36 per cent drop in sugar stocks held by millers sets the stage for price rally (Kenya)

By George ngigi | Business Daily, Kenya December 27, 2016

Sugar stocks held by millers have dropped by more than a third over the past week, setting the stage for a further rally in the price of the sweetener.

The Sugar Directorate said that the millers current hold 6,000 tonnes of the sweetener, down from 9,400 tonnes on December 8, reflecting a 36.1 per cent drop.

“The demand definitely is high and this is the reason why stocks held by millers have come down,” said Solomon Odera, head of the Sugar Directorate.

The tight supply has pushed the factory price of sugar to an average of Sh5, 500 per 50kg bag from Sh5,400.

Consumer prices remain high with a kilogramme of the commodity selling at Sh135 for non-branded sugar in the supermarkets, while a two kilogramme packet of branded Mumias sugar is sold at Sh300.

Sugar prices are trading at a four-year high of Sh135 a kilogramme, up Sh10 over the past month and Sh110 in October last year. The shortage has been attributed to poor performance of factories and increased demand for the commodity. High sugar prices have become cyclic in the years preceding general elections.

In 2011, just a year before the elections, a kilogramme of sugar retailed at a record Sh173.

Director- General of Agriculture and Food Authority Alfred Busolo said the directorate had imported 15,000 tonnes of sugar so far and they expect an additional 8,000 tonnes to bridge the deficit and curb rising prices.

Low factory output is attributed to poor performance at the plants with most of them milling at below installed capacities. West Kenya Sugar Company, which is currently the leading producer in the country, has been down for maintenance in the last two months.

The Kakamega based miller was supposed to resume last week but the management has attributed the delay to technical issues.

‘‘We postponed because there are issues that we need to sort out,” said Rai Group of Companies chairman Jaswant Rai.

The sugar directorate says international price of sugar has nearly doubled in the last eight months from Sh32,000 per tonne to Sh60,000 for the same quantity.

The imports, which Kenya relies on to bridge the local shortage, have in the recent months gone up, piling pressure on the consumer price locally.

A 50 kilogramme bag of imported sugar currently lands in Nairobi at Sh5,475 which is almost the same price that the locally manufactured one attracts.

On August, International Sugar Organisation (ISO) released its first full-scale forecast for 2016/2017 that indicated a looming shortage.

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