Millers call for 10pc duty waiver on raw materials

Tuesday, March 1st, 2022 00:21 | By
Trucks stuck at Namanga. Photo/PD/Print

Millers have raised the red flag of a further surge in the cost of wheat, maize, and soybean, leading to deterioration in the country’s food security situation.

Cereal Millers Association (CMA) now want the government to consider offering waivers on imported human feeds to save households from the surging food prices occasioned by a global shortage of raw materials and supply chain snarl-ups.

Paloma Fernandes, CMA chief executive said the government should consider waiving 10 per cent duty on imported wheat, adding that the country currently produces about 800,000 bags of local wheat but need to import about 20 million bags to bridge the deficit. 

“Local production has already been bought by members of the CMA and there is little or no local wheat left in Kenya,” she told Business Hub. The cost of maize flour and bread have already increased as wheat supply is constrained by the Ukraine-Russia tension while local value chain constraints have hit maize supplies.

Kenya imports about 75 per cent of its annual demand of 1.2 million metric tonnes of wheat grain from both Russia and Ukraine.

This has seen millers grapple with a shortage of cereals, especially maize, wheat, and barley caused by delays and high cost of freight charges, signalling that the high cost of production will be eventually transferred to end consumers.

Internationally, prices of wheat, corn, soya, barley are higher than usual with the cost of freight and oil almost doubling, according to  Paloma. “Prices of inputs such as fertiliser have almost doubled in price. It must be noted that 80 per cent of the cost of flour is directly related to the cost of raw material and therefore any volatility or increase in the price of raw material will affect the price of flour,” she added.

Volatile prices

The association said by scrapping 10 per cent duty levied on imported cereals for six to12 months can help to cushion the consumers from the volatile prices.

Consumers will also feel the impact of rising costs of flour as maize stock in Tanzania and Uganda, which has been pivotal in bridging the deficit, diverts to South Sudan, one of the four regions in the continent battling acute food insecurity.

The situation is further complicated by the heightened stalemate between National Cereals and Produce Board (NCPB) and large scale maize farmers who have been holding back their products in anticipation of price increases in the coming months.

In December 2021, the board increased the prices of a 90-kilogram bag of maize to Sh3,000 from Sh2,700 to attract more suppliers but still fell far behind in bridging the gap. It only managed to buy 80,000 bags from last year’s harvest against a target of one million bags, about 92 per cent off the target.

Supply scarcity

The supply scarcity has pushed up the cost of Kenya’s staple to a high of Sh3500 for a 90-Kilogram bag with a two-kilogramme packet of maize flour hitting Sh150 high from Sh108 in December 2021.

With animal feed manufacturers also decrying the short supply of raw materials, CMA wants free yellow maize allowed into the country to reduce the competition for white maize between the human food and animal feed manufacturers.

More on Business