Farmers have emerged the winners after the regulator increased the cost at which millers buy sugarcane to Sh4,300 per metric tonne, piling pressure on the cash-strapped State-owned factories.
The new price is Sh500 more than the Sh3,800 that millers have been paying farmers since October.
The higher price look set to up the cost of producing local sugar and further dim the competitive edge of local factories against cheap imports.
“The recommended price was adjusted to Sh4,800 but millers are free to pay anything above that,” said Sugar Directorate head Solomon Odera.
The State-owned millers like Sony, Chemelil, Nzoia, and Muhoroni have been struggling to pay farmers on time. Nairobi bourse-listed Mumias Sugar #ticker:MSC is also struggling in a market as private operators like Kibos, Kabras and West Kenya are thriving.
Nzoia owes cane growers Sh263 million while Mumias Sugar’s debt to farmers stands at Sh1 billion.
The government is yet to release Sh800 million that President Uhuru Kenyatta promised two millers during his political campaign tour in western Kenya nearly a month ago.
Critics have blamed a high cost of production for the woes facing Kenya’s sugar industry.
Poorly funded government factories have aging machinery that is prone to break down.
Most sugarcane growing zone in the country are facing a severe shortage that the directorate has attributed to drought that affected the region.
The directorate says in the period January to April 2017, production of the commodity dropped to 172,722 tonnes compared with 238,872 tonnes achieved in the same period last year.
Kenya produces 600,000 tonnes of sugar annually and it relies on imports to meet the growing demand that currently stands at 900,000.
The country is allowed to bring in 300,000 tonnes of duty free sugar every year from Comesa states.