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July 05, 2010

Kenya cuts sugar production forecast as rains curb deliveries

by Sarah McGregor
Kenya, East Africa’s biggest sugar producer, cut its forecast for this year’s crop by 3.5 percent after heavy rains hampered harvesting and curbed deliveries.

The estimate was reduced to 550,000 metric tons from a previous projection of 569,830 tons, Rosemary Mkok, chief executive officer of the Kenya Sugar Board, said in an interview in the capital, Nairobi on June 22. The latest forecast is still ahead of last year’s record production of 548,207 tons.

“The first quarter we weren’t performing well because there was so much rain and the roads were bad and farmers couldn’t get their heavy equipment through the fields,” Mkok said.

Heavy downpours during the March-to-May rainy season ended an almost two-year drought in Kenya that had depleted hydropower reserves and cut agricultural production.

Last year, sugar output rose 5.7 percent after Kibos Sugar Co. built a new processing factory and West Kenya Sugar Co. expanded its operations, said Mkok. The companies operate in western Kenya along with rivals Mumias Sugar Co. and Soin Sugar Co. The four Kenyan-owned companies account for 60 percent of total production in the East African country.

Kenya’s government is expected to complete by December the sale of stakes in five sugar refineries, Mkok said.

“The government wants to divest part of its shareholding to get the capital to modernize and expand capacity,” Mkok said.

Kenya plans to sell majority stakes in the refineries to private investors and 30 percent to growers, former Agriculture Minister William Ruto said in January. The remainder will be sold in initial public offerings once the profitability of each refinery has improved, he said.

Kenya intends to raise sugar production to as much as 750,000 tons a year to meet demand in East Africa’s biggest economy, Mkok said, without providing further details.

About 250,000 Kenyans farm sugar, more than 80 percent of them on plots of less than a hectare (2.47 acres), in the Nyanza and Western provinces and parts of the Rift Valley, she said.

Business Week

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