Sugar prices expected to increase

Consumers will have to dig deeper into their pockets to buy sugar after millers unanimously increased the ex-factory price of a 50-kilogramme bag of sugar by Sh400 to cushion their profit margins.

The millers are now selling sugar at an average of Sh3,600, up from Sh3,200. The price of sugar had been pushed down by the entry of illegal imports last year.

Manufacturers now say market forces are behind the latest increase even as the government and the industry regulator continue to point accusing fingers at illegal imports.

“It is a decision based on forces of demand and supply in the market,” said Mr Saul Wasilwa, the managing director of Nzoia, the country’s second largest miller.

The move contradicts an earlier complaint by Chemili Sugar Company that it was finding it hard to sell its sugar because the market is flooded with cheap and illegally imported commodity.

There have been unverified complaints from sugar distributors that factories are colluding with cartels to sell large quantities of sugar to them (cartels) cheaply only to adjust the ex-factory prices upwards in order to share the spoils.

The chairman of Sugar Millers Association and Mumias sugar company chief executive Peter Kebati could not be reached for a comment on this story.

Earlier in the week, Chemilil Sugar company head of agriculture Albert Aki, said the company was grappling with poor sales with more than 45,000 bags of unsold sugar in its warehouse.

Mr Aki said the unsold commodity, which is worth close to Sh180 million, meant that the company could not buy more cane as the current processing rate had drastically contracted.

“The supply we have in the market to a great extent exceeds the demand with the results being low sugar prices,” he said.

Efforts to establish the impact of the price increase on the firm were unsuccessful as calls to the company’s head of communication Bosco Magare went unanswered.

West Kenya Sugar Company also said the millers have no option but to increase the price to cushion its bottom line in the face of a high cost of production.

“Even at Sh3,600, the profit margin is extremely narrow and the evidence is clear as most millers are not paying farmers on time,” said an official at the private miller who asked not to be named.

The country has been experiencing an influx of contraband sugar with the government and industry regulator, the Kenya Sugar Board warning of dire consequences to the sector.

Mid last month, the board seized 46,000 bags of imported sugar worth Sh184 million in Mombasa. This came barely a week after a similar seizure in a supermarket in Nakuru.

Agriculture cabinet secretary Felix Koskei admitted, following the seizures, that the growth of the sector faced great challenges due to cartels.

“Factories are grappling with high volumes of processed sugar and supermarkets and shops are not complaining of sugar shortages, meaning they are procuring cheaply from the illegal traders,” said Mr Koskei in an earlier interview.

In spite of the potential to compete, Kenya’s cost of sugar production is the highest among EAC and Comesa sugar producing countries, at $600 per tonne, making Kenyans pay dearly for the commodity.