A number of millers have cut the price of raw cane below recommended minimum as they struggle with losses arising from unsold stocks, risking punishment by the regulator.
Agriculture and Fisheries Authority (AFA) director-general Alfred Busolo has threatened to withdraw licences of those in breach of the agreement with farmers who are supported by the sugar pricing committee.
Millers are stuck withstocks due to stiff competition from cheap imports.
“We are aware that some millers have gone ahead to cut the price below the recommended one—this is in breach of the contract that they have with farmers,” said Mr Busolo.
Some of the millers have cut the price to Sh3,800 a tonne, less than the Sh4,025 that the pricing committee has set as minimum. Farmers and millers are only required to pay at or above that price unless it is reviewed.
Millers argue they took the measure after several attempts to have the directorate cut the price. “We have written to the sugar directorate urging them to reduce the price of cane in line with the falling consumer prices but there has been no response. This has forced us to do it ourselves,” said an official of the Kenya Sugar Millers Association.
The price is pegged on the consumer price of sugar in the market. There has been a decline in shelf price of the commodity since August last year, but the cost of cane per tonne paid to farmers is yet to be reviewed.
The ex-factory price of sugar has also been on the decline since mid-last year following increase of duty-free sugar in the country that stood at over 900,000 tonnes between May and November.
The imports grew three folds in 11 months to November 2017 compared with the previous year following the scrapping of duty on the commodity to check the rising cost of the sweetener that had hit Sh200 per kilo.