February’s 4.6% Sugar Price Dip Eases Inflation

Quick Look

• Sugar prices in Kenya dropped by 4.6% in February after a ban on cane crushing was lifted.
• The average retail price fell to Sh200.01 per kilo from Sh209.55 in January.
• Increased local production and deliveries of cane to factories spurred the price reduction.
• The price decrease contributed to easing inflation in February.

Kenyan consumers received a welcome reprieve in February as sugar prices fell by 4.6%. The Kenya National Bureau of Statistics (KNBS) highlighted this significant reduction in prices. The cost of a kilo of sugar, which was an average of Sh209.55 in January, decreased to Sh200.01. A closer examination of supermarket prices supports this trend. Naivas Supermarket listed the prices of white sugar between Sh195 and Sh199.5, while Carrefour offered it at Sh185 to Sh195. This decline in sugar prices played a crucial role in mitigating inflation during the month, offering relief to consumers struggling with the cost of living.

Production Boom: Sugar Output Soars to 487,877 Tonnes

The price reduction was set against a backdrop of a significant increase in local sugar production. The Agriculture and Food Authority (AFA) played a vital role by ending a months-long ban on cane crushing. Initially imposed in July to allow immature cane to ripen, the lifting of the ban on December 1, 2023, led to a production surge. Sugar production nearly doubled to 487,877 tonnes in December from 25,179 tonnes in November. This increase followed the delivery of 610,020 tonnes of cane by over 300,000 farmers to factories in December, marking a 105.9% increase from November. The resumption of full operations at sugar factories boosted production and played a key role in the price reduction observed in February.

Global Sugar Market Faces 150-Point Drop

The reduction in sugar prices is not limited to the Kenyan market. Globally, sugar price trends have shown significant negativity in recent trading sessions. A substantial drop highlighted this trend, closing below the anticipated target of 21.35 and opening avenues for further declines. The Commodity Futures Trading Commission (CFTC) reported a speculative long position of 30,642 lots in the sugar futures market. However, a nearly 150-point decline in sugar prices over two sessions likely affected these positions. The bearish trend should continue in the short term, with a breach of 21.35 potentially easing the negative pressure and initiating recovery attempts.

Consumers in Kenya have enjoyed a temporary relief from rising costs, thanks to the notable drop in sugar prices. These developments are the result of increased local production and strategic regulatory decisions that have influenced the market positively. Globally, the sugar market’s dynamics, marked by significant price fluctuations, reflect broader economic trends. Despite the recent decrease in prices, the inherently speculative nature of the futures market indicates that volatility is an ongoing challenge for both producers and consumers. This situation suggests that while short-term benefits are evident, stakeholders must remain vigilant due to the potential for future price changes.