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Kenya: Imports Set to Ease Rising Prices of Wheat Products
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Business Daily (Nairobi)
18 May 2008
Posted to the web 19 May 2008
Jim Onyango
Consumers of wheat products are hoping for a reduction in prices after the government opened a window for the importation of duty free wheat flour.
The government has said it will, at the end of May, authorise millers and importers to ship in 17,000 metric tonnes of duty free wheat flour from Egypt and Mauritius.
Bread makers hope that the imports will bring in cheaper wheat flour to push down the cost of bread and other wheat products.
It is anticipated that the duty free imports will eliminate the shortage of wheat flour in the market, but analysts warned that consumers should not expect to gain in terms of lower prices of wheat flour products because the exporting countries might have as well factored in the 35 per cent tax excluded in the duty free arrangement.
A surge in the price of wheat and cereals globally and in the domestic market has led to an increase in the price of wheat flour products such as bread.
Local bread manufacturers adjusted prices upwards in April, the fourth time in six months, because of the increase in the price of wheat flour.
Mini Bakeries, the makers of Super Loaf, said they adjusted the retail price of their 1.5kg bread by Sh8 to Sh125. The 800g bread is retailing for Sh65 up from Sh63 while the 400gm bread is selling at Sh35 up from Sh33.
Bakers and millers interviewed by Business Daily early this month projected that the prices of bread and wheat flour products will rise further following a worldwide shortage of wheat and other grains.
The government is expected to award tenders for the importation of the flour at the end of the month.
The Ministry of Agriculture on Thursday put out a notice inviting eligible millers and wheat flour importers to tender for importation of the flour.
Twelve millers and importers who were awarded import licenses on August 13 last year will compete for the tender.
In February, Treasury gazetted a legal notice that provided a framework for importation of duty free wheat from the Common Markets for Eastern and Southern Africa (Comesa) region.
Local millers said they would meet to discuss the government's opening of the duty free window.
Perloma Fernandes, the spokesperson for the millers, said they would issue a statement afterwards.
Questions abound as to why the government advertised for the importation of only 17,383 metric tones of wheat flour but not for the entire 52,149 tonnes provided for by the legal notice of February 11.
In putting out the notice, Finance minister Amos Kimunya said the huge volume would cater for both allocations for 2008 and the arrears that failed to come in the two successive years to 2007. The notice provided that 32,400 metric tonnes of wheat flour were to be imported from Egypt, while Mauritius would supply 2,366 metric tones.
In the tender notice floated last week by the Ministry of Agriculture, importers would bring in up to 16,200 metric tones of wheat flour from Egypt and 1,183 tonnes from Mauritius.
Importation opposed
Local wheat growers are opposed to the duty free imports, which have the potential of reducing the market share for their upcoming harvests.
Projections by the Food and Agriculture Organisation (FAO) showed that as at January, the global prices of wheat were 83 per cent compared to a year ago.
Kenya's total wheat requirement is around 900,000 tonnes per year while local farmers produce only 300,000 tonnes per year.
Local millers can source wheat flour from any other exporter, including that bought from an East African Community member country at 60 per cent duty.
Millers have argued for the removal of the tariff to spare consumers high retail prices. They say that if the levy is not removed flour and bread prices will rise further.
The price of imported standard milling wheat has risen from $175 per tonne in 2006 to $234 in January 2007, to $430 last month due to a global shortage on supply and increased demand.
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Locally, bad weather and reduced wheat acreage have also pushed up wheat prices.
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