Tough Economic Times Ahead As Wheat Price Rise

Kenyans continue paying more for a loaf of bread and wheat flour amid disruption on imports and rising international prices of the cereal.

Prices have been on an upward trend since the last quarter of 2020 and spiked in the past month after Russia, the world’s largest exporter, slapped export taxes on wheat and grain export quotas.

The rising price of wheat has made its products costlier. Almost all brands of bread have also recorded a price increase, with a 400-gram loaf that has been retailing at 50 shillings for the last four years now selling at 55 shillings.

In most parts of the country, the price of a two-kilogram packet of flour is trading at an average of 137 shillings up from 124 shillings in December last year, a 10.5 percent increase.

According to data from the Kenya National Bureau of Statistics, the average price of flour has been on an upward trend since September last year when it hit 116 shillings before rising to 117 shillings in October, 118 shillings in November, and 124 shillings in December.

Last month, Agriculture CS Peter Munya admitted to challenges in the international markets which he said the government has no control over, signaling continued high wheat prices in the short-term as the country remains heavily dependent on imports.

Millers have been increasing the price of flour to reflect the high cost of wheat in the international market following a tightening of supply from Kenya’s source countries.

A tonne of wheat has increased by 30 percent to 33,000 shillings from 25,300 shillings sparking a rally both on bakers and standard flour.

Items like smokies, sausages, and pastries have an increased price of between 10 and 300 shillings. Paying import tax and meeting the increased price of wheat forces the manufactures to hike the cost of final products

Millers have called on the government to abolish the duty on wheat, in order to cushion consumers against the rising international prices, the ministry has said it has little influence over the price hike. Imports are currently charged a 10 percent duty.

Effective last month wheat products such as bread were moved from zero-rated to exempt VAT status denying manufacturers a tax refund

Data from the ministry of agriculture shows the country’s consumption stands at 900,000 tonnes per year against an annual local production of 350,000 tonnes.

A typical Kenyan would consume about 15 kilograms of cereal in a year 40 years ago. This has more than tripled to almost 50 kilograms, according to government data.

The low local production is expected to continue even as the Cereal Growers Association argues that the country has sufficient land to grow enough wheat to satisfy local demand.