Business

Rising food prices set stage for costly Xmas

Wednesday, December 16th, 2020 00:00 | By
Retailers are warning of further price hikes ahead of end-of-year festivities.

After a steep discounting during the lockdown periods as rapid spread of coronavirus pandemic kept people away from shops, consumers are waking up to the prospects of higher costs over the festive period.

Food prices are racing to their peak ahead of Christmas with prices of wheat flour, cooking fat, rice and eggs already up compared to last month with retailers warning of further price hikes ahead of the festivities.

Wheat is milled into flour and used as a major ingredient in such foods as chapati also known as Roti, a delicious Kenyan meal, bread, cakes, and biscuits, already has its price up by 18 per cent. 

Two kilogrammes of wheat flour that usually costs Sh110 is now selling at an average of Sh130.

This is attributed to a 32 per cent increase in the price of wheat on the international market since January.

Kenya imports two thirds of its wheat and international wheat prices are up to their highest level since 2014 according to data from the IMF. The prices of wheat hit $270 (Sh27,000) a tonne up from $210 (Sh21,000) in May.

Trade activity

“International export prices of wheat edged upwards in November, driven by robust trade activity as well as reduced production estimates,” said the Food and Agricultural Organisation (FAO).

The highest price of wheat was recorded this year in October at $625 (Sh69,743 for a tonne.

That price has informed the current high flour prices as millers make shipment orders three months in advance.

Confirming this trend, Forstin Amani of Betta Grains, a grain price tracking platform in Nairobi said: “Our data shows local wheat prices have risen quite steeply from as low as Sh4,000 to Sh4,500 today due to supply shocks.”

The rising cost of wheat flour adds to an already expensive shopping basket for consumers who are already under economic stress as prices of other basic items such as milk and sugar have gone up.

For instance, Sugar which is used as a sweetener in drinks and confectionaries is also up by 10 per cent with the cost of a kilo of sugar rising from Sh100 to Sh110 in less than one month.

Gerishon Ikiara, economics lecturer at the University of Nairobi said there is optimism as most economies open up and fuel demand for various commodities. 

“Many people are also getting back their jobs so there is more activity. That has an effect of raising the prices,” the don who is also a former government official said. 

Ikiara added that sometimes the supply takes time to respond after a period of low demand, adding that this could be one source of inflation.

Price of palm oil, an ingredient in about half of all supermarket goods, is also up almost 70 percent since May, but local prices are being partly shielded by vegetable and animal oils. 

The prices are rising due to bad weather in Malaysia and heavy demand from China and India.

Kenya imports cooking oil from Malaysia and Indonesia. The prices of cooking oil are up 14 per cent from Sh140 a kilogramme to Sh160 a kilogramme.

Retailers have also warned that prices of eggs will soon rise due to high cost and shortage of feeds.

Maize prices have, however, remained stable, helping to cushion consumers from steep price hikes.

Consumer prices increased by 1.1 per cent month-on-month in November, picking up from October’s 0.95 per cent increase. November’s figure was the sharpest increase in prices since February.

The increase was due to higher prices for food and non-alcoholic beverages and cost of health, and hotels and restaurants services.

The prices of goods and services jumped to a six-month high in November according to data from the Kenya Bureau of Statistics.

The consumer price index jumped to 5.5 per cent in November up from 4.9 per cent in October.

Fuel prices

The rise was mostly driven by the increase in fuel prices that have spiked the cost of production in the country.

Since April this year, Kenyans have been shielded from the high cost of living by a combination of measures by the government to cushion them from the severe impact of Covid-19 pandemic.

The government  lowered taxes and offered interest rates moratorium on borrowers.

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