Uganda Sugar prices skyrocket

Friday, 22nd July, 2011

A combination of low production and increased regional demand has conspired to push Uganda sugar prices up despite the 50% reduction in excise duty on sugar by the Government in this year’s budget.

The retail price of sugar, which was at around sh2,500 per kilogramme early this year, costs between sh3,500 and sh6,000 today.

The high world commodity prices and the depreciation of the shilling against the dollar are the other factors contributing to the surge in sugar prices, economic experts say.

There is also alleged sugar rationing in the country, which leaves the prices at the mercy of the market forces of demand and supply. That is, there is a high demand, but low supply of sugar. The South Sudan market is also taking a big fraction of our sugar.

These factors aside, there is a shortfall in sugar production globally because of bad weather in the major sugar-producing countries like Brazil and India. This has led to a reduction in supply on the international market.

The Food and Agriculture Organisation showed that the sugar price index rose by 14% between May and June, reaching 359 points. This was 15% below the February record, where international sugar prices hit $800 per tonne, but are now between $802 and $820 on the global market.

Information and national guidance minister Mary Okurut Karooro said the sugar shortage partly worsened when the three major local producers; Kinyara, Lugazi (SCOUL) and Kakira closed their factories for routine annual maintenance between May and July.

“But there is no cause for alarm as SCOUL was expected to resume production on Saturday (July 17), while Kinyara should resume by July 30. This means that sugar prices are expected to stabilise by mid-August when all the factories are fully operational,” Karooro noted while commenting about the sugar crisis in the country yesterday.

According to data from the Uganda Sugarcane Technologists Association, Uganda is expected to consume 371,744 tonnes of sugar this financial year. But all the producers combined are expected to produce 350,000 tonnes.

Kakira will produce 165,000 tonnes, Kinyara 110,000 and SCOUL 60,000 tonnes. The New Sango Bay projects are expected to out 15,000 tonnes. This means that there would be a shortage of 21,744 tonnes of sugar this year.

Statistics show that Uganda’s sugar consumption rises every year. In the 2009/2010 fiscal year, it was predicted at 342,170 tonnes. It grew to 356,651 tonnes last year and is expected to reach 371,744 this fiscal year.

K.P. Eswar, the Madhvani Group corporate affairs director, under which Kakira Sugar Works falls, said sugar was available. “We have resumed full production after closing for the annual routine maintenance. We sell a kilo of sugar at a factory price of sh2,200. A 50kg bag is sh112,500, plus all taxes. Without taxes, the bag costs sh94,000.”

Eswar allayed fears of the situation worsening. “We hope the situation will normalise in the next 10 days. But we don’t control prices. We also hope Kinyara and Lugazi will have resumed production within this period.”

Kakira is the largest sugar producer in the country, accounting for about 50% of the total output.

On the sky-rocketing sugar prices, Eswar could not rule out the fact that middlemen could be hoarding sugar, anticipating a shortage in future.

One of the managers at Kinyara, who did not want to be named, said they sell a kilogramme of sugar at a factory price of sh2,238 and a sh50kg bag at sh112,400. Like Eswar intimated, the Kinyara administrator said: “The middlemen are to blame for the increasing sugar prices because of their speculation.” He said they had no intensions of increasing sugar prices, adding that they expected to resume milling in the third week of August or early September.

But the situation is not about to end. Kenya, where Uganda gets some sugar, is also anticipating a shortfall as firms close for routine maintenance.


By Chris Kiwawulo : The New Vision Newspaper