Falling wheat prices in the international market will spell doom for local growers under the new taxation structure announced by Finance Minister Amos Kimunya.

The minister revised the duty on wheat imports from 35 per cent to 10 per cent, in a bid to raise the competitiveness of local millers in the region while keeping a measure of protection for farmers.

Sound the alarm

Cereal growers are now sounding the alarm that the playing field would be heavily tilted against them were the international price of wheat to fall below $450 per tonne.

The Cereal Growers Association executive officer, David Nyameino, says it cost between Sh32,000 and Sh38,000 to plant an acre of wheat. With an average yield of 12 bags per acre, argues Mr Nyameino, the break even point for a farmer with an average cost of Sh35,000 per acre for a 90kg bag of high grade wheat would be Sh2,750. That translates to Sh33,000 per acre or $473 per tonne).

That means international wheat prices below $450 - $475 after adding the 10 per cent duty - would see imported wheat costing cheaper than locally grown wheat, sounding a death knell for farmers.

A monthly bulletin released by the ministry of agriculture early this month indicated that on average, the prices for the 90kg bag of wheat rose in the local market rose from Sh4,044 in April to Sh4,335 last month.

The price of imported standard milling wheat has since risen from $175 per tonne in 2006 to $234 in January 2007 to $430 last month, due to a global shortage on supply and an increased demand.

"Every country, including China and India support their farmers and our members know the kind of difficulty they usually encounter whenever they try to export their commodities," said Mr Nyameino.

CGA argues that with prices for inputs and transport on the general climb, only a sustained rise in the international market could save farmers in a liberalised market.

The alternative, he said, is for the government to seek a five year extension to the Comesa safeguards that block duty free wheat from entering Kenya.

Mr Nyameino said the government should counter the threat of imports by increasing investment on research to develop more high yielding wheat varieties, improvement of infrastructure up to the farm level and establishment of structured markets such as the warehouse receipt system.

Take a gamble

In endorsing the finance minister's decision to loosen the import values on wheat, CGA also took a gamble that some 3.5 million bags of wheat that have begun to stream into the local market from the crop's regions of Timau, Narok, and Uasin Gishu could see the price of the commodity drop significantly and make the local produce dearer in the local market compared to imports.

Mr Nyameino says, cereal growers will be forced to knock at the minister's door for a new round of negotiations.