Kenyan sugar millers decry plummeting prices as cheap imports surge

A significant drop in prices has thrown Kenya’s sugar industry into turmoil, with millers reporting losses as high as Sh20,000 per tonne.

According to the Kenya Sugar Manufacturers Association (Kesma), the sharp decline in prices is due to an influx of duty-free and illegal sugar imports that have eroded profit margins and created instability in the sector.

Kesma CEO Stephen Ligawa revealed that the cost of producing a tonne of sugar has risen above the current market price, leading to losses of between Sh18,000 and Sh20,000 per tonne over the past three months.

He noted that sugar prices have decreased from Sh126 per kilo in March to Sh100 in August. Consequently, the price of a 50-kilogramme bag of sugar has fallen from Sh6,300 to Sh5,000.

“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. 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,” Ligawa said.

Ligawa said the price drop is negatively impacting farmers.

“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,” he said.

Cane pricing formula

He expressed concern that the plummeting prices are destabilising the industry and jeopardising the long-standing cane pricing formula.

“The declining prices are destabilising the cane pricing formula which has been running effectively for over 15 years,” Ligawa said.

He warned that this unsustainable situation threatens the viability of the industry and the livelihoods of farmers, creating significant anxiety within the sector.

On August 8, the national sugarcane pricing committee reduced the price of sugarcane to Sh4,950 per tonne, a decrease of 18.85 per cent from Sh6,100 in February.

The Agriculture and Food Authority (AFA) has linked the price drop to increased sugar production by millers and is considering exporting the surplus to stabilise the market.

AFA Chairman Cornelly Serem announced that they plan to request Parliament to permit sugar exports, given the current surplus.

“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,” Serem said on Wednesday.

Official figures indicate that local sugar production surged by 123.4 per cent in the six months to June 2024, reaching 384,552 tonnes compared to 172,105 tonnes in the previous six months and 29.7 per cent more than the 296,382 tonnes produced in the same period in 2023.