Western Kenya sugar companies to raise cane prices to US$39.5 per ton

KENYA—All four millers in the former Western province have announced that cane prices will rise from Sh5,000 (US$ 32.64) and Sh5,500 (US$ 35.90) to a fixed cost of Sh6,050 (US$ 42.43) on December 1, following the resumption of milling.

This communication by the West Kenya Sugar Company, Butali Sugar Mills, Nzoia Sugar, and Mumias Sugar Company comes ahead of their scheduled milling activities set to resume next week.

This decision follows the lifting of a four-month moratorium by the Agriculture and Food Authority.

The government, through AFA, had halted sugar milling across the country in June due to a lack of raw materials and to allow cane to mature.

After the suspension, enterprises such as West Kenya utilized the downtime to perform repairs on three of its factories to enhance efficiency, as stated by George Muruli, the head of communication and community engagement.

This adjustment in cane pricing is not unprecedented for these corporations.

In April, West Kenya Sugar, the manufacturer of the Kabras sugar brand, increased its cane price from Sh5,250 (US$34.27) to a record Sh5,500 (US$35.90) per tonne, according to a local daily newspaper, The Standard.

This review coincided with announcements by competitors Mumias Sugar Company and Butali, offering fresh prices of Sh5,250 (US$34.27) and Sh5,200 (US$33.94), respectively, to their farmers for a ton of sugarcane.

Initially, the three major players in the sector were paying an average of Sh4,500 (US$29.37) per ton in the past couple of months until the commodity became scarce.

This pricing strategy was implemented to entice cane growers to sell their cane to corporations offering better prices due to limited raw material supplies.

Mr. Muruli also highlighted that West Kenya also provided incentives such as subsidized farm inputs and transportation of cane from farms to millers.

The entry of Mumias Company into the industry is expected to boost competitiveness.

Despite facing payment issues and a troubled past with former contracted farmers, Mumias, which had shut down, is poised to bring about a new dynamic in the market.

Mumias Sugar faced financial challenges starting in the 2012/2013 fiscal year, accumulating net losses and eventually folding at the end of 2018, with losses amounting to Sh39.44 billion (US$257.44 million).

As of June 2018, the company’s borrowing, principal loans, and interest payments from government sources totalled Sh12.59 billion (US$82.18 million).

Mumias Sugar Company, before closing in 2019, had a daily capacity of 2,000 tons of cane and an inherent capacity of 8,400 tons, boasting the largest cane-growing nucleus in the country, covering 4,000 hectares.