Commodities

Global sugar prices hit 11 year high on low output

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Packets of sugar being sold at a Naivas Supermarket, Nairobi on May 16, 2023. PHOTO | BONFACE BOGITA | NMG

Kenyans are headed for a longer period of higher sugar prices as a global shortage, declining imports and reduced local production cut supply.

Global sugar prices have surged to an 11-year high as the largest global producers experienced reduced cane production, curtailing Kenya’s ability to ship in more stocks to cool runaway prices now at more than Sh420 for a two-kilo packet.

Read: Prices of sugar up by 18pc on shortage

Reduced sugarcane production in Asia and South America has been occasioned by bad weather. India which is the second largest producer of sugar in the world has restricted sugar exports to cater for their domestic demand due to low rainfall in their sugar-producing regions.

“According to the International Sugar Organisation report published in April 2023 market report, white sugar price Index averaged $675.69/tonne, up from $586.92 in March and $560.46 in February,” says the Sugar Directorate.

The global shortage saw just 14,034 tonnes of sugar imported in April, an 85 percent drop from 93,880 in March signalling a tightening supply on the international market.

To cushion Kenyans the government had issued permits to importers to ship in 100,000 tonnes of zero-rated sugar.

Kenya’s weekly optimal stock of sugar dropped by 80 percent on the back of diminished production by factories and expensive imports on the global market last month.

The Sugar Directorate said they have been recording weekly stocks of 4,000 tonnes against the required optimum of 20,000 tonnes to meet the daily requirement.

Currently, there is a huge shortage of sugar in the Common Market for Eastern and Southern Africa (Comesa), forcing Kenya to seek the commodity outside of the regional bloc to cushion consumers from the high cost of sweeteners.

The directorate had in January warned that Kenya could fail to secure sufficient stocks of sugar at the international market even with the opening of duty-free imports owing to high prevailing global prices and a shortage of the commodity world over.

The global price of sugar has been rallying since January when it recorded Sh74,117 to the current standard at Sh92,400 per tonne.

Total sugarcane milled by all sugar factories dropped to 405,389 tonnes in April this year, down from 546,150 tonnes in March and 716,274 tonnes in February 2023, cutting production of the commodity by 36 percent in the review period.

Read: Cheap sugar imports from India, Madagascar cool prices

Brazil which is the global leading sugar producer is also grappling with poor rainfall reducing its production by three percent.

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