Kenya sugar price increases on weak shilling, global scarcity

Sugar imports at the Mombasa port. FILE PHOTO | NMG

A global shortage of sugar and the depreciating shilling to the dollar is contributing to the high cost of the product, as the regional States opt to sell their commodity to the European market where it is fetching a premium.

The sugar prices on the world market have been volatile in the last one year with a tonne of the product going up from $509 in January to $531 in August, according to the International Sugar Organisation.

Kenya relies on imported sugar to meet its annual deficit which has now grown to 200,000 tonnes, with the country consuming one million tonnes against production of 800,000 tonnes annually.

The Common Market for Eastern and Southern African (Comesa) countries, from where Kenya is allowed to import the commodity, are selling their produce to other global regions especially the European Union owing to good prices that it fetches there.

According to the Sugar Directorate, in the EU prices are higher by at least $20 per tonne compared to those within the region.

“The diversion of the commodity to other markets has contributed to an acute shortage of the produce, thus denying countries that benefit from quota sanctioned by the regional bloc secretariat every year,” said Willis Audi, head of the sugar directorate.

Sugar prices have been on a steep rise since August with a two kilo packet retailing at Sh300, up from Sh230 in June.

The shilling was exchanging at 121 units to the greenback by Friday.

The local production has also been hit by two millers shutting down for maintenance, cutting the supply of the commodity in the market.

Sugar production in August dropped by 34 percent as more factories closed for maintenance amid scarcity of mature cane.

Total sugar production in August was 46,459 tonnes from the 70,278 tonnes recorded a month earlier.

The shortage of the sweetener at the international market has seen Kenya lag on the import quota that is supposed to have shipped in by last month.

Kenya ought to have imported 135,000 tonnes of sugar from Comesa by the end of September but it has only managed to ship in 80,000 tonnes.

Most Comesa countries are spending up to $600 in production of a tonne of sugar compared with Kenya where factories incur as high as $900 to make the same amount.

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