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Shortage or No Shortage, Kenya Corn Prices Are Surging

Shortage or No Shortage, Kenya Corn Prices Are Surging

(Bloomberg) -- While the cost of corn flour in Kenya is surging and adding to inflationary pressures, government officials are in a squabble over whether there is a shortage that should be filled with imports.

The cost of corn flour, used to prepare meals in most Kenyan homes, may raise as much as 25% to 150 shillings ($1.5) per two-kilogram pack within a month, agriculture Cabinet Secretary Mwangi Kiunjuri said two days ago. He attributes the surge to a shortage of corn after a drought curbed output this year, and has asked the cabinet to approve imports of more than 1 million tons of the grain to plug the gap.

The government’s Strategic Food Reserve Trust Fund disagrees. There is enough corn to “take us for the whole of July and part of August,” Noah Wekesa, chairman of the food reserve, said Friday by phone. The food agency is opposed to importing of corn, partly because that might distort pricing as it expects a harvest in September from the south rift and Nyanza region, Wekesa said.

The ministry sees duty-free corn imports not only plugging a shortage but also bringing down food prices, which helped to push inflation to 5.7% in June. Importing of corn is a sensitive subject in the East African nation. About a decade ago, some lawmakers accused businessmen and government officials of re-exporting corn to avoid price controls in Kenya and earn bigger profits.

Kenya usually issues import permits to private millers to bring in corn whenever there is a shortage.

The food reserve, which collects corn from across the country, is against imports because it could reduce prices to a level where farmers hardly make any profit and only traders benefit. “We cannot look after the trader who makes huge profit and forget the farmer,” he said.

The U.S. Department of Agriculture estimated Kenya may import 1.3 million tons of corn in the 12 months starting July, more than double the previous year’s purchases. Tanzania said last month that it received a request from Kenya for purchases of 1 million tons of the grain.

To contact the reporters on this story: Eric Ombok in Nairobi at eombok@bloomberg.net;David Herbling in Nairobi at dherbling@bloomberg.net

To contact the editors responsible for this story: David Malingha at dmalingha@bloomberg.net, Rene Vollgraaff

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