Sugar prices surge as mills prepare for maintenance

Speculators have infiltrated the sugar market and triggered a jump in the price of the commodity as several millers prepare for the annual factory maintenance break.

A survey by the Business Daily across the major towns revealed a price increment of between Sh5 and Sh20 per kilo of sugar with some traders warning of further increases in coming weeks.

In Nakuru and Eldoret, a 2kg pack Monday averaged Sh240- Sh250 compared to last week’s Sh180.

Buyers of the commodity in Nairobi, Nyeri, Kisumu and Mombasa also witnessed price hikes with restrictions on the volumes one could buy in some outlets.

Mr George Okello, a manager at one of the Woolmart Supermarket branches in Nakuru, blamed the rise on supply hitches.

“Suppliers are delivering less stock. This has forced us to increase prices and control the sale of the commodity” he said.

Ms Njeri Mwaniki, the proprietor of Woodley Supermarket in Nyeri, said the price increase pointed to a looming shortage of the commodity.

“The manner in which prices have jumped over the last three weeks, from an average of Sh4,000 per 50kg bag to Sh6,000 today is indication that there will be a supply problem soon,” she said.

Millers and the Kenya Sugar Board (KSB) termed the drop in cane supplies over the July-August window as “cyclical” owing to traditional April-June wet weather conditions that affect the development as well as harvesting of cane for crushing.

This year, however, below normal rains over the April-June window have affected cane production with some factories reporting up to 50 per cent drop in output. “Most of the cane grown in Kenya relies on direct rainfall and the rainfall distribution has been erratic in recent times”, Joel Wangendo, agricultural manager at Muhoroni Sugar Company said.

“Over time, the supply of mature cane cannot meet the demand leading to a shortage similar to what is being witnessed currently”

Mr Raju Chamal, the managing director at Kibos Sugar factory, concurred that there is indeed shortage of cane in the industry, but could not immediately provide the exact extent of the deficit.

“All I can say is that the cane at the mill is far less than the demand that is in the market right now,” he said.

KSB CEO, Solomon Odera, however, said the price climbs were unjustified despite the cyclical dip in supplies of cane around the July-August window.

“The ex-factory price of sugar currently stands at about Sh4,300 per 50kg bag or Sh86 a kilo….this clearly shows there is an issue in the market chain. Something isn’t adding up” he told Business Daily.

“The variation in the ex-factory price and what some traders purport to demand is unacceptably high,” Mumias Sugar Company, the country’s largest miller with a 60 per cent market share, also said the price variations were too high.

The miller said it had set the recommended retail price at Sh100 per kilo and Sh205 for the 2kg pack.

“We have not increased our prices and our consumers should be guided by what we have put out as our recommended retail prices,” Mumias managing director Evans Kidero said.

Industry insiders, however, said speculators could be taking advantage of the up coming annual maintenance breaks by some millers such as Mumias to make a kill.

“Mumias and several other millers are about to go on a break and the cartels in the industry are well aware of that. They will hit hard through speculation. Sugar stocks in the region are also low and they could even take to making exports,” a ministry of Finance official said.

Mumias is scheduled to go on a three-week maintenance break starting the second week of July.

“There is the genuine shortage of cane that will directly lead to a sugar shortage. Add the fact that there are shady traders stock piling the commodity in anticipation of exorbitant returns and we have a major crisis on our hands” Mr Wangendo said.

Some importers are expected to take advantage of the latest climb in prices of the commodity to push for larger quotas of duty-free imports.

Agriculture minister Sally Kosgey at the weekend claimed that some traders had began amassing large stocks of the commodity for exports.

Mr Odera, however, said the country had about 1,600 tonnes in stocks of sugar while millers are expected to churn out more stocks before closing down for annual maintenance.

Reporting by Elizabeth Wanjiru, Dennis Odunga, Frankline Sunday and Charles Mwaniki