Millers warn cut in flour cost temporary

KENYA – Millers have warned that the drop in maize flour prices is temporary, arguing that prices will revert to market levels once cheap grains from the government is exhausted in 12 days.

Cereal Millers Association (CMA) says the government should urgently seek deals with neighbouring countries to make maize flour affordable.

The government ordered the release of a million bags of cheaper maize from the Strategic Food Reserve (SFR) to ease a shortage that had seen a two kilogramme packet of maize flour hit a record Sh153.

The 2kg packet of Soko that was retailing at Sh153 on April 3 at Tuskys has dropped to Sh148, reflecting a drop of Sh5. Other brands have dropped by an average of Sh6.

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“It is important to appreciate that once the Strategic Food Reserve intervention maize is milled, we will expect finished product prices to adjust to market prices for maize grain at the time,” said Cereal Millers Association chairman Nick Hutchinson.

“In the meantime, we are encouraging the government to urgently pursue regional interventions to ensure that maize supply returns to normalcy,” he added.

The government is selling 90 kilogrammes of maize from SFR for Sh3,000, which is lower than the prevailing market price of Sh4, 500.

The market price stood at Sh3,800 at the end of last year.

Millers had forecast that a packet of the staple food would drop between Sh115 and Sh125 on cheap maize from the State.

Kenya consumes about three million bags of maize every month, meaning the one million 90kg bags are only sufficient to feed the country for one week. 

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But the millers lobby says it could last between eight and 12 days.

The Treasury late in March scrapped the 50 per cent duty levied on maize imported from outside the East African Community in the next four months to lower the cost of importing the staple.

High cost of food saw inflation jump to 10.28 per cent in March from 9.04 the previous month, taking it beyond the Treasury’s preferred upper limit of 7.5 per cent.

Food and non-alcoholic drinks’ index rose 3.18 per cent driven by a steep increase in prices of food items such as spinach, maize flour, milk, potatoes and maize grain, according to the Kenya National Bureau of Statistics. 

Food takes up the largest share (36 per cent) of the basket of goods used to calculate inflation, making it the main driver of the cost of living.

The Central Bank of Kenya’s monetary policy committee (MPC) expects inflation to stay outside the preferred range in the near term.

April 13, 2017: Business Daily

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