Kenya turns to Ethiopia for cheap wheat to fill in local demand gap

Ethiopia has agreed to sell cheaper wheat to Kenya to help in filling in the demand gap faced by local grain players.

This new deal was reached after President William Ruto agreed with Ethiopia Prime Minister Abiy Ahmed to have Kenya import cheaper wheat from Addis Ababa.

Earlier on the horn of Africa state had listed the grain on the commodity exchange, locking out local traders from direct purchases.

Ethiopia’s commodity exchange is a closed market with only registered members allowed to trade and it is not open to international traders.

By Ethiopia listing the commodity, it now means that all the products from Ethiopia will have to go through the exchange as opposed to direct exports, hence making it costly should Kenyan traders want to import.

However, most stakeholders in the grain industry revealed that direct sales would have been cheaper than buying from the exchange where it will attract brokerage fees and other levies.

According to Gerald Masila, Eastern Africa Grain Council, Executive Director added that “Exporting the wheat from Ethiopia through the exchange will make it more expensive by the time it lands here and consumers will still have to pay more for wheat products.”

Gerald further said it would be difficult for traders to get all the volumes that are required from the exchange, hence needing to purchase it from different buyers, a move that will increase transaction costs.

“It is difficult for a trader to get like 100,000 tonnes at the exchange in one go. This means that they have to make multiple transactions and this has a cost implication,” Gerald comments.

Ethiopia is among the top producers of wheat in Africa.

They recently recorded a bumper crop this year and have projected a surplus of more than a million tonnes. The imports from Ethiopia were meant to tame the high cost of the commodity brought about by expensive wheat from Europe.

Even though the cost of wheat at the international market has dropped to a low of $390 a tonne, processors say the produce in the market was purchased in April at higher rates of $540 a tonne.

GAROWE ONLINE