Sugar price falls to five-year low on inflow of imports

The annual average retail price of sugar stood at Sh104 a kilogramme as at October, the lowest in five years, helped by a large inflow of imports.

Sugar prices hit an all-time high of Sh135 a kg in 2011 due to a devastating cane shortage that affected factory operations, closure by some millers for annual maintenance and cartels seeking to profiteer.

New data by the Agriculture, Fisheries and Food Authority (Affa) shows that a kilo of sugar retailed at an annual average of Sh104 in the period to October, reflecting a general cooling of prices as the market responds to the effects of a steady inflow of imports that have helped meet local demand.

As at October the country had imported a total of 196,713 tonnes of sugar, surpassing the 192,121 tonnes imported over the entire 2014.

Interestingly, the average annual ex-factory price of sugar for 2015 stood at S,824 per 50kg bag (Sh76.48 a kilo)ompared to S,768 (Sh75.36 a kilo) in 2014, confirming the positive effect of the more competitively priced import sugar on domestic retail prices.

The average annual wholesale price of sugar was also higher at Sh4,066 per 50kg bag (Sh81.32 a kilo)ompared to the previous month’s Sh4,053 (Sh81.06 a kilo).

“Imports have had an effect on retail prices and helped keep sugar prices level,” James Nandwa, a dealer in Nairobi, said.

Millers have for decades remained wary of competition from imports amid claims of unfair competition.

Kenya has an annual sugar deficit of about 200,000 tonnes, usually mainly filled by regional producers from the Common Market for Eastern and Southern Africa (Comesa) under special duty rates.

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Early this year, millers raised the red flag over a large inflow of sugar into the country prompting Foreign Affairs and International Trade minister Amina Mohamed to call on Egypt to clamp down on phony traders using the North Africa country as a conduit to dump cheap sugar sourced from outside the continent into the local market.

Millers claimed that sugar originating from far-flung markets such as Brazil is shipped into Egypt and later re-packaged as produced within Comesa. Such sugar is later ferried into Kenya under duty free rates.

Farmers feel the pain of dumped sugar because their payment for cane delivered is delayed by millers struggling to sell the sweetener on increased competition.

The Kenya Sugar Directorate estimates the cost of producing a tonne of sugar at about Sh50,000 in western Kenya compared with Sh28,000 in rival producer nations such as Egypt.