East African Community Wheat Report

An Expert's View about Fiber Crops in Kenya

Posted on: 29 Jul 2012

EAC consumers haven’t yet developed a preference for wheat products, in particular high-quality products such as pan breads and pastries,

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Voluntary Public - Date: 7/5/2012 GAIN Report Number: Kenya Post: Nairobi East African Community Wheat Report Report Categories: Grain and Feed Approved By: Stephen Hammond Prepared By: FAS/Nairobi Staff Report Highlights: Within the near future, East African Community (EAC) Member States will cumulatively import about two million metric tons of wheat annually, double the total from ten years ago. The increase comes from an increasing EAC population, up 40 million in the last 12 years and tempered marginally by increasing EAC wheat production. Kenyan wheat millers, who import about half of total EAC wheat imports, will likely import about one million tons during marketing year 2013. Executive Summary: EAC consumers haven’t 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-U.S. 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 U.S. commercial (non-monetized) exporter potential in the region, even though the Port of Mombasa can now receive Panamax-sized vessels, which effectively lowers the bulk- grains 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 (please see Table 3) here below), even while per capita corn consumption continues to increase (Table 2). 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 percent 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 percent 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 U.S. Department of Agriculture in Washington, D.C. EAC As depicted in Chart 1) here below, EAC wheat imports demonstrate a strong positive upward trend. However, as noted in the summary, the GOK could moderate the upward trend, if it imposes the highly regressive 16 percent VAT tax on wheat products as proposed in the Bill. Table 1) FAS/Nairobi--EAC Wheat 2008/ 2009/ 2010/ 2011/ 2012/ 5 Yr. PSD 2009 2010 2011 2012 2013 Avg. Area Harvested (Jul/Jun)(1000 H 367 289 313 265 270 301 ectares) Beginning Stocks(Jul/Jun)(1000 MT) 190 101 324 96 211 184 Production(Jul/Jun)(1000 MT) 415 683 483 464 475 504 MY Imports(Jul/Jun)(1000 MT) 1,652 1,649 1,379 1,820 1,820 1,664 TY Imports(Jul/Jun)(1000 MT) 1,652 1,649 1,379 1,920 1,720 1,664 TY Imports from USA(Jul/Jun)(1000 MT) 123 95 173 100 45 107 Total Supply(Jul/Jun)(1000 MT) 2,257 2,433 2,186 2,380 2,506 2,352 MY Exports(Jul/Jun)(1000 MT) 2 8 5 5 5 5 TY Exports(Jul/Jun)(1000 MT) 2 8 5 5 5 5 Feed and Residual(Jul/Jun)(1000 MT) 0 50 0 75 0 25 FSI Consumption(Jul/Jun)(1000 MT) 2,154 2,051 2,085 2,089 2,245 2,125 Total Consumption(Jul/Jun)(1000 MT) 2,154 2,101 2,085 2,164 2,245 2,150 Ending Stocks(Jul/Jun)(1000 MT) 101 324 96 211 256 198 Total Distribution(Jul/Jun)(1000 MT) 2,257 2,433 2,186 2,380 2,506 2,352 Yield(Jul/Jun)(Tons/Hectare) 1.30 1.69 1.44 1.53 1.57 1.50 Data Source: Latest available Government area harvested and production data--Latest available GTA trade data--Otherwise FAS/Nairobi estimates Table 2) EAC Food Grain Consumption as a Percent of a 2,200 Calorie Daily Diet MY EAC Population Corn Wheat Rice Grains Total 2013 142,585,000 29.5% 6.4% 5.6% 41.5% 2012 139,787,000 30.0% 6.3% 5.6% 41.9% 2011 136,923,000 30.4% 6.2% 5.1% 41.8% 2010 134,312,000 29.6% 6.4% 5.1% 41.1% 2009 131,832,090 30.0% 6.7% 5.5% 42.2% 2008 129,027,035 27.8% 5.2% 5.5% 38.6% 2007 126,831,342 27.7% 5.0% 5.4% 38.1% 2006 123,523,530 25.5% 5.6% 5.5% 36.5% 2005 120,171,559 24.4% 6.3% 5.2% 35.8% 2001 105,538,967 25.2% 6.4% 5.4% 37.0% Data Source: FAS/Nairobi Estimates Chart 1) EAC Wheat Imports Trend Upwards MMT 2.00 1.80 1.60 1.40 Table 3) EAC Wheat Consumption based on 3,270 Calories/Kg and a daily diet of 2,200 calories MY 1.20 Kg/PP/Yr Grams/PP/Day Cal/PP/Day % of Daily Diet Population 2013 15.7 43.1 141.1 6.4% 142,585,000 2012 15.5 42.4 138.7 6.3% 139,787,000 2011 15.2 .00 41.7 136.4 6.2% 136,923,000 2010 15.6 42.9 140.1 6.4% 134,312,000 2009 16.3 44.8 146.4 6.7% 131,832,090 2008 12.7 34.9 114.1 5.2% 129,027,035 2007 12.2 33.5 109.6 5.0% 126,831,342 0.80 2006 13.7 37.5 122.5 5.6% 123,523,530 2005 15.4 42.1 137.8 6.3% 120,171,559 2004 14.8 40.7 133.0 6.0% 114,834,538 2003 13.0 35.6 116.5 5.3% 111,321,532 2002 0.60 14.2 38.9 127.3 5.8% 108,109,998 2001 15.8 43.3 141.7 6.4% 105,538,967 Data: FAS/Nairobi Estimates 0.40 0.20 0.00 2001 2005 2006 2007 2008 2009 2010 2011 2012 2013 Data Source: GTA where available--FAS/Nairobi estimates otherwise Kenya Wheat production remains very difficult in Kenya. The very mild climate facilitates the proliferation of wheat diseases newly-developing and ever-enduring. Even with the tremendous protection provided by the EAC ad-valorem tariff and the additional price protection afforded by the relatively-high transport costs to move imported wheat inland, wheat producers reportedly struggle financially to continue producing. The reported yields listed in the table here below demonstrate the production difficulties. For instance, wheat stem rust continues to plague producer efforts but its intensity varies greatly from year-to-year. Once the fungus emerges and the climatic conditions become conducive to fungal development, producers may need to spray fungicides at least twice before harvest just to achieve minimal yields (2008/09). The production-related difficulties raise the specter of comparative advantage vis-à-vis tariff protection that incentivizes production. How much should east Africans, many of them the poorest of the poor, pay to support EAC wheat producers? The EAC made the determination by imposing the ad-valorem tariff in 2005, but could reassess the value of propping up current EAC wheat producers at the expense of the poorest consumers in east Africa. 008/ 2009/ 2010/ 2011/ 2012/ 5 Yr. FAS/Nairobi--Kenya Wheat PSD 2 2009 2010 2011 2012 2013 Avg. Area Harvested (Jul/Jun)(1000 H 132 160 130 120 110 130 ectares) Beginning Stocks(Jul/Jun)(1000 MT) 190 101 259 96 166 162 Production(Jul/Jun)(1000 MT) 219 512 256 250 250 297 MY Imports(Jul/Jun)(1000 MT) 909 802 686 1,000 1,000 879 TY Imports(Jul/Jun)(1000 MT) 909 802 686 1,100 900 879 TY Imports from USA(Jul/Jun)(1000 MT) 66 66 62 40 0 47 Total Supply(Jul/Jun)(1000 MT) 1,318 1,415 1,201 1,346 1,416 1,339 MY Exports(Jul/Jun)(1000 MT) 2 8 5 5 5 5 TY Exports(Jul/Jun)(1000 MT) 2 8 5 5 5 5 Feed and Residual(Jul/Jun)(1000 MT) 0 50 0 75 0 25 FSI Consumption(Jul/Jun)(1000 MT) 1,215 1,098 1,100 1,100 1,200 1,143 Total Consumption(Jul/Jun)(1000 MT) 1,215 1,148 1,100 1,175 1,200 1,168 Ending Stocks(Jul/Jun)(1000 MT) 101 259 96 166 211 167 Total Distribution(Jul/Jun)(1000 MT) 1,318 1,415 1,201 1,346 1,416 1,339 Yield(Jul/Jun)(Tons/Hectare) 1.66 3.20 1.97 2.08 2.27 2.24 Data Source: Latest available GOK area harvested and production data--Latest available GTA trade data--Otherwise FAS/Nairobi estimates KE Production KE Imports Linear (KE Imports) Linear (KE Production) 600 1200 500 1000 400 800 300 600 200 400 100 200 Kenya’s wheat imports filling the production void—the trends Imports Production TMT TMT 0 0 2001 2005 2006 2007 2008 2009 2010 2011 2012 2013 Data: GOK and GTA where available—FAS/Nairobi Estimates 16% 14% 12% 10% 8% 6% 4% 2% Per capita wheat consumption in Kenya continues flat, providing only about 250 calories per day in the Kenyan diet %/Daily Calories 0% 2001 2005 2006 2007 2008 2009 2010 2011 2012 2013 Data: FAS/Nairobi Estimates Kenya Wheat Consumption based on 3270 Calories/Kg and a daily diet of 2200 calories MY Kg/PP/Yr Grams/PP/Day Cal/PP/Day % of Daily Diet Population 2013 28.2 77.4 253.0 11.5% 42,500,000 2012 26.5 72.6 237.3 10.8% 41,530,000 2011 27.1 74.4 243.1 11.1% 40,530,000 2010 27.7 76.0 248.4 11.3% 39,600,000 2009 31.5 86.2 281.9 12.8% 38,610,000 2008 25.0 68.4 223.8 10.2% 37,953,838 2007 19.6 53.7 175.6 8.0% 38,260,000 2006 24.8 67.9 221.9 10.1% 37,263,245 2005 23.1 63.4 207.3 9.4% 36,294,779 2004 29.9 81.9 268.0 12.2% 33,967,087 2003 28.3 77.5 253.5 11.5% 33,041,785 2002 29.3 80.2 262.2 11.9% 32,155,316 2001 34.0 93.0 304.3 13.8% 31,298,701 Data: FAS/Nairobi Estimates Tanzania FAS/Nairobi--Tanzania Wh 8/ 2009/ 2010/ 2011/ 2012/ 5 Yr. eat PSD 200 2009 2010 2011 2012 2013 Avg. Area Harvested(Jan\Dec)(1000 Hectares) 171 55 108 65 80 96 Beginning Stocks(Jan\Dec)(1000 MT) 0 0 65 0 45 22 Production(Jan\Dec)(1000 MT) 95 62 113 95 100 93 MY Imports(Jan\Dec)(1000 MT) 516 694 529 650 650 608 TY Imports(Jul/Jun)(1000 MT) 516 694 529 650 650 608 TY Imports from USA(Jul/Jun)(1000 MT) 16 0 90 40 30 35 Total Supply(Jan\Dec)(1000 MT) 611 756 707 745 795 723 MY Exports(Jan\Dec)(1000 MT) 0 0 0 0 0 0 TY Exports(Jul/Jun)(1000 MT) 0 0 0 0 0 0 Feed and Residual(Jan\Dec)(1000 MT) 0 0 0 0 0 0 FSI Consumption(Jan\Dec)(1000 MT) 611 691 707 700 750 692 Total Consumption(Jan\Dec)(1000 MT) 611 691 707 700 750 692 Ending Stocks(Jan\Dec)(1000 MT) 0 65 0 45 45 31 Total Distribution(Jan\Dec)(1000 MT) 611 756 707 745 795 723 Yield(Jan\Dec)(Tons/HA) 0.60 1.10 1.00 1.50 1.30 1.10 Data Source: Latest available GOT area harvested and production data via CountryStat--GTA Trade Data--Otherwise FAS/Nairobi estimates Uganda 008/ 2009/ 2010/ 2011/ 2012/ 5 Yr. FAS/Nairobi--Uganda Wheat PSD 2 2009 2010 2011 2012 2013 Avg. Area Harvested(Jul/Jun)(1000 Hectares) 12 13 15 15 15 14 Beginning Stocks(Jul/Jun)(1000 MT) 0 0 0 0 0 0 Production(Jul/Jun)(1000 MT) 20 23 25 25 25 24 MY Imports(Jul/Jun)(1000 MT) 204 129 144 150 150 155 TY Imports(Jul/Jun)(1000 MT) 204 129 144 150 150 155 TY Imports from USA(Jul/Jun)(1000 MT) 37 22 21 20 15 23 Total Supply(Jul/Jun)(1000 MT) 224 152 169 175 175 179 MY Exports(Jul/Jun)(1000 MT) 0 0 0 0 0 0 TY Exports(Jul/Jun)(1000 MT) 0 0 0 0 0 0 Feed and Residual(Jul/Jun)(1000 MT) 0 0 0 0 0 0 FSI Consumption(Jul/Jun)(1000 MT) 224 152 169 175 175 179 Total Consumption(Jul/Jun)(1000 MT) 224 152 169 175 175 179 Ending Stocks(Jul/Jun)(1000 MT) 0 0 0 0 0 0 Total Distribution(Jul/Jun)(1000 MT) 224 152 169 175 175 179 Yield(Jul/Jun)(Tons/HA) 1.70 1.80 1.70 1.70 1.70 1.72 Data Source: Latest available GOU area harvested and production data--Otherwise FAS/Nairobi estimates Rwanda 08/ 2009/ 2010/ 2011/ 2012/ 5 Yr. FAS/Nairobi--Rwanda Wheat PSD 20 2009 2010 2011 2012 2013 Avg. Area Harvested(Jul/Jun)(1000 Hectares) 42 49 50 55 55 50 Beginning Stocks(Jul/Jun)(1000 MT) 0 0 0 0 0 0 Production(Jul/Jun)(1000 MT) 72 77 80 85 90 81 MY Imports(Jul/Jun)(1000 MT) 19 17 15 15 15 16 TY Imports(Jul/Jun)(1000 MT) 19 17 15 15 15 16 TY Imports from USA(Jul/Jun)(1000 MT) 0 0 0 0 0 0 Total Supply(Jul/Jun)(1000 MT) 91 94 95 100 105 97 MY Exports(Jul/Jun)(1000 MT) 0 0 0 0 0 0 TY Exports(Jul/Jun)(1000 MT) 0 0 0 0 0 0 Feed and Residual(Jul/Jun)(1000 MT) 0 0 0 0 0 0 FSI Consumption(Jul/Jun)(1000 MT) 91 94 95 100 105 97 Total Consumption(Jul/Jun)(1000 MT) 91 94 95 100 105 97 Ending Stocks(Jul/Jun)(1000 MT) 0 0 0 0 0 0 Total Distribution(Jul/Jun)(1000 MT) 91 94 95 100 105 97 Yield(Jul/Jun)(Tons/HA) 1.70 1.60 1.60 1.50 1.60 1.60 Data Source: Latest available area harvested and production data from FAO--Otherwise FAS/Nairobi estimates Burundi 008/ 2009/ 2010/ 2011/ 2012/ 5 Yr. FAS/Nairobi--Burundi Wheat PSD 2 2009 2010 2011 2012 2013 Avg. Area Harvested(Jul/Jun)(1000 Hectares) 10 12 10 10 10 10 Beginning Stocks(Jul/Jun)(1000 MT) 0 0 0 0 0 0 Production(Jul/Jun)(1000 MT) 9 9 9 9 10 9 MY Imports(Jul/Jun)(1000 MT) 4 7 5 5 5 5 TY Imports(Jul/Jun)(1000 MT) 4 7 5 5 5 5 TY Imports from USA(Jul/Jun)(1000 MT) 4 7 0 0 0 2 Total Supply(Jul/Jun)(1000 MT) 13 16 14 14 15 14 MY Exports(Jul/Jun)(1000 MT) 0 0 0 0 0 0 TY Exports(Jul/Jun)(1000 MT) 0 0 0 0 0 0 Feed and Residual(Jul/Jun)(1000 MT) 0 0 0 0 0 0 FSI Consumption(Jul/Jun)(1000 MT) 13 16 14 14 15 14 Total Consumption(Jul/Jun)(1000 MT) 13 16 14 14 15 14 Ending Stocks(Jul/Jun)(1000 MT) 0 0 0 0 0 0 Total Distribution(Jul/Jun)(1000 MT) 13 16 14 14 15 14 Yield(Jul/Jun)(Tons/HA) 0.90 0.80 0.90 0.90 1.00 0.90 Data Source: Latest available area harvested and production data from FAO--Otherwise FAS/Nairobi estimates
Posted: 29 July 2012

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