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Delayed rains, fuel hike to drive up the cost of living

In Summary

•Manufacturers are set to factor in the the fuel price increase to their cost of production

•Items including maize flour and milk have already registers a price increase owing to the prolonged dry weather

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Household expenditures are on the rise as the country grapples with delayed rainfall and a rise in fuel prices.

Consumers now have to pay Sh5.25, Sh5.52 and Sh2.76 more for a litre of Super Petrol, Diesel and Kerosene, following ERC’s Friday monthly price review.

According to the regulator, the price hike was a result of an increase in the average landed cost of imported fuel.  

This is set to have an impact on the cost of food items as producers factor in the price increase to their cost of production.

A local food vendor says she has already started feeling the pinch as some transporters have already raised fares. 

"Today morning I had to pay almost twice as much to come sell my food. This is money I would have saved or put back into my business as capital," she said. 

The higher cost of fuel comes at a time when consumers are already paying a high of Sh122 for a two-kilo packet of maize flour.

According to data by the Kenya National Bureau of Statistics, the same amount of flour retailed at an average Sh86.55 barely four months ago. This is about Sh35.45 less.

While the government argues there is enough maize adding that maize is being hoarded to inflate prices, millers have expressed concerns that the current stock is not enough on the back of delayed rains. 

“There is enough maize in the country at the moment that can last up to July, we are aware of the events surrounding flour prices but we shall be issuing a comprehensive statement on that soon,” Agriculture CS Mwangi Kiunjuri said.

Last week, he said the country has about 21 million bags, majority of which is still being held by farmers adding that the country has enough grains after a bumper harvest last year.

United Grain Millers Association chairman Peter Kuguru, however, dismissed this saying there is a looming shortage of maize in the market.

“Large scale farmers are hoarding about two million bags of maize. The situation of maize supply to the consumer market from Kenyan farmers is now heading to a crisis. Unless the ministry intervenes immediately, there is likelihood of a serious maize and consumer food crisis,” he said.

This has driven up the price of a 90kg bag of maize to Sh3,000 in Nairobi and between Sh2, 800 to Sh2, 700 in Kitale up from Sh2, 500 which the government was buying at in February. Without government intervention, the price is expected to reach Sh3,600.

The delayed March-May rains have also seen an increase in the price of milk as dairy processors registered a five per cent decrease in production during the first quarter of the year.

The effects of the dry weather across most of the country have seen the shelf price of a 500ml packet of milk increase by Sh5 to Sh55-Sh60.

James*, who says he's already found himself at a loggerheads with his shopkeeper twice, after purchasing a packet of milk. 

"I keep on expecting him to give me Sh45 back as change for a 500ml packet of milk not realising the price changed while I was away," he said. 

Brookside’s director of milk procurement and manufacturing John Gethi said the effects of prolonged dry weather had suppressed production across major milk sheds in the country.

“The current business environment has occasioned an increase in consumer prices of our products,” he said. 

In its Economic Update, the World Bank warned that a delayed rainy season could affect Kenya’s planting cycle and in turn result in poor harvests.

“Risks include drought conditions that could curtail agricultural output, especially if the country’s grain-growing counties are affected,” the bank said.