The Agricultural and Food Authority (AFA) has rejected a request from sugar millers on cutting down on the recommended sugarcane prices.
According to millers, sugarcane prices need to be reduced from the current 4,025 shillings per tonne to 3,000 shillings due to a sharp decline in consumer prices.
AFA Director General Alfred Busolo said that the authority was not going to review the price downwards given the prevailing cane shortage, pointing out that if the cost is reduced supply will be affected.
“Price is an average over a period; mills enjoyed higher prices during the shortage. The dip is short-lived and should firm up in the coming days,” Mr. Busolo said.
The factory price of sugar dropped 27 percent in the last two months helped by high volumes of imports, a trend that has led to a further drop in consumer prices.
According to the directorate, a 50-kilogram bag of sugar is currently selling at 4,000 shillings at the factory gate down from 5,500 shillings in August.
Sugar millers have been paying farmers more than the recommended price even after the directorate last August lowered the cost.
This follows heightened competition among millers for the material.
The Sugar Pricing Committee, under AFA, reduced the cost of a tonne of sugarcane from 4,320 shillings to 4,050 shillings in August after the price of the sweetener dropped by 400 shillings.
AFA said the current cane shortage is expected to normalize in the next 12 months.
The directorate allowed millers to ship in 150,000 tonnes of sugar to cover the deficit.
Low production led to higher prices, forcing the directorate to increase imports to contain soaring prices which had hit a record 400 shillings per two-kilogram packet. The price has so far dropped to 200 shillings.
Kenya is projecting a shortage of 1.9 million tonnes of cane by the end of this financial year, which will take a toll on the supply of the sweetener in the market.
The directorate has blamed the shortage on the drought that affected sugar growing zones following a prolonged dry spell in the country.
Sugar production dropped by 16 percent in the period under review compared with the same time last year as cane shortage took a toll on the quantities produced.
Production declined from 126,362 tonnes registered last year to 104,907 tonnes in February this year.