Millers get reprieve as State proposes supply contracts with farmers

Sugarcane growers could soon be required to sign mandatory supply contracts with millers as the government moves to stem predatory activities in the sector following the entry of new buyers.

Agriculture minister Sally Kosgei has proposed in an amendment that is awaiting parliamentary approval that farmers, either individually or through outgrower bodies, be assigned registration numbers after which they can choose who to supply the cane to and a contract drawn.

“This will enhance both stability in cane prices and adequate supply of cane for crushing by the manufacturers,” the Bill reads.

A recent drop in the volume of sugarcane following prolonged drought has triggered massive cane poaching as millers competed for the available stock. An increase in the number of new millers has also been blamed for increasing the incidence of cane poaching.

In just two years the three new millers — Butali, Sukari and Kibos — have entered the western sugar belt piling pressure on established millers. Another player, Trans Mara is expected on board this year.

The country’s largest miller, Mumias, claimed it lost 40,000 tonnes of cane to poachers last year and blamed it on the entry of new players to the zone who lacked sufficient cane production capacity.

In the Nyando sugar belt old timers, Chemelil and Muhoroni, have also had run-ins with the management of the newly established privately-owned Kibos Sugar Company over supply of cane with more farmers shunning the state-firms for their better paying rival.

Mr Peter Kebati, the chief finance officer at Mumias, said the company backs the proposals by the Agriculture ministry to have millers sign mandatory supply contracts with farmers.

“We have about 85,000 farmers contracted and we supply them with inputs on credit. When another firms takes the cane from our farmers we definitely lose,” he said, adding the contracts would assist planning at factory level.
The country’s 2010 sugar output dropped 4.5 per cent to 523,522 tonnes due to a weather-induced cane shortage in some zones.

The dip in sugarcane volumes has persisted this year with data from the Kenya National Bureau of Statistics showing that cane deliveries fell 28.2 per cent in the four months to October to 1.2 million tonnes from 1.7 million tonnes a year earlier.

Contract between farmers and manufacturers have worked well in the tobacco, barley, tea and horticulture sector where small scale growers commit their supplies in exchange for extension services and input credits.

East Africa Breweries Limited, for instance, has contracted farmers to grow barley in Narok area while tobacco firms such as Mastermind get their raw material through appointed growers in western Kenya.

In the horticulture industry, large exporting firms have contracted growers as they strive to cut costs through divesting from none core activities.

Huge differences in cane prices however may undermine the success of contracts in the sugar sector.

“Farmers should be at liberty to terminate contracts from time to time depending on the offer on the table,” Mr Okoth Obado, a director of the Kenya Sugar Board (KSB) which regulates the industry. He said the focus should be motivating growers through better pay. Sugar millers are looking up to set their own nucleus estates to boost efficiency as well as quality of cane.