Stiff competition, low demand sharply push down wheat prices - Daily Nation

Stiff competition, low demand sharply push down wheat prices

Monday February 12 2018

 Kenya does not produce enough wheat. FILE PHOTO | NMG

Kenya does not produce enough wheat. FILE PHOTO | NMG 

By GERALD ANDAE
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Wheat flour prices have dropped significantly as stiff competition among millers and low demand from customers force the processors to review the cost.

The price of a two-kilo packet has on average dropped from Sh130 in December to Sh115 across the major brands in Nairobi retail shops. The drop in flour prices — both for maize and wheat — is likely to positively impact on inflation.

The Cereal Millers Association (CMA) has also attributed the decline to increase in volume of wheat in the country, mainly due to imports.

“There has been aggressive competition for sales volumes in a soft market,” said Nick Hutchinson, CMA chairperson and Unga Group chief executive.

Mr Hutchinson said since the demand in the market is poor, millers are trying to trigger demand through pricing.

A two-kilo Exe all-purpose flour is now retailing at Sh114, Pembe Sh116, Kifaru Sh117, Exe Chapati Sh116 and Golden for Sh112. All the brands were retailing at above Sh130 in December last year.

In December, millers reduced the price of wheat flour by Sh8 following an increase in supply of wheat through the Port of Mombasa, after the delays occasioned by logistical challenges at the facility ended.

The move saw the recommended price for a two-kilo packet fixed at Sh129, down from Sh137 previously.

Local wheat did not perform well in the last season that started in July and millers have been relying on imports to run optimally.

The government has been restricting millers from importing at a time when harvesting is ongoing, compelling them to first mop up the domestic commodity before embarking on imports.

The directive put in place in 2016 is strictly monitored and only compliant millers are cleared to import.

The Ministry of Agriculture had projected local production would drop by half a million bags in last season’s harvest.

Kenya does not produce sufficient wheat locally and relies on imports to meet the annual demand.

This makes the country a net importer of wheat, bringing in two-thirds of its requirement to meet the annual consumption of 900,000 tonnes against the local production of 350,000 tonnes.

The country was last year forced to import thousands of tonnes of maize and wheat following a severe drought.