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Commodities

Supply shortage pushes sugar price to year-high

contraband sugar prices
People walk past 16,000 bags of contraband sugar that was netted by the police at Moyale Mall in Eastleigh, Nairobi on July 3, 2018. File Photo | NMG  

The price of sugar has risen to a one-year high, driven by an acute shortage in the market that retailers have attributed to the ongoing crackdown on contraband stocks.

A two-kilogramme packet of sugar is now retailing at Sh275 in Naivas supermarkets having shot up from Sh200 last month, a 35 per cent increase. Tuskys and Choppies are selling the commodity at Sh260 a kilogramme.

The retail prices have followed the factory price that shot from Sh74 per kilogramme last month to Sh100, as supply tightened in recent weeks. Sugar was last sold at this price in July last year.

But the sector regulator, the Agriculture and Food Authority (AFA), insisted the country has enough stocks and blamed unscrupulous traders for the current shortage.

“As far as we know there are enough stocks of sugar and the current shortage that is driving the price surge is just an artificial one, which we are investigating,” the acting AFA director-general, Joseph Ng’etich, said.

"Enough sugar"

The Sugar Directorate said factories had 17,000 tonnes of opening sugar stocks on Monday against a consumption capacity of 50,000 tonnes a month.

Agriculture Secretary Mwangi Kiunjuri said last week that there was enough sugar in the country to last months and blamed the shortage on poor distribution channels.

Millers yesterday supported the minister’s position, arguing that the shortage is a problem of distribution, not of a stock out.

“I do not think there is a miller who could be holding stocks of sugar at the moment because of the good prices the commodity is fetching,” Sony Sugar managing director Bernard Otieno said.

The crackdown on contraband sugar, which started last month, has seen more than a million kilogrammes of sugar confiscated and earmarked for destruction.

In recent weeks, retailers have complained of not getting enough stocks from distributors, leading to a scarcity that is pushing up prices.

Distributors have been procuring cheap imported sugar for sale to retailers at the expense of local millers, leaving factories with huge stocks that at one point in May rose to a high of 22,000 tonnes against the required threshold of 9,000 tonnes a day.

The 50kg bag of imported sugar is ordinarily priced at about Sh500 less than locally produced sugar.

Subsidy

Kenya imported 981,00 tonnes of sugar between May and December last year following the opening of the duty-free window to bridge the local deficit.

The Treasury scrapped duty on the commodity last year following a sharp decline in production that saw the price rise to Sh400 per two-kilogramme packet.

It is this window that unscrupulous traders used to import and release raw sugar into the market in breach of the standard procedure that requires such products to be refined before release to consumers.

The matter is currently a subject of parliamentary investigation and the report expected in the House today.

Kenya produces about 600,000 tonnes of sugar a year against an annual consumption of 870,000 tonnes. The sugar deficit is usually covered by stringently controlled imports from the Comesa trade bloc where Kenya has a quota of 300,000 tonnes annually.

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