Sugar sector struggles despite rise in cane prices

Simon Wesechere, a longtime sugarcane farmer, is among those not impressed by the recent historical hike of sugarcane buying prices from a low of Sh4,000 to over Sh5,200 per tonne by top millers in the country.

The Kenya National Federation of Sugarcane Farmers (KNFSF) deputy secretary general interprets the hike as a reflection of a failure in the sub-sector as there is hardly any cane to crush because of farmers' apathy that has not been addressed by the State and millers alike.

"When you see them (millers) run over each other to hike prices, the reality has dawned that we are in a crisis. There is no cane as most millers failed to nurture and support farmers to develop the crop as some kept delaying or failed to pay farmers for cane delivered to them altogether," he says.

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"The destitute farmers had nowhere to run to after being frustrated by the same millers as the government lacks clear laws to safeguard them or the sugar sub-sector. This made many of them give up on the crop and now the millers are hiking cane prices in a desperate attempt to woo them back."

West Kenya Sugar, the manufacturers of Kabras Sugar, has been offering farmers Sh 5,500 per ton of sugarcane from early April, the highest in the country's history, as their competitors Mumias Sugar Company and Butali give Sh5,250 and Sh5,200 respectfully.

Initially, the three major players in the sector were paying an average of Sh4,500 per ton in the past few years from a low of Sh 3,800 before the commodity became scarce.

The over Sh5,000 offer per tonne makes Kenya the first country in the East African Community (EAC) to pay farmers the highest price for cane.

In neighbouring Uganda, the price of sugarcane has been on a steady decline in the past few years from as high as Sh4,000 in 2018, the crop's value has plunged to sell to millers at below Sh2,000 since 2020 as the area covered by the crop has kept growing at an average annual rate of 2.83 per cent.

This contrasts with statistics from the Sugar Directorate of Kenya's Agriculture and Food Authority (AFA) that show a decline in total area under cane in the country since 2015 from 223,605 Hectares (Ha) to 191,215 Ha in 2018, with a corresponding decline in yield from 66 Tons per Ha to the current 55 Tons per Ha.

The cane milled during the two years also declined from 7,164,790 MT to 4,751,605 MT in the same period representing 45 per cent of the total cane requirement for all 16 factories even as the production cost keeps soaring.

Kenya's Sugar Research Institute puts the average ex-mill price of locally produced raw sugar (the price of sugar inclusive of excise duty) at roughly $800 per MT, while the average landed cost of imported raw sugar at the Port of Mombasa stands at $600 per MT.

Philip Alusiola, a sugarcane farmer in Kakamega, feels this disparity in the cost of manufacturing has led to the mass illegal importation of sugar that has in turn "hurts the sub-sector the most".

In his own small way, he has filed a petition through lawyer Edwin Wafula seeking to stop retailers from repackaging what he suspects to be illegally imported sugar under supermarket names.

In the court papers before the High Court in Kakamega, Alusiola says the suspect sugar hardly states its origin or even manufacturer.

The illegal sugar importation influx was a hot potato issue in the Sugar Industry Stakeholders Task Force report of 2019 which gathered views from stakeholders from December 2018 to May 2019 in line with reforming the sector.

"Stakeholders were unanimous that importation must be controlled and managed by a stakeholders committee. A majority emphasized that millers must not be licensed to import sugar as it leads to conflict of interest and undermines the industry's efforts to increase production towards self-sufficiency," reads the report.

"They proposed that controlled importation should be undertaken by a government agency, preferably the Kenya National Trading Corporation (KNTC), while another section was of the view that traders should import based on approved quota by the stakeholders committee. A section of the millers proposed they should be allowed to import based on a milling capacity."

April research by the Global Agricultural Information Network (GAIN) and the United States Department of Agriculture (Foreign Agriculture Service) project that the 2022/23 imports forecast are set to reach 500,000 MT from 375,000 MT in 2021/22 due to rising demand and lower domestic production majorly due to lack of sugarcane to crush.

This comes even as AFA capped the limit at 180,000 MT just last year.

Apart from Saudi Arabia, most of Kenya's imports are from the Common Market for Eastern and Southern Africa (COMESA) countries. Mauritius, Uganda, Saudi Arabia, and Eswatini are the top sugar suppliers to Kenya according to the research.

The research says that Kenya's sugar production will decrease 4 per cent in 2022/23 from 690,000 metric tons (MT) to 660,000 MT also due to lower sugarcane yields as high fertiliser prices triggered lower application.

Until the recent national and county governments fertiliser subsidies, the input was retailing at a minimum of Sh 6,000 per 50kg bag, a 71 per cent increase from the previous year's Sh 3,500 per bag.

But the high fertiliser and other input prices is not the only challenge facing farmers as Johnson Barasa, a farmer who gave up on the crop shares.

"We've had low farm returns due to delayed harvesting, delayed payments, high cost of production like tilling and weeding, poor quality seed and limited access to credit facilities for cane development after the Sugar Development Levy (SDL) was scrapped," he says.

"I gather that the existing low cane supply has led to milling underage cane of low sucrose content by some unscrupulous millers."

This, Smart Harvest gathered, has compromised the milling efficiency of especially cash trapped private millers, some of which have more stocks in the market, due to importation, than what they actually crush.

The public owned mills which were strict on milling age on the other hand are today disadvantaged by aging and obsolete equipment and poor governance.

As private mills convert sugarcane to sugar at an efficient rate averaging a cane to sugar ratio of 10:1, public mills do 18:1, this according to the Sugar Research Institute (SRI),

Such poor crushing capacity has for instance made state owned firms make losses and survive on state bailouts like Nzoia.

Last year, for instance, the State gave Nzoia some Sh500,000 directing Sh284 million to go towards offsetting farmers' debts and Sh 216 million to factory maintenance.

Nzoia Managing Director, Dr Crispin Omondi said the company with a sugarcane crushing capacity of 3,000 tonne per day had not realised its full potential for partially going too long without servicing and majorly being archaic.

He said they produce a tonne of sugar after crushing 15 tonnes of sugarcane instead of the standard one tonne to 10 tonnes of sugarcane that modern machines do.

The region's politicians have been calling on the State to modernize Nzoia which runs on 1978 technology and has the largest nucleus cane estate (3,600 Ha) keeps losing farmers due to its crushing inefficiencies and farmers debts ranging in hundreds of millions.

"I supplied cane to the company in 2010 and am still waiting to be paid. This made me shift to Naitiri Sugar which pays promptly and is doing its bit of helping me develop my cane and meet other operations like harvesting and transportation," says David Opala whose 150 acres of sugarcane farms cut across Bungoma and TransNzoia counties.

"I feel what Naitiri, Olepito, West Kenya and other companies which have the plight of cane farmers at heart are doing in line with having contracts with and helping them in cane development is what is needed to revive the sector."

Unlike Wesechere, Opala who also represents cane farmers in Tongaren, Bungoma feels the price hikes are a show of good things in the sugarcane sub-sector as more farmers who had abandoned the crop would be enticed back with the high prices set especially by private millers.

SRI documents that new private sector-supported sugarcane plantations "produce up to 140 MT/HA of cane compared to yields of 90 MT/HA in traditional areas serviced by public mills".

This difference in yields is largely due to better harvesting practices and lower transportation losses.

"We offer best prices to keep farmers in the business and more importantly give robust extension services to our farmers and have devolved cane weighing bridges closer to them (farmers) to minimise wastage during transportation," says George Muruli the West Kenya external communications head. "We have been in a constant programme of recruiting more farmers so that we maintain optimum operation levels of crushing mature cane."

Private mills like West Kenya make up nearly 80 per cent of the total sugar produced in the country besides accounting for nine of the country's 13 operational mills.

The irony is that the demand of sugar cannot be met by the 13 millers a feat that was easily attained in 1980 and 1981, by producing 401,239 MT against a demand of 299,514 in 1980 and 368,970 MT against a demand of 324,054 in 1981.

Then, stakeholders who gave their views to examine the challenges ailing the industry during the 2019 Agriculture CS Mwangi Kiunjuri and Kakamega Governor Wycliffe led sugar taskforce, said there was goodwill from the government following Sessional Paper No. 10 of 1965, which took investment in the sub-sector seriously as a way of boosting its socio economic development.

In a bid to reform the sector and meet the elusive sugar demand, the country in 2020 set up a policy to revitalize the industry following the task force's recommendations.