While Ugandan consumers rejoice over the lowest sugar prices in five years, the industry faces chaos.
Outgrowers are protesting declining cane prices due to a surplus that millers attribute to rapidly shrinking regional markets, leading to unprecedented domestic stock levels.
Growers in Buikwe’s eastern area decided this week to stop providing cane to Sugar Corporation of Uganda Ltd (Scoul), located in Lugazi, as a form of protest against the decrease in cane prices, which have dropped from Ush250,000 ($67.72) per tonne slightly over a year ago to Ush140,000 ($37.92) at this time.
The millers claim they are in a bind and threaten additional drops in output unless Uganda can access congested regional markets.
“It is a misconception to believe that cane prices are simply determined by the supply of cane; they actually reflect the challenges in the refined sugar market,” stated Wilbur Mubiru, spokesperson for the Uganda Sugar Technologists Association.
“Any issues we face in the refined sugar market impact cane prices. If we had better access to the East African market, both we and the outgrowers would be content, but currently, there’s nothing we can do about it.”
Retail costs in Uganda have recently dropped significantly, averaging Ush3,300 ($0.89) per kilogram. That is less than half of what it was three years ago, at the top, at Ush7,000 ($1.90) a kilogram. The Covid-19 shutdowns in 2020–21 reduced Uganda’s demand for sugar, which caused many farmers to give up on growing sugarcane.
However, as markets opened up due to disruptions in international shipping, the region saw dry circumstances that resulted in a jump in demand and sky-high retail prices.
A new normal was established by the sharp price recovery, which prompted more people to plant cane. Some millers are now projecting additional price declines.
“We foresee cane prices decreasing even more as the crop planted over the past two years matures,” stated Albert Bituura, general manager at Bwendero Sugar, a small miller in the western Ugandan district of Hoima.
“Our dependency on the Kenyan market is problematic because it is now inundated with domestically produced sugar thanks to good rains over the past 18 months. This has caused the regional market to come to a halt.”
The 16 sugar plants in Uganda have an installed capacity of 1.2 million tonnes annually, but due to limited access to export markets, they are barely using half of that potential. Just 0.4 million metric tonnes are consumed domestically. At one point, Ugandan exports reached a height of 100,000 tonnes, making Kenya the largest regional market overall.
According to Mr. Mubiru, frequent policy reversals have hindered market access, even though Uganda has the capacity to supply Kenya with between 120,000 and 150,000 tonnes of sugar yearly.
“We have heard reports that Kenya has banned Ugandan milk from their market. We worry that sugar might be next,” said Mr. Mubiru.
“If this occurs, cane growers should prepare for even tougher times. Millers already have an excess of sugar in stock and cannot process more than they can sell, which means the demand for cane will stay low,” he added.
The outgrowers insist on higher cane prices, citing rising production costs as their justification. According to a farmer in Buikwe, the most expensive aspects are harvesting, loading, and transportation.
Millers have been thinking about automating the loading and harvesting process, but they have encountered opposition and threats of arson. Growers are the most susceptible in an unfair status quo caused by the industry’s backpedaling.
“Although loading might appear straightforward, it requires a highly specialized skill. Very few loaders can optimize both the volume and weight of a vehicle’s carrying capacity. They dominate the market—tough and always tense. You can’t negotiate with them, so we have to accept their price,” he said.