Money Markets

Factory price of sugar drops, still high in shops

A shopper buying sugar at a supermarket. PHOTO | FILE
A shopper buying sugar at a supermarket. PHOTO | FILE 

The factory price of sugar has dropped by Sh600 per 50kg bag in the last one month on lower demand but the decline is yet to reflect on prices in shops, which remain high at Sh145 per kilo.

Kenya was hit by a shortage of sugarcane mid last year, pushing the price of a kilo of sugar higher by Sh10 to Sh145 as stocks at factories fell to about 5,000 tonnes.

The Sugar Directorate says a 50kg bag is now retailing at Sh5,000, from Sh5,600 in December, attributed to reduced uptake of the commodity.

This means that the factory price of kilo has dropped from Sh112 to Sh100. Consumers are however still paying between Sh143 and Sh145 per kilo of branded local sugar.

“The prices at the factories have dropped as demand for the commodity has been low in the last one month,” said Solomon Odera, head of the Sugar Directorate. He added that the purchasing power of consumers was low in January, a normal trend.

Delayed payments

Lower demand has seen stocks held by millers maintained at 9,000 tonnes in the last one month, which is an increase from 6,000 tonnes in the first week of January.

Mr Odera said that they were still working on mechanisms of compelling retailers to pass benefits of low factory prices to consumers. These include giving a directive to millers to open up their distribution networks to other players.
The regulator also wants millers to have channels that allow direct sell of sugar to consumers.

The regulator also attributes high consumer prices to limited stocks at supermarkets. Last year, some millers also held back direct supplies to supermarkets due to delayed payments, a move that has since seen retailers stock just one or two brands of the sweetener. Millers have complained that supermarkets violate terms of credit by defaulting on payments.