Kenyan sugar prices hit a record high of 200 shillings ($2.15) a kilogram due to a shortage of the sweetener.Retail prices have increased 100 percent this year
High sugar prices are set to persist till early next year, millers said, citing acute shortage of cane that has reduced local output and forced the market to rely on expensive imports from Latin America.
Sugar prices rose from an average of Sh75 per kilogramme in January to Sh200 this month as cane shortage forced most of the millers to operate below capacity, causing an acute supply shortage in the market.
Local sugar millers, led by the largest and most efficient player Mumias, said they expect high prices to continue into next year.
That should add impetus to the rate of inflation that stood at 15.53 per cent last month and open new opportunities for traders to make billions of shillings from the high margins that they charge on imported sugar.
Demand
“There are expectations of relatively higher prices in the medium term driven by increased demand and inability of local millers to meet the requirement,” said Mumias Sugar in a statement.
This price outlook means hopes that a resumption of milling by Mumias after a month-long break would increase supply and cool down prices will fade.
Kenya is expected to be more dependent on international markets to meet the ever-rising demand for sugar even as reports indicated that global prices were at record levels.
Though a kilogramme of sugar is retailing at Sh73.60 in international markets, the 100 per cent duty charged on imports, freight charges and traders’ margins mean consumers can only get it at more than Sh200 per kilogramme in the shops.
A recent weakening of the shilling against major world currencies has also contributed to the high cost of importing goods such as sugar.
The shilling has lost 22 per cent to the dollar since the start of the year and closed trading last week at Sh92.50 to the greenback.
Persistent shortage of sugar has forced most retailers to ration the commodity.
In recent months, the scarcity of sugarcane has also diminished the capacity of millers like Mumias to generate electricity forcing Kenya Power to go into a rationing.
Source- http://www.businessdailyafrica.com
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