State reduces sugarcane prices to Sh5,500 per tonne

Kenya Sugar Board Chairman Jude Chesire/HANDOUT

The government has announced a review of sugarcane prices, reducing the minimum sugarcane price from Sh5,750 to Sh5,500 per tonne.

In a directive issued by the Kenya Sugar Board on April 24, all licensed millers were instructed to immediately implement the revised price and ensure prompt payment to farmers across the country.

The policy shift is aimed at balancing farmer earnings with miller sustainability as Kenya’s sugar sector undergoes structural reforms.

"This is therefore to notify you that a new sugarcane price of Sh5,500 per tonne has been approved effective immediately. This new price is comparatively high in the region," the directive stated.

The adjustment follows deliberations by the 4th Interim Sugarcane Pricing Committee, which reviewed prevailing market conditions, production costs, and stakeholder submissions before arriving at the new rate.

The committee was appointed by the Agriculture Cabinet Secretary vide his letter dated 9th January 2025.

According to sources familiar with the discussions, millers had pushed for a deeper cut to around Sh5,000 per tonne, citing rising operational costs and declining sugar prices that have squeezed profit margins.

However, the government opted for a moderated reduction, settling on Sh5,500 per tonne to cushion farmers from a sharper income decline.

Officials say the decision reflects the need to maintain stability in both production and supply chains while responding to shifting market realities.

The review comes at a time when Kenya is experiencing increased sugar production in 2026, driven by improved cane availability and higher output from factories.

The reopening and leasing of previously dormant state-owned sugar mills to private operators has also boosted production capacity, increasing the volume of locally produced sugar in the market.

With higher supply, sugar prices have fallen significantly.

A 50-kilogram bag of sugar, which previously retailed at about Sh7,000, now sells between Sh6,000 and Sh6,100.

This decline has directly influenced the adjustment in cane pricing, as raw material costs are closely tied to the final market value of sugar.

Industry stakeholders argue that maintaining high cane prices while sugar prices fall could strain millers’ operations and threaten the sustainability of the sector.

The new pricing structure is therefore intended to align production costs with market performance.

Despite the reduction, Kenyan farmers continue to earn more than their regional counterparts.

Farmers in Tanzania receive approximately Sh4,900 per tonne, while those in Uganda earn around Sh4,500 per tonne.

This comparison has been used by government officials to argue that local growers remain relatively well compensated within the East African region.

The policy shift forms part of broader reforms being implemented in the sugar industry under Agriculture Cabinet Secretary Mutahi Kagwe, who has been overseeing efforts to revive struggling factories, improve efficiency, and attract investment into the sector.