Maize flour prices have increased by nearly a third to Sh115 for the two kilogramme packet after millers exhausted subsidised flour stocks, putting pressure on inflation and home budgets.
Top retailers like Naivas, Uchumi #ticker:UCHM and Tuskys said yesterday they have exhausted the subsidised Sh90 maize flour packet, raising the cost of the staple by 28 per cent to Sh115
The Treasury ended the Sh6 billion subsidy to maize importers on December 31 to allow millers buy grain from farmers.
This will benefit farmers who have been pushing for higher grain prices, but put pressure on inflation, which fell to 4.50 per cent in December, from 4.73 per cent a month earlier, pushed by a fall in some food prices.
“We have started receiving fresh maize flour from millers and we will be selling the 2kg packet at between Sh110 and Sh113,” said Uchumi Supermarket acting CEO, Mohamed Ahmed.
Naivas said the staple is now retailing at between Sh110 and Sh115.
Millers are buying maize from farmers and traders at Sh3,000 for the 90 kg bag, up from the subsidised price of Sh2,300.
They expect flour prices to rise to a cap of Sh120 a packet till the end of March when the country’s maize supply is expected to dwindle, offering a replay of last year events.
The price of a two kilogramme packet of maize flour jumped by a third to Sh135.87 in April last year from the same period in 2016, prompting the import subsidy plan.
“Supply of maize is currently stable and we do not foresee further increase in the cost of flour because there is no shortage at the moment, “said an official of the Cereal Millers Association (CMA), adding that they have raised wholesale four prices by between Sh10 and Sh15.
Drought, poor planning
Kenya on May 16 announced the Sh6 billion subsidy on maize imports to help lower the cost of flour, which had shot up due to drought and poor planning.
Rising prices of staple maize flour and other foods had become a political headache for President Uhuru Kenyatta as he sought a second term in the August elections.
The subsidy lowered the price of a 90-kg bag of maize to Sh2,300 from above Sh4,000 with taxpayers offering importers a rebate or the difference of about Sh1,700.
This has kept the cost of the two-kg packet of flour at Sh90 from a high of Sh153 in April.
The subsidised flour prices were backed by a Kenya Gazette notice that criminalised the sale of the product above Sh90.
Millers have now reverted to the market price of maize, which has been influenced by the purchase of the grain by the government to replenish the strategic reserves.
The government is buying a bag from farmers at Sh3, 200 in a Sh6.7 billion plan.
Millers say the cost of getting the bag from the farmers to mills will rise to Sh3,400 when transport costs are factored in.