Sugar prices to increase after mills run out of cane

Trucks loaded with sugarcanes on Mayuge-Namayingo road on May 4, 2020. Three of Uganda’s biggest sugar mills have admitted to an acute shortage of mature sugarcane that could trigger a hike in sugar prices across the country. PHOTO / FILE

What you need to know:

  • Saturday Monitor understands that mills at Kakira and Lugazi are not operating at optimum crushing capacities due to the cane shortage. Another mill at Kinyara acknowledged the diminishing amounts of raw cane, but was quick to say the development is yet to affect production.

Sugar retail prices across the country are primed to shoot up from the current average of between Shs4,000 and Shs4,500 after three of Uganda’s biggest mills admitted to an acute shortage of mature sugarcane.

Saturday Monitor understands that mills at Kakira and Lugazi are not operating at optimum crushing capacities due to the cane shortage. Another mill at Kinyara acknowledged the diminishing amounts of raw cane, but was quick to say the development is yet to affect production.

“We have started experiencing sugarcane shortages, which we foresee will affect production and the sugar sector in the near future,” Ms Caroline Amongin, the corporate affairs manager of Kinyara Sugar, said on Thursday, adding, “Matters are not helped by the fact that rains have not been stable everywhere.”

The Uganda National Bureau of Statistics’ most recent consumer price index captured a year-on-year increment of 20.8 percent for the price of a kilogramme of sugar. Figures from the governmental agency that runs the rule over the national statistical system indicate that a kilogramme of sugar retailed at Shs3,201 last June. The price jumped to Shs3,752 in May and Shs3,844 last month.

This comes as top officials at the mills in Kakira and Lugazi tell Saturday Monitor that they are not operating at optimum crushing capacities due to shortages of raw sugarcane.

Mr Anil Kumar, the chief executive officer of the Sugar Corporation of Uganda, Lugazi, (SCOUL)—which has a crushing capacity of 4,500 tonnes of raw cane per day—admitted that the mill is not working at full capacity.

“We are operating at 80 percent of our installed crushing capacity due to shortages of raw sugarcane, but we hope that things will improve as the year progresses,” Mr Kumar told Saturday Monitor.

At Kakira Sugar, which like Kinyara Sugar has an installed crushing capacity of 100,000 tonnes of raw sugarcane per day, production is down to 60 percent of installed crushing capacity.

Mr Mwine Jim Kabeho, the chairman of Uganda Sugar Manufacturers’ Association (USMA), says the situation will impact on sugar production targets for 2022.

“The estimated sugar production for 2022 is 822,000 metric tonnes, out of which 720,000 tonnes is meant to be brown sugar and 60,000 tonnes… industrial sugar. The shortages of cane mean that we are highly unlikely to meet those targets,” Mr Kabeho confessed.

Crisis looming

According to the chairperson of the Busoga Sugarcane Outgrowers Association, Mr Abubaker Ojwang, Kakira is trying to mitigate the situation by reintroducing the provision of seedlings and fertilisers to farmers.

Kakira is also helping the farmers to access low interest bank loans. There is, however, a realisation that such interventions will not bear immediate results. It takes at least 18 months for the cane to mature.

The situation also sets the stage for an increase in the price of both raw sugarcane and the end product—sugar. While the mills are confident that local demand needs will be met, it is feared that an increase in costs of production will ultimately be passed onto the end user. Currently, the retail price of a kilogramme of sugar oscillates between Shs4,000 and Shs4,500.

Mr Ramathan Ggoobi, the Secretary to the Treasury, has previously ruled out interventions such as price controls to curb soaring commodity prices. Saturday Monitor was unsuccessful in its attempt to establish from Mr Ggoobi whether the forecasted rise in sugar prices will be treated differently.

Mr Ojwang told Saturday Monitor that the effect of the failure to regulate the farming and trade of cane has triggered an acute shortage in Busoga Sub-region.

“There is no cane in Busoga. All the factories from Buikwe and areas as far as Luweero have been coming to Busoga to look for cane. Mayuge Sugar and GM Sugar also do not have nuclear estates of their own. They are all fighting for the sugarcane in Busoga so there is a serious shortage,” Mr Ojwang said.

Another growing problem is that some of the sugarcane that is being scrambled for does not end up in small mills alone. Saturday Monitor understands that some of it ends up in jaggery sugar mills and local potent gin manufacturing areas.

Both Mr Kabeho and Mr Ojwang believe the sub-sector will have a full blown crisis on its hands by the end of August.

“The sum effect of the failure to provide for zoning will have been fully felt by September and October. There will be acute shortages of cane. That is the crisis,” Mr Kabeho said.

Liberating Busoga

President Museveni signed the Sugar Act into law in April 2020. This was months after the President first rejected the same and sent it back to Parliament over the issue of zoning.

Mr Kabeho blamed the current status quo on both the government and Parliament’s failures to introduce zoning during debate on the Sugar Act.

Experts say zoning would have set the stage for farmers to deal with particular factories. They also add that it would have regulated the establishment of sugar mills in particular areas.

In 2019, when he first sent back the Bill to Parliament, Mr Museveni had argued a case for ring fencing sugarcane farming for only people with land holdings of more than six acres. He had also proposed zoning of 25 kilometres, which would mean that no new sugar mill would be established within a 25-kilometre radius from an existing mill.

The Bill also proposed that sugarcane out-growers in a particular locality could only supply sugarcane to mills within their locality.

Lawmakers—particularly those from Busoga region—vehemently rejected the proposals on grounds that they were promoting exclusion and placing those with small land holdings at a disadvantage. The Bill was once again sent back to the President.

“When this zoning was distorted, people rushed and they planted cane without entering into contracts with the millers. That sent the prices of cane plummeting to their lowest. Others could not even sell to any of the mills. They were frustrated and most of them have run away from sugarcane [growing],” Mr Kabeho said.

Due to the influx of farmers into the sugarcane growing sub-sector, Busoga Sub-region had by the beginning of 2018 accumulated so much raw cane that the price of the commodity plummeted from Shs180,000 to Shs120,000 per tonne. It further dropped to Shs110,000 in 2019.

The prices then fell on two other occasions, both in July 2021. First they fell from 110,000 to Shs104,000 per tonne before dipping to Shs99,000 within less than a fortnight. In January, the price increased to Shs102,000 per tonne.

As the millers jostle for the little sugarcane available in especially Busoga and Buganda sub-regions, there are fears that acts of poaching on cane could gain traction amongst farmers who are contracted to established mills. Experts further say this could in turn mean that farmers will be induced to sell premature sugarcane. That also means that Uganda will be producing much less than it should be producing, says Mr Kabeho.

“Ten tonnes of sugarcane should ordinarily give you one tonne of sugar. But now 10 tonnes are giving these mills in region of a half a tonne,” he said, adding “You have to keep fighting for the cane because you cannot say that you are waiting for the cane to mature.”

President Museveni recently revealed that he will visit Busoga Sub-region to impress upon locals how they can be “liberated” from sugarcane growing. It remains to be seen if the looming crisis will expedite the visit.