Millers have turned down the one million bags of top grade maize worth Sh2.5 billion offered to them last month from the State-owned Strategic Grain Reserves to curb the rise in flour prices. The millers quote transport costs as their reason for shunning the opportunity.
Maize flour prices crossed Sh100 in April with millers attributing the rise to increased cost of the raw material because of grain shortage.
The price of a two-kilogramme packet of maize flour has increased by more than Sh15 since August, prompting the State to release cereals from the strategic reserve in attempt to offer relief to households grappling with expensive staple food.
Data provided to Parliament indicate the millers have accessed 102,903 bags or 10 per cent of the allocated quota.
The maize was released on June 29 at Sh2,500 per bag, which is a discount on the prevailing price of Sh2,800.
Cereal Millers Association chairman Nick Hutchinson said transport cost from National Cereals and Produce Board (NCPB) silos to their factories discouraged millers from buying maize from the Strategic Grain Reserves.
“The truth is we are getting little returns from the government stocks since considering transportation costs, the maize is arriving in Nairobi at Sh2,763 per 90-kilogramme bag,” said Mr Hutchinson, Unga Group’s chief executive.
Data from the reserve show the millers have paid for 266,639 bags of maize from NCPB and transferred 102,903 to their plants.
Maize prices have a big effect on inflation in Kenya where it is the staple food and accounts for a significant share of poor households’ budget.
Inflation increased to 5.80 per cent last month from five per in May, rising by the biggest margin since May 2014.
Shortage of maize has raised the cost of a 90-kg bag to Sh2,800, up from Sh2,200 in February.
Millers argue that the price of flour would be determined by market forces, ruling out the possibility of lowering costs any time soon.
Kenyans are likely to get a reprieve in September when harvesting of this season’s crop is expected to start. Maize prices are expected to dip on increased supply.
The NCPB holds 2.2 million bags of maize in the Strategic Food Reserve and release of the one million bags will deplete the emergency stocks.
Kenya consumes about three million bags monthly, a pointer that the reserve is holding less than the optimum amount of maize.
The NCPB stocks is only being sold to millers in a move aimed at locking out middlemen. The board is holding 400,000 bags of maize worth nearly Sh1 billion that is unfit for human consumption.
The poor quality grains is linked to failure to sell old stocks.
The NCPB released another the 700,000 bags on May 13 that the millers said was fit for animal feed and not for human consumption.
Source: Business Daily