Sugar retail prices rebound despite bumper output

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The average retail price of sugar in Kenya rose for a fourth consecutive month in July 2026, defying expectations of a drop because production of the commodity rose by more than a third in the first half of the year.

Domestic sugar output rose 35.2 percent to 437,852 tonnes between January and June, the highest first-half production according to data by the Kenya National Bureau of Statistics (KNBS).

Cane deliveries increased even faster, climbing 36.2 percent to 4.93 million tonnes, pointing to a recovery in raw material supplies to sugar factories after a steep slump last year.

However, average retail sugar prices have been rising since April, increasing from Sh164.35 per kilogramme that month to Sh167.41 in July, according to data collated by KNBS.

The price reversal raises questions about the government’s efforts to revive the sugar industry, improve efficiency and eventually make sugar more affordable through greater competition and private investment.

Average retail prices had fallen steadily from Sh186.78 per kilogramme in July 2025 to Sh166.56 in February this year, before reaching a low of Sh164.35 in April.

They subsequently rose 0.8 percent in May, 0.58 percent in June and another 0.47 percent in July, suggesting that the decline in prices had stalled.

The increase, although marginal, came despite sugar output rising above the previous first-half peak of 410,536 tonnes recorded in 2022, indicating that higher domestic production alone has yet to deliver sustained consumer price relief.

The development also raises questions about whether increased cane availability and the leasing of State-owned mills are translating into lower production costs and stronger competition across the sugar market.

President William Ruto’s administration leased Nzoia, Chemelil, Sony and Muhoroni sugar factories to private investors in May 2025 under 30-year agreements intended to inject capital, modernise equipment and improve management.

The government argued that private operators would improve efficiency, reduce costs and strengthen the competitiveness of the mills, which have historically depended heavily on State support.

However, a joint November 2025 report by the World Bank Group and Competition Authority of Kenya found that domestic sugar was significantly more expensive to produce than imported alternatives.

The gap, the report said, has widened over the years, raising concerns about whether reforms in the industry will translate into lower prices for households.

The report, titled From Barriers to Bridges, warned that leasing the State-owned mills could fail to deliver genuine market discipline unless competition concerns surrounding the leasing process and the wider sugar market are addressed.

“The GOK has sought to increase private investment and market discipline through the leasing of state-owned mills, although competition concerns remain,” the report said.

It also blamed years of government financial support for distorting competition, arguing that debt write-offs and direct grants shielded inefficient State-owned factories from market forces while restricting the expansion of more efficient private operators.

The Ruto administration wrote off Sh117 billion owed by State-owned sugar factories in 2023, including loans from the Sugar Development Fund as well as accumulated taxes and penalties.

A further Sh62 billion debt was written off in 2020 under the administration of President Uhuru Kenyatta, according to the World Bank-CAK report.

The study found that Kenya’s ex-factory sugar prices rose by more than 40 percent annually in both 2022 and 2023, outpacing increases in cane prices and diverging from global trends.

The Agriculture Ministry has recently tightened protection for local producers through taxation and import controls.

The Finance Act 2026 in July raised excise duty on imported sugar to Sh40 per kilogramme from Sh7.50.

In August, the Kenya Sugar Directorate halted issuance of new sugar import licences, with Agriculture Cabinet Secretary Mutahi Kagwe saying domestic production was now sufficient to meet demand.

“I have asked the Kenya Sugar Board to stop sugar imports,” Mr Kagwe said, arguing that imports should not disrupt the local market or undermine the domestic industry.

The policy shift places greater pressure on the leased mills to demonstrate that increased production can eventually translate into lower costs, stronger competition and better prices for consumers.

“Henceforth, I do not want any licence issued for sugar imports. We are going to ensure we do not mess up the internal market because of imports. We are not going to import sugar at the risk of the local industry,” Mr Kagwe said on August 6.

This came after the government earlier in the year moved to expose the industry to greater regional competition after exiting the Comesa sugar import safeguard regime in January, ending 24 years of protection against cheaper regional supplies.

The safeguards, introduced in 2001, allowed traders to import up to 350,000 tonnes of sugar annually from Comesa to bridge domestic deficits while protecting local millers from lower-cost competition.

Reporting originally appeared via Business Daily. Read the full source for additional context.