A sharp drop in sugar prices due to a glut has rattled local millers amid claims of losses of up to Sh20,000 per tonne of the commodity produced.
The Kenya Sugar Manufacturers Association (Kesma) claimed influx of duty-free and illegal sugar imports has crashed prices since March, wiping out their profit margins long squeezed by the high cost of production.
“The average cost of production per tonne of sugar is currently higher implying that in the last three months, millers have been making a loss of between Sh18,000 to Sh20,000,” Kesma chief executive officer Stephen Ligawa said. He said over the last five months, local sugar prices have dipped by Sh1,3000 per 50 kilogramme bag. This translates to a drop of Sh26 a kilogramme from Sh126 in March to Sh100 in August.
“The sugar prices per 50-Kg bag have dropped from Sh6,300 in March 2024 to ShSh5,000 presently,” Mr Ligawa said, noting that the dip is also affecting the take home by farmers supplying the various millers since the pricing of the raw material is based on ex-factory prices of the sweetener.
On August 8, 2024, the national sugarcane pricing committee cut sugarcane prices to Sh4950 per tonne down from Sh6100 in February marking a 18.85 per cent reduction within six months.
The Agriculture and Food Authority (AFA) has blamed the glut on higher production by millers and indicated that Kenya considered exporting all surplus sugar to help stabilise prices in the industry.
“We are in the process of submitting a formal request to Parliament to open exports of sugar. We are traditionally net importers of sugar but we are now in a unique position where we have a surplus,” AFA chairman Cornelly Serem said on Wednesday.
Official data shows that local millers produced 384,552 tonnes of sugar in the six months to June 2024. This is a 123.4 per cent rise compared to the 172,105 tonnes they bagged in the preceding six months.
It is also an increase of 29.7 per cent compared to the 296,382 tonnes they produced in the six months to June 2023.
Mr Ligawa said the drastic price drop risk destabilising the industry weighed down by the high cost of production.
“The declining prices are destabilising the cane pricing formula which has been running effectively for over 15 years. The unsustainable situation threatens the viability of our businesses and livelihoods of farmers while creating deep anxiety in the sector,” he said.
The Kesma boss revealed that they approached the Agriculture Principal Secretary Paul Ronoh in May this year over the price drops and he committed to freezing imports to help stabilise the market.
