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Commodity Watch

Rise in Global Wheat Prices Likely Push Bread to Ksh.67

BY Lynnet Okumu · March 2, 2022 10:03 am

KEY POINTS

A 90 kg bag of wheat is projected to cost approximately 5,650 shillings, with a two-kilo packet projected to retail at between 180 and 200 shillings in March 2022.

KEY TAKEAWAYS

Even though the rate of inflation in February eased to 5.07 percent from 5.39 in January, the cost of basic commodities is still high.

Millers have warned of a possible price jump on wheat flour attributable to global wheat prices which have shot up from USD 345 (approximately 39, 295 shillings) per ton to USD 460 (52,394 shillings) per ton over the last four days.

A 90 kg bag of wheat is projected to cost approximately 5,650 shillings, with a two-kilo packet projected to retail at between 180 and 200 shillings in March 2022.

While the Russia-Ukraine crisis has already impacted global oil prices which have been pushed past USD 100 per barrel, economics also says that the crisis could trigger wheat prices in the short and medium-term.

Being a large importer of wheat from Russia, should the conflict escalate, Kenyans would have to dig deeper into their pockets to purchase products such as bread.

“Kenya imports a bit of wheat from Russia and potentially if there is a full-blown conflict, the wheat volumes may go down and prices go up, the global supply chain will be affected and millers may not get enough,” Ken Gichinga, the Chief economist at Mentoria economics said.

ALSO READ: Kenya’s Annual Inflation Rate Drops to 5.07% in February

According to the Cereal Millers Association (CMA), Kenya is reliant on Russian and Ukrainian wheat entirely in the second half of the year.

“The war between Russia and Ukraine has already affected global prices. Kenya relies on both Ukraine and Russia as one of the key exporters for grain as they account for 33 percent of global wheat supplies,” CMA chief executive Paloma Fernandes said.

Data from the Kenya National Bureau of Statistics (KNBS) shows that Kenya produced 366.2 tons of wheat in 2020 and imported 1,882.5 tons.

Kenya imports eighty percent of the commodity with Russia accounting for the highest proportion. And while the country might have other options to go for, the complexity of contracts, marketing, and negotiation will prolong the exercise.

Depending on the availability of wheat, prices are projected to cross USD 500 (56,950 shillings) per tonne, which would translate to USD 550 (62,645 Shillings) per tonne in Nairobi.

The Kenya Association of Manufacturers says a 400gram loaf of bread could go up from 55 shillings to between 60-67 shillings.

Even though the rate of inflation in February eased to 5.07 percent from 5.39 in January, the cost of basic commodities is still high.

And now with the escalating war between Russia and Ukraine, looks like we are headed for more tough days.

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