Agro Perspectiva

Kenya. Wheat Import Duty Cut May Create Yawning Gap

29.07.2010 14:29 "Agro Perspectiva" (Kyiv) — The likely global wheat prices rally on depressed harvest by leading producers has complicated the raging debate on the government’s decision to lower duty on imported produce. During his 2010/2011 Budget, Finance minister Uhuru Kenyatta announced the reduction of the import charge on wheat from 35 per cent to 10 per cent. Currently there is standoff between farmers and millers. The expected global price increases have led to farmers withholding their harvested wheat while importers are not unloading their cargo at the port as they wait for the government to revise the tariff. It has now emerged that farmers have stopped delivering their produce to millers in the hope that reduced wheat production due to poor weather that has simultaneously hit many of the world’s wheat-growing countries would lead to higher prices. Millers say they are offering local farmers Sh2,300 a bag, which is equivalent to the cost of imported wheat at Mombasa port. Wheat prices surged to a six-month high two weeks ago as hot weather in some parts of Europe together with heavy rains in others cut expected production. Western Europe and parts of Russia and Kazakhstan have suffered hot and dry conditions during the month, affecting crops at a sensitive point in their growth phase that has led to cuts in official output forecasts. Heavy rains in Ukraine have prevented harvesting. Cereal Millers Association chairman Diamond Lalji yesterday confirmed his members are not receiving wheat from farmers. He said importers were unwilling to discharge it at the Mombasa port because they would have to pay 35 per cent duty instead of 10 per cent. «You can see the dilemma millers are in; farmers are not delivering their wheat, and imported wheat is not coming in either,» Mr Lalji told Sunday Nation. «What happens when we run out of what we have in our stores? Tanzanian and Ugandan wheat flour will starting coming into the country.» As per East African Community regulations, Kenya, Uganda and Tanzania should have started charging 10 per cent duty on imported wheat grain on July 1, 2010. According to a notice published in the East African Community Gazette, EAC Council of Ministers — the community’s decision-making organ — approved the fee reduction on June 29, 2010. The council said it exercised powers of EAC Customs Management Act, 2004. It approved the reduction of the import duty on wheat grain from 35 per cent to 10 per cent for Kenya, Tanzania and Uganda for a period of one year. It also endorsed reduction of import duty on wheat grain from 35 per cent to zero per cent for Rwanda for a period of one year. Alongside wheat, sugar prices could rise as white sugar touched a four-month peak of $607 (Sh49,470) a tonne as available supplies remained extremely tight. Mumias Sugar Company managing director Evans Kidero on Saturday said that globally sugar prices have been on the rise but have remained stable locally. He said the company had not increased its recommended retail prices in the last three months. «We hope sugar, whose duty is not paid, does not get into the country through our porous Kenya-Somalia border,» he told Sunday Nation. «But I think now the government is alert along this border to keep away un-customed sugar.»