Press Center | Freight Shipping Logistics News
Dec 29, 2008
General
caxias
The reduction of import duty on wheat in this year’s budget and improved supply has not yielded respite on the high prices of wheat flour in the country.
The reduction of import duty on wheat in this year’s budget and improved supply has not yielded respite on the high prices of wheat flour in the country.
And this is being blamed largely on the turnover of grain at the Grain Bulk Handlers facility in Mombasa.
Mombasa Maize Millers, one of the grain importers, last week off loaded 13,500 metric tonnes of wheat from MV Goerge Carris and bypassed the Grain Bulk Handlers to avoid delays that come with a penalty in form of demurrages charges.
“Although the conventional method is more expensive than using the grain handling facility, we did not wish to take risk,” said Mr Munir Thabit, the Mombasa Maize Millers financial manager, adding that a ship carrying the company’s wheat, Mv Good Hop, had to wait for 20 days with demurrage starting to accrue only after four days.
Shipping lines slap vessel delays surcharge for unusually long delays, which Munir said ranges between $45,000 and $50,000 per day.
“The high demurrage charges are passed to consumers hence the reason the cost of wheat flour is high. This is besides the 16 dollars per tonne charged by Grain Bulk Handlers, which is too high,” said Mr Thabit.
An official at GBHL, however, said the handling charges are not the cause of high prices as they have not been raised for years.
In 2007, there was a shortage of wheat in international markets, leading to a scarcity that stoked a rally in local prices of wheat flour to Sh115 per 2kg packet. Kenya imports 60 per cent of its wheat requirements, according to Mr Kipserem Maritim, the public relations manager at National Cereals and Produce Board (NCPB).
However, this year, the supply went up and there was a downward trend in prices. The government also intervened to reduce import duty on wheat, lowering prices to levels that close to other regional competitors.
Industry analysts estimate that after taking into account local port and transport costs, which have increased in line with inflation, the estimated cost of the wheat arriving at a typical mill in Nairobi has reduced by around 29 per cent.
They have argued that the reduction from Sh115 per 2 kg packet of wheat flour to the current average price of Sh105 is not in line with the reduction in costs.
The other problem that is affecting the wheat industry is slow discharge from the terminal. The official at GBHL last week said there were 75,000 metric tonnes of wheat that is yet to be discharged from the terminal by millers.
The daily discharge of 2,000 to 2,500 metric tonnes from the terminal is not commensurate to the GBHL capacity of 11,000 metric tonnes, he said.
Railway, which is the most effective way of delivering the grains according to GBHL, is performing poorly with train turnaround taking double the usual time.
Millers have over last few months been pushing for the licensing of a second grain handling facility, accusing GBHL of monopolising the industry.
This, they argue, has reduced competition, leading to high cost of handling grain. The eight-year exclusive licence expired in February this year.
However, Grain Bulk Handlers has blamed delays on increased imports of grain to address food shortage, adding that the case for demurrages has been exaggerated by millers who do not want to pass the wheat price reduction to consumers.
GBHL maintains that the amount of grain coming into the country has not yet surpassed the three million tonnes annual capacity of the facility.
And this is being blamed largely on the turnover of grain at the Grain Bulk Handlers facility in Mombasa.
Mombasa Maize Millers, one of the grain importers, last week off loaded 13,500 metric tonnes of wheat from MV Goerge Carris and bypassed the Grain Bulk Handlers to avoid delays that come with a penalty in form of demurrages charges.
“Although the conventional method is more expensive than using the grain handling facility, we did not wish to take risk,” said Mr Munir Thabit, the Mombasa Maize Millers financial manager, adding that a ship carrying the company’s wheat, Mv Good Hop, had to wait for 20 days with demurrage starting to accrue only after four days.
Shipping lines slap vessel delays surcharge for unusually long delays, which Munir said ranges between $45,000 and $50,000 per day.
“The high demurrage charges are passed to consumers hence the reason the cost of wheat flour is high. This is besides the 16 dollars per tonne charged by Grain Bulk Handlers, which is too high,” said Mr Thabit.
An official at GBHL, however, said the handling charges are not the cause of high prices as they have not been raised for years.
In 2007, there was a shortage of wheat in international markets, leading to a scarcity that stoked a rally in local prices of wheat flour to Sh115 per 2kg packet. Kenya imports 60 per cent of its wheat requirements, according to Mr Kipserem Maritim, the public relations manager at National Cereals and Produce Board (NCPB).
However, this year, the supply went up and there was a downward trend in prices. The government also intervened to reduce import duty on wheat, lowering prices to levels that close to other regional competitors.
Industry analysts estimate that after taking into account local port and transport costs, which have increased in line with inflation, the estimated cost of the wheat arriving at a typical mill in Nairobi has reduced by around 29 per cent.
They have argued that the reduction from Sh115 per 2 kg packet of wheat flour to the current average price of Sh105 is not in line with the reduction in costs.
The other problem that is affecting the wheat industry is slow discharge from the terminal. The official at GBHL last week said there were 75,000 metric tonnes of wheat that is yet to be discharged from the terminal by millers.
The daily discharge of 2,000 to 2,500 metric tonnes from the terminal is not commensurate to the GBHL capacity of 11,000 metric tonnes, he said.
Railway, which is the most effective way of delivering the grains according to GBHL, is performing poorly with train turnaround taking double the usual time.
Millers have over last few months been pushing for the licensing of a second grain handling facility, accusing GBHL of monopolising the industry.
This, they argue, has reduced competition, leading to high cost of handling grain. The eight-year exclusive licence expired in February this year.
However, Grain Bulk Handlers has blamed delays on increased imports of grain to address food shortage, adding that the case for demurrages has been exaggerated by millers who do not want to pass the wheat price reduction to consumers.
GBHL maintains that the amount of grain coming into the country has not yet surpassed the three million tonnes annual capacity of the facility.
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