Cane shortage linked to Kenya's sour sugar prices
Packets of Sugar being sold at Naivas Supermarket, Nairobi on May 16, 2023.
What you need to know:
- A two-kilogramme packet of Mumias and Ndhiwa sugar cost Sh420 each at both Quickmart and Naivas supermarkets.
A local and global shortage of sugarcane and speculation following a proposal in the Finance Bill 2023 to introduce a new tax on sugar has triggered a hike in the prices of the product, with Kenyans paying 32 per cent more than last month to access the food additive.
As prices rise, various players in the sector are blaming a cane shortage that has forced some millers to import the raw material from Uganda, amid concerns that a proposal in the Finance Bill to introduce an excise duty of Sh5 per kilo of sugar has fuelled speculation in the market.
A spot check by Nation at various supermarkets in Nairobi and Kisumu yesterday showed that a kilo of sugar was selling for between Sh189 and Sh210, while a 2kg packet was selling for between Sh419 and Sh440, depending on the brand.
Kenya’s weekly optimal stock of sugar has dropped by 80 per cent on the back of diminished production by factories and expensive imports.
The Sugar Directorate is recording weekly stocks of 4,000 tonnes against the required optimum of 20,000 tonnes in order to meet the daily requirement in the country. It had in January warned that Kenya could fail to secure sufficient stocks of sugar at the international market even with the opening of duty-free imports owing to high prevailing global prices and a shortage of the commodity world over.
Sugar Directorate head Jude Chesire said the deficit has been occasioned by low production at the factory level that has seen some of the millers scale down on milling due to a severe shortage of raw material.
Despite the National Treasury waiving duty last December, Mr Chesire said, the quantities that have been shipped into the country have not lowered the cost because they are landing at an exorbitant price owing to a global shortage and the weak shilling.
A tonne of sugar is now landing in Mombasa at Sh121,000 up from Sh85,000 at the end of last year. The government has been using imports as a stop-gap measure to protect consumers from exorbitant prices.
The Kenya Association of Manufacturers (KAM) suggested that some traders could also be manipulating prices, or that consumers are rushing to stock up.
“The 2023 budget proposes a tariff on sugar. The moment that is announced, the market is anticipating that sugar will be expensive. The moment that information is out, the market is reacting across the supply chain,” he told Nation yesterday.
Millers' warning
The Sugar Millers Association in Kisumu also warned of an expected two-month shortage of the commodity due to the continued shortage of cane
The association’s vice-chairman, Mr Francis Ooko, said the sugar shortfall was occasioned by inadequate cane supply to factories, which in turn had led to factories underperforming despite growing demand.
One miller, Transmara, has reportedly been operating on and off due to the shortage of cane.
“The next two months will be tough and Kenyans should be prepared because what we have in stock may not be enough to supply the entire population,” said Mr Ooko.
A Nation spot check yesterday morning revealed that sugar prices remained at record highs at a number of supermarkets in Kisumu City.
At Quickmart supermarket, a kilogramme of Kabras sugar was selling for Sh210 while a two-kilogramme packet cost Sh420.
A two-kilogramme packet of Mumias and Ndhiwa sugar cost Sh420 each at both Quickmart and Naivas supermarkets.
At Carrefour supermarket, a two-kilogramme packet of Nutrimeal sugar cost Sh440. This was despite the fact that only a handful of residents visited the outlets but left without buying anything.
Cane production
“This is something we had anticipated, but we have scheduled a millers’ meeting with the Sugar Directorate in Kisumu on Monday next week to discuss the way forward,” said Mr Ooko.
Mr Ooko attributed the low cane production to the inability of millers to support farmers with inputs such as fertiliser and chemicals, resulting in a 60 per cent drop in cane production.
He added that, despite farmers investing almost two years in tending the crop, the yield per acre in most plantations is currently 30 tonnes compared to 75 tonnes in the past.
Millers, on the other hand, are still burdened with salary arrears, with some companies no longer in a position to generate finance to support farmers.
“While the farmers are losing out, the millers are not being spared either; it is not advisable for the industry to operate on and off every two months due to irregular supply,” he said.
Data from the Sugar Directorate shows that in February — the latest data available — cane milled by all factories in the country fell by 22 per cent to 716,274 metric tonnes (MT) from 908,537 MT in January.
Total sugar produced in February was 67,451 MT, also down from the previous month’s total of 81,488 MT. This resulted in a 26 per cent increase in sugar imports from 22,722 MT in January to 28,608 MT in February.
But retail sugar prices, the directorate said, fell from an average of Sh155 per kilo in January to Sh147 in February.
“Weighted ex-factory sugar prices for February 2023 averaged Sh5,432 per 50kg bag, down 11 per cent from Sh6,087 in the previous month,” the Sugar Directorate said.
The current market prices represent a sharp increase from last year’s sugar prices, with the commodity currently retailing at Sh210 per kilo, up 60 per cent from Sh130.46 per kilo in April last year.
Last month, sugar retailed at an average of Sh159.1 after rising by Sh3 from an average of Sh156.18 in March, according to market data from the Kenya National Bureau of Statistics (KNBS).
Reporting by Peter Mburu, Gerald Andae and Angeline Ochieng
