Wheat farmers cry foul as millers go for cheap imports

A farmer sprays herbicide and fertilizer to wheat on a wheat field in Nanyuki. The government wants millers to pay farmers Sh3,000 per bag of local wheat, opening the stage for a fight with the processors in the wake of low international prices. PHOTO | JOSEPH KANYI | NATION MEDIA GROUP

What you need to know:

  • “Every year we need more wheat as the demand for the flour grows amid low volumes of the crop in the country. This is the reason why we import a lot of wheat,” said Mr Hutchinson.

The government wants millers to pay farmers Sh3,000 per bag of local wheat, opening the stage for a fight with the processors in the wake of low international prices.

Most millers have brought in huge volumes of the cereal in the wake of a 26. 7 per cent decline in global prices. This now leaves local producers at the mercy of either processors of middlemen.

According to a report, a tonne of wheat at the international market is retailing at Sh17,654 currently compared with Sh24,098 in 2014.
“Due to failure to reach an agreement on the floor price for 2016/17 between Cereal Growers Association (CGA) and millers, the government recommends wheat to be bought at Sh3,000,” says Agriculture ministry in the report.

The recently released report indicates that the cost of producing a single bag of wheat in Kenya stands at Sh2,389 with farmers demanding Sh3,450 for the same quantity in order to break even.

Low international cost of the produce has seen millers import huge volumes of the produce in recent months. A bag of imported wheat is landing in Nairobi at Sh2,650 against the local price of Sh3,450 that farmers are demanding.

The report indicates that global prices of wheat have dropped by 26.7 per cent in the last two months making it cheaper for millers to import than buy locally. Kenyan farmers ask for a higher price for their crop, citing high cost of production. This compels millers to prefer imports.

Wheat production
Cereal Millers Association (CMA) boss Nick Hutchinson has defended the imports noting that their business is growing by 15 per cent every year while wheat production in the country has remained stagnant.

“Every year we need more wheat as the demand for the flour grows amid low volumes of the crop in the country. This is the reason why we import a lot of wheat,” said Mr Hutchinson.

The report indicates that millers imported 492,371 bags of wheat between January and May 2016. Millers had anticipated that the government would increase duty on imported grain, hence the high imports before budget reading day.

Mr Hutchinson said the government should not be involved in setting a minimum price at which they should buy the local crop as this will affect the market and make wheat products even expensive.

Stranded
Farmers have been lamenting that millers have been avoiding their crop for imports, leaving them stranded with their crop.

“It is very wrong for millers to purport that our crop is expensive and subject farmers to losses. What they should do at least is to mop up the entire local produce before embarking on imports,’ said Cereal Growers Association chief executive Anthony Kioko.

“We are worried that the current low prices at the international market could see millers go for imports at the expense of the local wheat,” he added.
The growers have been calling for reinstatement of duty to 35 per cent as opposed to the current 10 per cent.

Wheat imports, according to the Kenya Ports Authority (KPA) weekly report has been dominating the bulk of the cargo to the country. KPA said a total of 41,752 tonnes of wheat were offloaded at the Port of Mombasa in the week ending June 29, emerging as the top bulky consignment during the week.

Millers want the government to introduce a subsidy for local wheat to make it cheaper and lower the cost of grain products.

Mr Hutchinson said a government-managed subsidy would bridge the difference between import and local prices to enable millers to procure domestic products at a lower cost.