The agriculture regulator has rebuffed a request by sugar millers to cut the officially recommended price of sugarcane following a sharp decline in consumer prices.
Millers want the Agriculture and Food Authority (AFA) to lower the price of cane from the current Sh4,025 per tonne to Sh3,000.
Cane price is pegged on the sugar price and other variables. If the sugar price remains constant, the cane price will remain the same.
If the sugar price changes then the cane price will be calculated based on the new price. However, AFA Director General Alfred Busolo said the authority will not review the price downwards given the prevailing cane shortage, pointing out that if the cost is reduced supply will be affected.
“Price is an average over a period; mills enjoyed higher prices during the shortage. The dip is short-lived and should firm up in the coming days,” Mr Busolo said.
The factory price of sugar dropped 27 per cent in the last two months helped by high volumes of imports, a trend that has led to a further drop in consumer prices.
According to the directorate, a 50 kilogramme bag of sugar is currently selling at Sh4,000 at the factory gate down from Sh5,500 in August.
Sugar millers have been paying farmers more than the recommended price even after the directorate last August lowered the cost.
This follows highened competition among millers for the material. The Sugar Pricing Committee, under AFA, reduced the cost of a tonne of sugarcane from Sh4,320 to Sh4,050 in August after the price of the sweetener dropped by Sh400.
AFA said the current cane shortage is expected to normalise in the next 12 months.
The directorate allowed millers to ship in 150,000 tonnes of sugar to cover for the deficit.
Low production led to higher prices, forcing the directorate to increase imports to contain soaring prices which had hit a record Sh400 per two kilogramme packet. The price has so far dropped to Sh200.