are expected to put pressure on flour prices as millers warn of growing costs of the staple food.
Millers are buying a 90kg bag at Sh2,400 from below Sh2,000 in early December following the entry of the National Cereals and Produce Board (NCPB) in the market late last month.
This looks set to reverse the fall in maize flour prices that started mid-last year as millers pass on the additional production costs to consumers.
The Cereal Millers Association has been forced to match the Sh2,300 for the 90 kilogramme bag offered by the NCPB, whose multibillion shilling budget helps to regulate prices and reduce the influence of brokers.
“When a price is set, this simply means that the cost of maize will rise as other dealers increase the price of maize to match what the government offers, hence increasing the cost of flour,” said Diamond Lalji, chairman of the millers association.
Mr Lalji noted that Kenyans can only enjoy low prices of flour if the State leaves market forces to determine the cost of maize. Retailers have cut the price of a two-kilogramme packet to below Sh100 from Sh118 in May on increased supply of maize following good harvest in South Rift.
This was in response to the drop in price of the 90kg bag from a high of Sh3,200 in May, offering millers room to cut flour prices.
Maize prices have a big effect on inflation since it is the staple food and accounts for a significant share of poor households’ budget.
Inflation in December eased to a 17-month low of Sh6.02 per cent on cheaper food and fuel.
This has kept the cost of living measure within the government’s preferred band of 3.5-7.5 per cent.
But while the higher maize and flour prices hurt consumers, they look set to benefit farmers who have been complaining about not recovering their production costs on the rock bottom grain prices.
This explains the farmers’ pressure on the Treasury to allocate funds to the NCPB to buy maize and offer the State agency the muscle to regulate the prices of the grain.
The NCPB normally starts buying maize in October during the harvest season, but delayed its presence this time round to late December.
The board was allocated Sh2.7 billion to purchase maize in the current financial year and cushion farmers from middlemen, who pulled down prices to a low of Sh1, 200 for the 90 kilogramme bag in November.
It has so far spent about Sh1.1 billion buying maize from farmers over the past 10 days. Official data say it costs Sh1,500 to produce a bag of maize in Trans Nzoia and Sh1,300 in Uasin Gishu.