I am interested in the maize business and need advice on the same. To be specific, I am talking about buying bags of maize from areas like Kitale and selling in Nairobi, the target market being mid-size millers and cereals stores. I have the following questions:
1)Capital: What would be the reasonable minimum capital to start with. On the same note, what’s the reasonable minimum number of bags can one start with in order to make reasonable margins, considering all logistics involved.
2)Legalities: Are there any specific business permits/licenses that should be obtained? How about KRA? Any direct obligations to the tax collector?
3)Logistics: What’s the average cost of transporting the maize from Kitale to Nairobi? Are there reliable transport providers that should be given priority? Still on logistics, what would be the storage cost for specific number of bags in Nairobi? Are there any other logistical expenses I should be aware about, including hidden costs?
4)Market: How stiff is the competition? Are there gaps in this business that new entrants can fill and still make reasonable profits? Are millers a good market for small scale sellers?
5)Diversification: Is it advisable to diversify and also include other cereals in the business, like rice and beans, considering the seasonality of maize?
I will appreciate answers to the above questions, as well as any additional insights on the business.
Thanks for sharing.
I didn’t know the minimum would be that high (300 bags)
Would you know the selling price in Nairobi, or a rough estimate of how much millers will be willing to pay for a bag in Nairobi? I understand that a bag costs Ksh2,500 in Kitale.
Hapo kwa KRA umesemaje? Na Licence?
For millers and other maize processors, they usually buy in bulk with minimum 10T and they won’t trust you if that’s all you have. It’s also a big risk picking from different farmers and putting into one. You will contaminate the maize easily with aflatoxin and pests and companies will reject your maize
6 tonnes! Show me your ways master. Will a bank give me a loan to deliver such volumes?
Say a miller issues an LPO for 10 tonnes and I dont have capital, is this enough for a bank to finance the project?
On the flip side, since supplying to millers seems to be highly capital intensive, can I start small by supplying local cereals shops. This means I include beans, rice, dengu etc. Gunia mbile shop A, gunia tatu shop B, 50kg of mbaazi shop C, mdogo mdogo namna hii. Hii itaweza ama faida iko chini? I already have a local storage in mind. It’s a local business premise that is vacanat and can hold a sizable number of bags. Anyone done this before? I know most shops in Nairobi source their cereals from Nyamakima.
Of course you can sell but mostly in low supply seasons. For a real processor, 6T will be processed in less than 2hrs and they don’t want to pick so many of 6T. That’s why they prefer 28T trucks. Moisture content should be below 13% and total aflatoxin 8ppb na kampuni kama proctor & Allan 4ppb.
About the mositure content and aflotoxin, how much does it cost to do the tests before loading the maize for transportation? I gather that the millers also do their own tests when the maize are delivered.
You can buy a Moisture meter. Small gadget very portable. (For us in the biz, tushazoea kuweka Mkono kwa gunia).
You can gauge the moisture condition by hand mostly for maize.
It’s better to have a Moisture Meter esp in sensitive markets like EABL cz if the level is NOT right imagine ukirudishwa na Lorry mzima eti uende uanike vizuri.
For the Millers, Arabs and Indians have taken over the business wholesomely and what we are doing is kuwa Middlemen for them.
Unamwaga lorry then you wait for pay after 3 days. I you can access cash it’s a good biz, rlow risk.High capital, small margins.
But if you get say 2 millers ur Ok. One pays you for Cereals, you use that money to buy stock and supply to the other one, then build a good relationship with ur bank.
I once walked with my client & boss (am her broker) into Ekwiti and she was signing cheques worth 3.2, 2.1 and 2.7 from EABL as payments for delivery.She makes a clean 2bob per KG of White sorghum akiwa amelala, without investing zilch.Ako na konekshen na tender. (I was there for just 290K).
I was shocked! Good biz but you gotta have capital.
Feel free to keep in touch for cereals, am based in Meru.
Have done Dry grains mostly Sorghum for EABL and Sunflower for Oil production.