Kenya has inked a deal with Kampala to buy 6.6 million bags of maize at Sh2,050 each to plug a deficit that has triggered a rise in flour prices.
The multi-billion shilling deal that was brokered by the Trade ministry will see local millers pay Grain Council of Uganda for delivery of cargo at the National Cereals and Produce Board (NCPB) depots.
Local millers will have access to 600,000 tonnes of maize at $225 per tonne in what will plug a deficit of more than five million bags following poor weather last year.
This will curb rising flour prices, which increased to Sh115 for the two-kilogramme packet compared to Sh90 in December after the government ended the Sh6 billion subsidy for maize importers
"The deal is between Grain Council of Uganda and the Cereal Millers Association and was brokered by the Ministry of Industrialisation, our role was to bring together the two bodies by acting as the intermediary party," said NCPB managing director Newton Terer.
The Uganda deal look set to hurt farmers who had expected to profit from a forecast rise in maize prices from the current Sh3,200 a bag to above Sh3,400.
Maize prices rose to above Sh3,000 a bag after the government started buying from farmers at Sh3,200 in a Sh6.7 billion plan. The state has since stopped buying the grains tilting the market in the favour of millers now buoyed by the Uganda deal.
Maize deficit last year increased the cost of the two-kg packet of flour to a high of Sh153. This prompted the Sh6 billion subsidy on maize imports to help lower the cost of flour, which had shot up due to drought and poor planning.
Kenya remains a major export destination for Ugandan maize, followed by Tanzania. Last year, however, Kenya suffered a major setback after the two countries banned the export of grain due to scarcity in the two countries.
Maize imports from Uganda to Kenya grew 78 per cent in January compared with December 2017, as traders rushed to cash in on good price following a shortage of grain lifted the trade.
Data from Eastern African Grain Council indicate cross-border trade between the two countries increased from 25,791 tonnes last December to 46,010 in January at a value of Sh1.4 billion.