Comesa sugar supplies keep prices low

Improved supply of sugar from regional markets cushioned consumers from the effects of lower output over the first half of the year, new statistics by the Kenya Sugar Board (KSB) show.

Imports of white and brown sugar climbed 130 per cent to 132,755 tonnes between January and June, saving the country from the effects of a potential rise in the prices of the commodity after local millers recorded a nine per cent dip in production to 286,202 tonnes compared to the previous year, hit by poor cane supplies.

Low supplies of sugar in the local and international markets early last year saw the price of the commodity climb to a record Sh250 a kilogramme in some parts of the country.

The board said the country imported 132,755 tonnes in the first-half of 2012 compared to 57,717 tonnes the previous year with the bulk of the shipments originating from the Common Market for Eastern and Southern Africa (Comesa).

Imports from Comesa between January and June totalled 82,452 tonnes.

“Increase in sugar imports is attributed to improved supply/availability of table sugar,” KSB said in its latest performance report.
Industry players said the huge rise in imports has helped suppress any increases in sugar prices.

“The short fall in production in the first half of the year would have obviously seen prices going up but the extra sugar that came helped level matters,” Peter Musoli, a retail trader said.

Retail prices have held steady at an average Sh110 a kilogramme despite the lower output by millers over the first half of the year.
The availability of more sugar from Comesa is attributed to improved global supply.

Leading trading companies have projected that the global supply of the commodity for 2012 would be higher than earlier projected, leading to massive surplus that could see prices fall substantially.

Czarnikow, a leading trading company, early this year increased its forecast for the sugar surplus in 2011/12 by 26 per cent to 7.7 million metric tonnes. It said the projected surplus would have an impact on prices starting June.

The International Sugar Organisation also raised its projected 2011/12 global surplus to a more conservative 5.17 million metric tonnes from 4.46 million tonnes in November.

The drop in international prices reflects expectations of a large world production surplus over the new season on the back of good harvests in India, the European Union, Thailand and the Russian Federation.

Though the country may not be directly linked to international markets, any changes in the global front have a direct impact on the domestic market. For instance, in 2009/10 record high prices in the global market saw supplies from Comesa hard hit, sending prices climbing sharply.

Lured by opportunities of the record high world sugar prices, suppliers from Comesa diverted their stocks to better paying European, American and Asian markets, bringing some relief to local producers highly disadvantaged by high production cost and inefficient systems.

This has since changed amid the projections of a glut in 2012. Forecasts in international futures markets showed that in August sugar prices will stand at $595 a tonne compared to $700-800 in a similar period last year, representing a 26 per cent drop.