The Kenya Sugar Manufacturers Association (KESMA) has expressed objection to the new cane price of Sh4,950 per ton set by the Sugar Directorate.
KESMA argues that the price is unjustifiably high and threatens the stability of the sugar industry.
In a letter addressed to the Director of the Sugar Directorate, KESMA highlighted ongoing issues related to duty-free sugar imports from Uganda and other illegal imports.
“It is inconceivable that the Directorate has arrived at a price of Sh4,950 per ton, which is significantly higher than what is justifiable under the existing guidelines. Imposing the price will exacerbate the already desperate financial situation of the millers, potentially leading to insolvency and a collapse of the industry,” said KESMA Chief Executive Stephen Ligawa.
KESMA argues that, based on current ex-factory sugar prices over the past three months, a fair cane price should be between Sh4,600 and Sh4,800 per ton. It says using the average sugar price from the last month alone would suggest a cane price range of Sh4,300 to Sh4,500 per ton.
Last week, the Agriculture and Food Authority (AFA) announced a reduction in cane buying prices from Sh5,100 to Sh4,950.
Jude Chesire, AFA Director of the Sugar Directorate, issued a memo stating that the new interim price for August would be Sh4,950.
“With the interim cane pricing committee’s term expired and no Cabinet Secretary appointed to replace it, this price adjustment will take effect immediately,” he said.
Millers and farmers say unregulated imports undermine the local sugar sector by reducing sugar prices.
Farmers say the recent surge in government-approved low-cost sugar imports had caused a significant drop in sugar prices, which informed AFA’s decision to reduce cane prices.
Charles Atyang, the Chairman of the Kenya Association of Sugarcane and Allied Products (KASAP) said cheap imports were causing farmers huge losses.
“The cost of producing a ton of sugarcane ranges from Sh5,000 to Sh6,000, yet millers are paying as little as Sh4,900,” Atyang said.
He added: “This unjust price adjustment by the Agriculture Ministry comes less than a year after the country faced a severe sugarcane shortage that led to the closure of 16 mills and caused many farmers to abandon the crop.”
Simon Wesechere, Secretary-General of the Kenya National Federation of Sugarcane Farmers, questioned the rationale behind the price cut, noting that the shelf price of sugar had remained at Sh150 a kilo for the past six months, despite the price per ton fluctuating between Sh5,100 and Sh6,000.
“It is perplexing that such price adjustments are being taken despite a court order mandating millers to pay Sh5,950 per ton they receive from farmers and banning questionable imports. The government’s pricing decisions are deeply unjust, leaving farmers desperate and millers increasingly profitable.”
Sugarcane prices are currently determined by a formula that factors in cane weight, the net ex-factory sugar price and the farmer-sharing ratio.
Farmers argue that this formula is flawed as it primarily reflects sugar prices, excluding other by-products like molasses and electricity.
This price adjustment occurs amidst ongoing “good faith consultations” between millers, farmers and the Sugarcane Pricing Committee to address the cane payment dispute resulting from the High Court order in JR Misc. E 047 of 2024, issued on April 24, 2024.
These discussions, initiated by the Agriculture PS Paul Rono, are expected to conclude next month.
According to AFA, the utilisation of co-products in the sugar sector is generally low. Molasses production ranges from three to four per cent per ton of cane milled and is used for industrial ethanol production and as animal feed.
