Millers now stage bitter protest as sugar prices drop

Some of the tractors at Butali Sugar Company ferrying sugracane to the miller for crushing. Experts have advised sugar millers in Kenya to employ alternative means of generating revenue. [Nathan Ochunge, Standard]

Millers in Western Kenya have complained that sugar destined for transit has been diverted into the local market.

They are concerned that this could push the commodity’s prices too low, leading to huge losses.

If factory prices fall below 5,000 for a 50-kilo bag at a time when cane prices have steadied at Sh4,000, they say, then they will incur losses.

A spot check in Kisumu city showed that supermarkets were awash with privately packaged sugar although retail prices have fallen by between Sh5 and Sh10, reflecting about 6 per cent drop, compared to between 15 and 22 per cent in factory prices.

Millers and farmers representatives who spoke to the Saturday Standard were convinced that ‘someone’ was taking advantage of the spike in sugar prices occasioned by the seizure of nearly one million tonnes of imported sugar to exploit the market.

Sony Sugar managing director Bernard Otieno said price drops registered by both private and public millers in Nyando and South Nyanza sugar belts was “definitely in response to a rise in supply.”

Sony is selling a 50-kilogramme bag of sugar at Sh5,800, down from Sh6,200 a week ago following a sudden drop in demand across the industry.

Although Otieno said Sony had not been hard hit by the slowed demand, the situation was different in the Nyando belt where factory prices dropped from highs of Sh6,400 per 50-kilogramme bag to between Sh5,000 and Sh5,500.

Kibos Sugar managing director Raju Patel said the company had registered a big decline in demand, forcing it to lower prices for the 50 kilo bags to Sh5,000 from over Sh6,000 just a week ago.

Muhoroni and Chemelil, which got back into operation on the back of increased sugar prices now stare at uncertain futures, managers said.

Muhoroni Receiver Manager Francis Ooko said produced sugar was piling in company warehouses because of low demand.

Public millers, which are struggling with operational inefficiencies expressed concern that if the prices fell below Sh5,000, they would start making losses.

Debt-ridden State-owned Chemelil and Muhoroni sugar companies were buoyed back into operation by the spike in sugar prices and were banking on the prices to stay afloat after the government delayed a pledged bailout for both.

Sugarcane farmers who have been enjoying flat rate factory gate prices of Sh4,000 for a tonne of cane delivered were concerned that they are now staring at a significant drop in the rates.

Kenya National Federation of Sugarcane Farmers Secretary General Atiang’ Atyang’ said Kibos had already announced plans to slash the prices to Sh3,700 in the wake of declining sugar prices.

He wants Agriculture Cabinet Secretary Mwangi Kiunjuri and his Interior and National Government Coordination counterpart Dr Fred Matiang’i to investigate the source of the “unexplained” supply so as to protect the industry.

Millers were also banking on the Kenya Association of Manufacturers to intervene.