Sugar price increase looms as millers raise costs

Sugar millers have raised ex-factory prices by up to 10.5 per cent per 50 kilogramme bag, signalling a possible increase in retail costs of the product.

Leading producer Mumias Sugar has raised its ex-factory price from Sh3,800 to Sh4,250, while its rival Nzoia Sugar Factory has raised the cost by an almost similar margin from Sh4,000 to Sh4,200.

A kilogramme of sugar, depending on the brand, is currently selling at between Sh125 to Sh130.

The ex-factory price had dropped from Sh5,000 in August to as low as Sh3,800 in what was attributed to cheap sugar, which was being smuggled into the country, flooding the market. Peter Kebati, chief executive officer of Mumias Sugar Company, said the new price took effect last week.

He, however, said that he “does not foresee an increase in consumer prices given that distributors and retailers are already making a huge profit margin at current prices.”

Cheap

The increase in price, according to the millers, has been precipitated by the decline in availability of cheap sugar in the country.

Kenya Sugar Board (KSB), the sector’s regulator, has in the past said Kenya is a favourable country for dumping of cheap sugar given that the cost of production is high, making local brands expensive.

Speaking before the Parliamentary Committee on Agriculture, Nzoia Sugar managing director Saul Wasilwa said the influx of cheap sugar in the country had taken a toll on millers’ profits as most of them were forced to sell below the cost of production.

“I am happy that currently prices have improved from what we were selling at in the past few months,” said Mr Wasilwa.

Butali Sugar Factory managing director Jayanti Patel said that until last week they had up to 80,000 bags of sugar in their stores as they could not sell below the cost of production.

“We decided to retain our stocks as we were cautious not to sell our sugar below the cost of production,” said Mr Patel.

According to West Kenya Company chairman Rai Tejveer, their factory price has gone up by Sh200 to Sh4,200.

Samuel Muriuki, a sugar distributor in Kariobangi, Nairobi, said they were selling sugar to retailers at Sh4,400, from Sh4,000 last week — pointing to the likelihood of retailers raising their price by up to five shillings per kilogramme.

“Retailers are very quick at increasing their prices in case of any change, I am quite certain that they will hike their price, though marginally,” said Mr Muriuki.