The State has ordered millers to pay a minimum of Sh3,700 per 90-kilogramme bag of wheat, handing a boost to farmers long aggrieved by poor pricing.
Agriculture Cabinet secretary Peter Munya said the new rate is a compromise deal after the farmers demanded Sh4,000 a bag against the Sh3,600 that the millers had offered.
“We have agreed that millers will have to mop up the local wheat first at Sh3,700 before they can be allowed to import,” he said after a meeting of growers and millers in Nairobi on Monday.
Wheat farmers in Kenya favour higher prices to counter the rising cost of production partly due to costlier energy and labour.
Market data shows that the cost of production ranges between Sh2,000 and Sh2,500 per bag, according to farmers, implying that the growers will not only break even but also make a profit selling their produce at Sh3,700.
Mr Munya said the wheat production has dropped over the years, forcing Kenya to import more than 80 percent of the grain to meet the local demand.
Millers have previously argued that high prices in the domestic market rendered their produce uncompetitive in the region.
At the moment, Kenya charges a 10 percent duty on all imported wheat, but it is still cheaper than the locally produced one.
The import price of wheat, which millers refer to as the premium grade, is between Sh3,100 and Sh3,500 for a 90-kilogramme bag.
The government started the quota system of wheat purchasing a couple of years ago, which requires millers to exhaust the local crop before they are allowed to import.
The quota is allocated based on the installed milling capacity of a given miller. The import permits are only issued after a processor has purchased all that is required.
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.