Regulator links falling sugarcane yield to delayed payments

Sugar firms are bracing themselves for a cane shortage on the back of dwindling production.

A census by the Kenya Sugar Board (KSB) indicates that yields have dropped by 2.5 per cent despite increased investments in cane development by millers.

“The cane available for crushing in the next financial year will be 7,574,850 tonnes against a requirement of 8,302,000 tonnes. The industry is thus projected to have a deficit cane supply,” says the regulator in a report.

This news comes hot on the heels of another report indicating that most processors have cleared their stocks to begin normal operations. The overall stock held in factories has dropped to just 13,000 tonnes in July compared to 42,000 tonnes in February.

The KSB has linked the looming shortage to delayed payments from millers and poor returns that have forced some farmers to abandon the business altogether.   

Millers in the country owe farmers more than Sh1 billion in unsettled deliveries. Mumias leads the pack with more than Sh400 million.

The KSB report adds that farmers’ earnings from cane has also reduced from an average of Sh3,900 per tonne last year, to Sh3,200 this year in tandem with drop in ex-factory price.

Mr Richard Ogendo, chairperson of the Sugar Growers Association says the figure issued by the regulator is conservative as growers have recorded more than 20 per cent drop in their incomes.

“There was poor maintenance of sugar cane for a whole year as a result of delayed payment by millers, farmers were forced to abandon good husbandry as they did not have funds for the exercise,” said Mr Ogendo.

READ: Kenya’s sugar production costs set to remain high

The amount of cane milled rose by 7.6 per cent from 5,690,128.73 tonnes in the 2012/13 financial year to a total of 6,122,427.25 tonnes in the last season.

The growth pushed up sugar production by 38 per cent to 654,209 tonnes, the first time millers ever crossed the 600,000-tonne mark.
The sugar sector has over the past years had a number of challenges that include illegal cheap imports.

Mumias, the country’s largest miller, has been making losses from 2012 with its management blaming the dismal performance on scarcity due to cane poaching.

In the six months to December 2013, it reported a loss of Sh73.4 million, an improvement from the Sh1.67 billion loss it had in the full-year to June 2013.

In March, Kenya was given another year extension by the Comesa secretariat to raise competitiveness of its sugar industry before it is exposed to competition from other member states.

The country’s annual consumption stands at 700,000 tonnes against domestic production of 500,000 tonnes.