Mumias Sugar Co., (MSUG) Kenya’s biggest miller of the sweetener, fell to its lowest level in a week as international prices of the commodity declined.
Shares in Kenya’s only publicly trader sugar company slipped for a second day, falling as much as 7 percent to 5.35 shillings and trading 4.4 percent lower at 5.50 shillings by 1:30 p.m. in the capital, Nairobi. White sugar fell as much as 0.7 percent to $511.80 a metric ton on NYSE Liffe, the American futures exchange, according to data compiled by Bloomberg.
“When the international prices start coming down the main threat to Mumias is that other companies in the Common Market for Eastern and Southern Africa starting diverting sugar to Kenya where they can get better prices,” Wycliffe Masinde, an analyst at Nairobi-based Dyer & Blair Investment Bank Ltd., said in a phone interview today. “The margins of Kenyan millers tend to be under pressure because our production costs are higher.”
Kenya, East Africa’s biggest economy, has four state-owned sugar factories, Nzoia, Sony, Muhori and Chemilil, in addition to four privately run millers including Kibos & Allied Sugar Co., Butali Sugar Co., Soin Sugar Co and West Kenya Sugar Co., according to the Kenya Sugar Board.
The regulator has in recent months been encouraging farmers to take loans to boost their output from the state-run Agricultural Finance Corp. because it is cheaper, Rosemary Mkok, chief executive officer of the board said in a phone interview today.
“Around April or May we disbursed 500 million shillings ($5.84 million) to Agricultural Finance Corp. to lend to farmers,” Mkok said.
This is a disadvantage to millers because farmers will not be restricted to selling their cane to a specific miller but will go to the one offering the highest price, Masinde said.
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