Sugar price unlikely to fall, despite 36pc rise in imports

Kenya’s sugar consumption has increased by 3 percent in the last one year due to increased  demand in retail, industrial and food service sectors.

However, the growing demand is higher than the local production of sugar.

Kenya produces 600,000 tonnes of sugar annually and relies on imports to meet growing demand that currently stands at 900,000 tonnes an increase from 860,084 tonnes in 2014 according to the Kenya Sugar Directorate.

The growth is supported by an increase in consumer purchasing power, and the
diversification of manufactured sugar-based products.

Local production meets about 60 percent of the total consumption and the resultant shortfall is offset by imports, mainly from the COMESA region.

According to Genghis Capital, sugar imports in the first third of the year rose 35.48 percent y/y to 131,846 tonnes from 97,320 tonnes in a similar period last year.

“The imports are geared to meet the shortfall in sugar production, attributed to cane shortage in most growing zones, which has seen a 27.69 percent y/y dip from 238,872 tonnes to 172,722 tonnes,” notes the Analysts.

Imports issued mainly from Madagascar, Mauritius, Uganda, Zimbabwe and Swaziland. Sugar exports dwindled 89.61 percent y/y to 7.9 tonnes in the first third of 2017.

The volume of imported sugar grew from 97,320 tonnes early last year to 131,846 tonnes from January to April this year.

“Sugar imports in April comprised 14,742 tonnes table and 10,256 refined , Comesa gave 1,500 tonnes while EAC provided 2,550 tonnes, non-Comesa countries gave 6,332 tonnes,” says the Sugar Directorate report.

Between January and April 2017, sugar production dropped to 172,722 tonnes compared to 238,872 tonnes compared  to the same period last year.

According to the Kenya National Bureau of Statistics (KNBS) first Quarterly Gross Domestic Product Report 2017, the volume of cane deliveries dropped from 2,068.0 thousand Metric Tonnes in the first quarter of 2016 to 1,452.6 thousand Metric Tonnes in the quarter under review.

Since 2004, the government has utilized the import safeguard granted by the COMESA secretariat to limit duty free imports from COMESA countries to a maximum of 350,000 tons per year. The latest two-year extension of the safeguard was granted in 2016 and expires in February 2019.

FAS/Nairobi forecasts Kenya’s sugar production to remain flat in the marketing year 2017/2018 due to continued poor performance of the state-owned sugar milling plants.

The Sugar Directorate projects a shortage of 1.9 million tonnes of sugarcane in 2016/2017 fiscal year, creating a huge production deficit.  Millers are already crushing below installed capacity as the shortage takes its toll on production.

Nzoia Sugar Company has suspended operations due to shortage of raw material that will enable the miller to fully function. The company has not been operating in the past two weeks.

The company as of March 2017 was milling less than 2,000 tonnes of cane per day against the installed capacity of 3,000 according to the management.

Mumias sugar had also suspended operations for the same reasons and despite the fact that it has resumed working,.

With the drop in production, prices keep rising and households have to cope up with the high cost. A kilogram of sugar is now retailing at between 175 and 190 shillings up from an average of between 120 and 140 shillings a month before.

A quick check across various shops and supermarkets within Nairobi revealed that 2-kg packet of Kabras sugar is now going for 350 shillings up from 315 shillings while that of Sony Sugar going up to 380 shillings.