Sugar miller Mumias has temporarily stopped operations due to lack of raw material.
Its chairman Dan Ameyo Tuesday said the Nairobi Securities Exchange (NSE) listed firm has stopped producing because it cannot get enough cane from its catchment area.
Mr Ameyo said most farmers signed by the company to supply cane had reneged on their contracts and were delivering to rivals.
Mumias has an agriculture department that helps farmers to develop cane on contracts that bind them to exclusively supply it.
Late payments have however seen farmers shun Mumias, preferring to supply rival millers who in most cases pay cash-on-delivery.
The company claims to have so far lost 750,000 tonnes of cane due to poaching, adding that the factory will remain closed until the situation is addressed.
“Our cane has been poached because people have ready cash just to buy cane which other people have developed. We would like a reversal of this trend so that the sustainability of this and other companies is assured,” Mr Ameyo said.
The partly State-owned miller only months ago received a Sh1 billion bailout from the Treasury, and is scheduled to get another tranche in the coming financial year starting July.
The company is an important cog in the economic wheel of Western Kenya, making it a strategic investment for the government.
Mr Ameyo said Mumias can withstand competition from the private millers “so long as the playing field is level.”
“It is a worrying trend. We now have other millers who have come around flashing cash and going and picking cane without investing in its development,” he said.
Mr Ameyo said that the company will start instituting legal proceedings against rivals engaged in cane poaching.
The chairman said the company has waived Sh600 million debt owed to it by farmers resulting from cane development.
He said about one third of the nucleus estate within which the miller has contracted farmers has now been rehabilitated to date.
The chairman also asked the government to disburse more funds to the company.
“We still require the remaining Sh830 million for the company to be stable” he said adding that Sh1 billion already disbursed was used to pay farmers.
Most of the miller’s operations had resumed to normal after the bailout, which was also spent on rehabilitating its machines and purchasing spares for maintenance.
Some farmers had abandoned cane farming complaining of poor returns, which makes the cane shortage problem more complicated.
The firm is targeting robust and early maturing sugarcane varieties to improve yields and address shortages.
The chief executive Erold Johnstone said last month the varieties which have been introduced to farmers for planting include CO 945, CO421,CO617, EAK7335, N14 and early maturing KEN 83-737.