Rising factory stocks signal cheaper sugar

Daily factory sugar stocks have stabilised following an improvement in supply of the raw material in recent months, potentially pointing to a cheaper commodity.

The stability has seen the price of the sweetener average Sh4,300 for a 90 kilogramme bag for most processors, from a high of about Sh5,000 in December.

Data from the Sugar Directorate indicate the volumes have been averaging at 10,000 tonnes a day between January 7 and 10. These are the ideal quantities required in the country at any given time to stabilise prices.

“Production has improved and we have witnessed stability in terms of volumes,” said acting head of the Sugar Directorate Francis Muriithi.

Cumulatively, sugar production in January to November 2018 was 450,335 tonnes compared with 327,211 tonnes achieved in the same period the previous year.

“This is an indication that the industry is recovering from the severity of the drought suffered by the country last year, which had led to reduced sugar production,” the directorate said.

In 2017, the country opened a duty-free window for imports, flooding the market with the cheap sweetener. This followed shortage of the commodity after the drought that cut supply of sugarcane in the factories.

Kwale Sugar Company holds more than half the stocks currently in the country with 5,897 tonnes, according to the latest report from the directorate.

The miller was at loggerheads with the authorities last year following the crackdown on illegal sweetener, a move that saw their warehouse locked by state agencies.

“Probably they are unable to get sugar out of their go down as a result of the crackdown that was there last year on illegal sweetener,” said an official at the directorate.

Sugar prices dropped 26 per cent in October last year helped by increased local production, according to the regulator.

Data from the directorate indicated the price of a 50 kilogramme bag of the commodity was sold at Sh4,435 in October compared with September price of Sh5,935 for the same quantity.