Millers grappling with new rules on importing wheat

Workers spray wheat with an insecticide in Moiben, Uasin Gishu County. PHOTO | VICTOR SIELE

What you need to know:

  • The directive compels millers to exhaust allocated local quotas to qualify for an import licence.

Kenyan farmers have demanded for higher wheat prices for quite a while now. The move has compelled millers to opt for cheap imports. But now the government has come up with a new strategy to force millers to exhaust local wheat before opting for imports.

Starting last year, the government allocated each miller a quota of locally produced wheat based on their installed capacity.

The new rule compels millers to exhaust their allocated local quotas to qualify for an import licence for duty free wheat.

“We have a new system in place that requires millers to buy all locally produced wheat before we issue them with an import licence,” said Agriculture Cabinet Secretary Willy Bett.

Mr Bett said that when millers seek the wheat import licence from the Treasury, their request is referred to the Ministry of Agriculture to confirm whether they have met the condition of buying their portion of local wheat.

This comes as a reprieve to farmers who have for long been complaining of cheap imports’ adverse affects on the local crop. To protect farmers, the government directed millers to pay them Sh3,000 per 90 kilogramme bag of the cereal to enable them make some margin on their produce.

“Due to failure to reach an agreement between the Cereal Growers Association (CGA) and millers on the floor price for the 2016/17 crop, the government recommends that wheat to be bought at Sh3,000 per bag,” said the ministry in a report.

Latest statistics by the ministry indicate that 14 millers in Nakuru County had not met their allocated quotas as at December 4, and hence did not qualify for the import licence.

In Eldoret, 19 millers are yet to meet their quotas with only Weetabix East Africa Limited having bought 843 bags out of the required 835.

Kenya is a net importer of wheat, bringing in two-thirds of its requirement to meet the annual consumption of 900,000 tonnes against local production of 350,000 tonnes.

Kenyan farmers normally demand high prices for their crop citing production costs, a move which compels millers to prefer imports.

A report by the Agriculture ministry indicates that 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.

The low international cost of the produce has seen millers import huge volumes of the cereal in recent months.

A bag of imported wheat lands in Nairobi at about Sh2,650 against the local price of Sh3,000.

The report indicates that the global price of wheat has dropped by 26.7 per cent in the last two months making it cheaper for millers to import than procure locally.

According to the report, a tonne of wheat at the international market is retailing at Sh17,654 compared with Sh24,098 in 2014. “It is wrong for millers to purport that our crop is expensive and subject farmers to losses, what they should do is mop up the local produce before embarking on imports,” said Cereal Growers Association chief executive Anthony Kioko.

“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,” he added. Growers have been calling for reinstatement of the 35 per cent duty to opposed to the current 10 per cent.

Cereal Millers Association (CMA) chairman Nick Hutchinson has defended the imports saying that their business grows by 15 per cent annually while wheat production in the country has remained flat.

Every year we need more wheat as the demand grows amid low volumes of the crop in the country, this is the reason why we import a lot of the produce,” said Mr Hutchinson.

Millers have opposed the government’s setting of a minimum price at which they should buy the local crop saying that the move will affect pricing and make wheat products even expensive.

The price of bread has stagnated at Sh50 over the years with millers saying that this is the effect of the high price of wheat.

The association wants the government to subsidise local wheat to make it cheaper and lower the cost of grain products.

Mr Hutchinson said that a government subsidy would bridge the difference between import and local prices and enable millers to sell products at a lower cost.

“We want the government to start a managed subsidy programme for direct make-up payments to farmers on differential between the import price and the targeted local price,” he said.

Cereal processor Weetabix East Africa started a programme in 2014 meant to reduce its wheat imports by 50 per cent. The company has been working with a local wheat farmer in Narok who is expected to supply 26,000 bags, about half of its requirement.

Weetabix has in the past opted for imports because of the high price of local wheat.

Processors also argue that local wheat is of low quality, hence the need to blend it with imports. 

Some millers have also contracted the National Cereals and Produce Board (NCPB) to buy wheat on their behalf.

NCPB managing director Newton Terer confirmed that some millers had requested the service.
“We are just acting as their agents, we are buying for them wheat using their own funds but they pay us some commission,” said Mr Terer.

NCPB does not buy wheat from farmers as it does with maize.

Currently, NCPB is focused on buying maize for the strategic food reserve on behalf of the government. The reserve has been expanded to include powder milk.

The government will spend more than Sh6 billion to replenish maize stocks at the reserve this harvest season. It has so far been depleted to less than a million bags.

The government intends to buy up to six million bags but has so far released Sh3 billion for the exercise.

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