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Millers raise the red flag as surplus sugar drives down prices

sugar

A customer picks sugar at a supermarket in Nairobi. FILE PHOTO | NMG

Sugarcane millers have raised concerns over “mysterious” surplus of sugar in the market that has left them with thousands of kilos of unsold stock, setting the stage for lower sugar and cane prices.

Millers say the surplus sugar, which emerged 10 days ago, is threatening their cash flow.

The cost of a 50kg of sugar bought from the factories has dropped to Sh4,500 from Sh6,200 — a 37 per cent fall –over the period.

This looks set to cut retail sugar prices, which has risen from Sh107 a kilo in January to the current Sh152.

“The price decrease is attributed to competition from cheap imports,” says the Sugar directorate, the regulator.

“It is good to note that imported sugar supply dropped in May 2018 drastically following the Government’s crackdown on contaminated sugar in the market.”

The crackdown slowed down imports, boosting the cash flow of local millers who have struggled to compete with foreign millers on high cost of production.

Sony Sugar managing director Bernard Otieno said the surplus could be the result of availability of sugar flowing in from Uganda through Busia and release of duty-free imports held from 2017.

“The supply could be dominated by dumped sugar that is being re-exported from Uganda and posing as local production,” he said.If the trend continues, he cautioned that the market could collapse as the price of local sugar is bound to go down drastically.

This has slowed down cash flow since factories are not selling sugar because of diminished demand from local traders, said Mr Otieno.

His counterpart from Chemelil Sugar Company Gabriel Nyangweso also raised the alarm that the influx of sugar has started taking a toll on the company as over 20,000 bags lie in the warehouse. “We are concerned that we might not be able to pay our farmers if things remain unchanged in the next one week,” said Chemelil Sugar Company’s newly elected chairman Zedekiah Bundotich.

The company, which resumed operations after a six-month break, is currently operating at half capacity and crushing 1,400 tonnes of sugar daily. Due to the declining market, the Chemelil sugar is sold in the neighbouring Kisumu, Kericho, Nandi Hills and Kapsabet.

Mr Nyangweso however revealed that they are exploring Eldoret, Baringo and Nakuru as they attempt to expand their market and make a comeback in the largely turbulent industry. Mr Bundotich cautioned that the move by the standard gauge railway (SGR) to discount freight costs from Mombasa to Nairobi by 50 per cent could adversely affect the price of local sugar.

“This means that the price of imported sugar could further fall by half while the local sugar experience higher transport costs due to increased cost of fuel,” he said. “The economy of western region which heavily relies on sugarcane is under threat as they compete with cheap imported sugar that is arbitrarily dumped to the market,” he said.

To protect the industry and Kenyans from consuming harmful products, the Sony Sugar boss called on the Kenya revenue Authority (KRA) and the Kenya Bureau of Standards to test the products.