The Sugar Pricing Committee will meet this month to review the farm-gate price of cane amidst clamour by millers for the regulator to lower the cost of raw material to Sh3,000 a tonne after consumer prices fell.
Agriculture and Food Authority (AFA) director-general Alfred Busolo said the pricing committee will meet before the end of the month to set a new price that will run up to January next year.
AFA had indicated that it did not intend to reduce the prevailing price despite the millers’ push.
The factories through their umbrella body, the Kenya Sugar Millers Association argue that the current price of Sh4,025 is way too high for their businesses to run sustainably in the face of competition from cheaper foreign sugar.
“We have organised a meeting for the sugar pricing committee to meet and review the current price paid to farmers,” said Mr Busolo.
Millers said the factory price of sugar has dropped to Sh3,500 and a further decline is expected in the coming days.
“We request you to issue an urgent circular in regard to the sugarcane price as it is not possible for the sugar millers to sustain the current price based on the current price of sugar,” said KSMA in a letter to the regulator.
Millers noted that based on the sugar pricing formula, the cost of one tonne of cane should be Sh3,017. They said it may become difficult to pay farmers if the current price is maintained.
However, some millers are paying more than the recommended price.
Sony Sugar for instance is offering farmers Sh4,300 per tonne and the management said it does not intend to reduce the price.
“Our board has made a decision not to reverse the current price for a tonne of cane,” said Ruth Opole, the factory’s public relations manager.
The cane cost is pegged on the sugar prices and other variables as indicated in the formula. If the sugar price stabilises, the cane cost remains the same. If sugar prices change in the course of the month, the recommended price will be calculated based on the new cost.
Factory price of sugar has dropped 27 per cent in the last two months as high volumes of imports helped to cool off the high cost of the commodity.