It is not the price of flour but the supply of maize

By David Ndegwa

Why is a packet of Unga retailing at Kshs 205?

Let’s forget the subsidy and Corporate Social Responsibility (CSR)  first. Under normal market forces, the explanation is that the maize supply is low while the demand is high and therefore the price must be high. Therefore, are the millers to blame? I highly doubt it.

Last week I called a friend and asked him the price of maize in Bungoma where harvesting is ongoing and he gave me a price of 150 Bob per gorogoro which is approximately 2.25 kgs. The cost of maize per kg is therefore 66 Bob.  If you mill 1kg, you recover 70% which is 700 gm for Kshs 66. This means the cost of 1kg of Unga is Kshs 94. Add milling costs of Kshs 2 per kg which is Kshs 4 for a 2kgs packet, packaging costs at Kshs 2 etc .

If you add all these costs, you will realize that Kshs 205 for a 2kg packet isn’t excessive and millers are charging reasonably. So, if they are asked to squeeze their margins further down, what would be the likely scenario? The millers will stop milling because they can’t operate at a loss.

What do we need to do? The problem is the low maize supply in the country and this is what should be addressed. Once the supply is increased, the price will automatically go down. The President announced some measures that will make it easier to import maize, but not unless someone or some traders had gotten a wind on what would happen and had started shipping, the normal arrangements and shipping would take almost a month for meaningful supply to be realized.

He went further on and reduced the price of Unga to Kshs 100. As much as this is good to the ears, it is not realistic and may not last for more than a week and if it happens, then it would appear that the current maize shortage is artificial which I highly doubt.

What the government did is to introduce an artificial force into the market similar to increasing the consumer’s purchasing power in a period of scarcity which births inflation. This is a situation where buyers have more money than the available goods which brings about inflation under normal circumstances.

 But since the situation isn’t normal, buyers will buy and deplete the goods on the shelves halafu wauziwe hakuna.

If maize supply is not increased with lightning speed to replace the stepped-up purchases as a result of the drop in price, there will be a serious shortage in a week or 2.

David Ndegwa is a trained agriculture expert and a practising farmer and agronomist

Share your views about this story

Related stories

Ethanol smuggler using maize arrested

Two traders have been intercepted while trying to smuggle 6200 litres of ethanol while  concealed  in  maize and  wheat bran bags. Stephen  Njuguna Kironji, owner of goods and Kenneth Karanja Kimaku who was the driver of a motor vehicle registration number KCG 865K. The driver was arrested on 13th June 2021 in Kinangop area along Nakuru Nairobi Highway and the owner was arrested at Mugumu Police Station where the vehicle was detained. The customs duty of the goods is  Kshs 2,571,924. The 30 drums of ethanol were concealed inside their Isuzu lorry using 46 bags of maize and 37 bags of wheat bran which were neatly arranged at the rear and side doors. Before their arrest, the two failed to produce importation documents, a licence or registration by KRA, and which are a requirement to import excisable goods such as ethanol. The suspects were charged with three counts relating to tax evasion on Tuesday 15th June 2021 before Engineers Law Court Resident Magistrate Hon Rawlings Musiega. They faced charges of; fraudulent evasion of payment of duty, importation of Excisable goods without a licence or being registered and that of conveying uncustomed goods. The charges are offences under various sections of the East African Community and Customs Management Act 2004, the Excise Duty Act No 23 of 2015 and Excise Duty (Excisable Goods Management System Regulations 2017. They denied the charges and were released on a bond of Kshs 300,000 and a surety or a cash bail of Ksh 150,000 each. In order to import excisable goods such as ethanol into Kenya, importers are required to pay customs duty for the

Read more »
Traders charged with smuggling 350 bags of maize into Kenya

Three businessmen have been charged before Busia Law courts Senior Principal Magistrate Hon. Phoebe Kulecho with counts relating to smuggling of 350 bags of maize worth Kshs 800,000 in taxes. Joseph Kiprono  and Mugisha Moses  were charged both jointly while Issa Abuneri Ingati separately faced similar charges of being in possession of uncustomed goods contrary to section 200(d)iii as read with section 210 and 211 of the EACCMA,2004 and that of conveying uncustomed goods contrary to section 199 (b) as read with section 199(c|) EACCMA,2004. Joseph and Mugisha were intercepted by Adungosi Police Station Officers while transporting 200 bags of uncustomed maize worth Kshs 460,000 in taxes on 9th March this year at Among’ura- Amaase Murram road Teso South within Busia County. The accused persons denied the offences and were each released on bond of Kshs 200,000 or bail of Kshs 100,000. Their case will be heard on 6th May 2021 and mention on the 25th March 2021.

Read more »

Subscribe to Kilimo News

Get the latest agriculture news in East Africa