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Kenya Wheat Products Affected by Market Confusion

12 July 2012
USDA Foreign Agricultural Service

KENYA - EAC consumers have not yet developed a preference for wheat products, in particular high-quality products such as pan breads and pastries, leaving importers and millers to source lower-quality wheat of sufficient protein only to produce flatbread.

For a very limited sub-market, importers do source high quality wheat for blending by millers to produce bread-and-pastry-quality flour.

However, non-US suppliers continue to dominate the EAC market for imports of high-quality wheat and Black Sea exporters fill the importable deficit of flatbread-quality wheat, partly because of relatively high freight rates for bulk shipments from the United States to east Africa.

Freight rates almost always determine US commercial (non-monetised) exporter potential in the region, even though the Port of Mombasa can now receive Panamax-sized vessels, which effectively lowers thbulk grainsns freight rates. The freight portion of the economic equation appears to open opportunities when the Baltic Dry Index (BDI) drops below 1,000. The BDI has been as high as 12,000 in May 2008 and currently stands at 1,000+.

The trend in EAC per capita wheat consumption remains flat. The estimated per capita consumption in 2001 appears to be exactly that projected for 2013, even while per capita corn consumption continues to increase.

Kenyan per capita wheat consumption may even begin to drop in the near future, if the Government of Kenya (GOK) succeeds with its currently-proposed Value Added Tax Bill 2012 (Bill). The Bill appears to require a 16 per cent VAT tax on all processed foods, excluding only whole grains from the proposed tax.

If passed, the Bill will likely dampen commercial milling at the expense of domestic consumption and to the benefit of local, “non-commercial” milling, because a vast majority of Kenya’s consumers cannot afford to pay an additional 16 per cent for wheat flour or the products thereof.

This report reflects the analysis and opinions of the FAS/Nairobi Office of Agricultural Affairs and does not necessarily represent the views or opinions of the US Department of Agriculture in Washington, DC.

Further Reading

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