Reports Leo Odera Omolo
Farmers around awendo sugar cane growing zone are up in arms against the SONYSUGR company fr what thy termed as gross discrimination on cane prices. They have blamed the company management for being adamant to increase cane prices.SONYSUGAR is still paying the old price of Kshs 3,128/- per ton.
Other millers are now payment between Kshs 3,950 per ton or even as higher as Kshs 4,200 per ton.
According to a Nairobi based business mn wh is also a cane farmer in Uriri constituency John Bob Awiti-Otange this company is fleecing the cane farmer out of their sweats.
He said that while it is assumed, that management of the organization would be more concern about the prevailing conditions in the market in order to monitor the forces of demand and supply which dictates the commodity price per ton. It is because the company is operating under perfect market conditions where there are several participants with little or no influences on prices by one particular participant.
In this regard,Awiti-Otange stated,” continuity in business would only depend on good hospitality and healthy rates being offered to potential customers who are engaged in the supply of raw materials input to the factory for conversion to finished product.”
“Looking at the current market rates, assuming all factories operate under the same environment conversion cost per ton would be the same as sources of raw materials are same, supplied by nearby out growers next to factory location. All factories have similar fixed and incremental costs in converting raw material to finished product ready for sale.”
And in each factory, one ton of raw material yields 100 kilograms of sugar after processing it packaged in fifty (50) kilograms sold @ Kes, 5,600/-. Therefore, 100 Kilograms would fetch Kes, 11,200/- factory price. Whilst Sony Sugar Co. pays farmers only Kes, 3,128/-
Awiti-Otange said the Direct material cost per ton Kes, 3,128/-, Conversion cost per ton 50% of cost direct material Kes,1,564/-,absorption cost per unit (ABC) Kes, 1,500/- therefore total production cost per ton is roughly kES, 6,192/-Mark up is Kes, 5,008/- which is more than cost of material.
Participants in the market are Kibos Sugar, Chemelil Sugar, Miwani Sugar etc which operate under the same environment with similar market conditions and particularly Kibos Sugar pays farmers Kes, 4,200/- per ton whilst other millers have pegged their prices per ton in the region of Kes, 3,750/- and 3,800/-. But Sony Sugar Co. which is also expected to operate in the same environment and under the same market conditions only pays Kes, 3,128/-per ton. What is the rationale behind this big variation in price per ton paid by Sony Sugar.
While some farmers perceive it as punitive measure inflicted by management to get cost advantage, others perceive as inept management which do not bother to monitor the concept of market conditions to adjust prices to motivate farmers for continuity of supply of raw materials to maintain factory’s operational existence.
In view of the above,Awiti-Oange warned” farmers have given the management one (1) week within which to review rates per ton upwards to comply with the existing market rate, failure to which farmers will have no choice save to demand theirs rights by demonstrating along Migori / Kisii highway and finally match to the factory to dialogue with the management.”
Ends