Sucre Ethique - Kenya : Farmers to miss global sugar boom

The nation - vendredi 5 février 2010

Farmers supplying sugarcane to government-owned millers could miss out on the high sugar prices in the international market, due to production inefficiencies.

Because they depend on millers for farm inputs among them fertiliser and transport services, industry players said, the final payout is squeezed by these deductions.

But those who supply to private mills have independent arrangements that ensures they enjoy maximum benefits of upward price revisions.

“While such prices are welcome to the farmers and the factories, the farmers may not end up enjoying the full benefits. Once the companies have taken

their dues the farmers remain with very little to take home,” said Mr Saulo Busolo, a farmer’s representative at the Kenya Sugar Board.

The poor returns are caused by poor harvests that most farmers get per acreage.

A global shortage in white sugar has increased demand over the past six months.

Data available from the international commodity markets show that sugar prices have rallied to a 28-year high, therefore heightening the prospect of supply diversion as producers rush to increase their profit margins in better paying international markets.

Last week, Mumias Sugar Company reported a humongous 561 per cent in profits before tax, attributing it hugely to a rise in global prices during its half-year trading period.

High profit margins are expected from other sugar

millers in the country, with the hope that farmers will gain from these in payments.

As a sugar deficient country, Kenya relies on imports from its Comesa partners to plug the deficit.

This is as a result of production and management inefficiencies experienced by local millers whose management is still under government control.

However, there are plans to privatise them to improve on governance, but the process has been held back by bureaucracy.

But due to better pricing in other markets, countries that traditionally sell sugar to Kenya too have shifted focus, instigating a rise in retail prices.

Late last year, Malawi, a member of Comesa, turned attention to European, American and Asian markets that were offering premium prices for the produce at the expense of the regional market.

Consequently, local millers have had a field day selling the commodity to consumers at higher prices.

“The payment to farmers is made after the sale of sugar and that is why ordinarily high prices needs to benefit them too,” said Mr Busolo.