Factors Determining Sugarcane Price at the Farm Level in Kenya

Author

David Ochieng Nyaoke, Southern Illinois University CarbondaleFollow

Date of Award

5-1-2014

Degree Name

Master of Science

Department

Agribusiness Economics

First Advisor

Rendleman, Charles

Abstract

Kenya's current sugar consumption stands at 700,000 MT. The country is only able to produce approximately 500,000MT. The deficit is covered by cheap imported sugar from other countries. Weak import policies together with other supply demand factors have impacted negatively on the sugarcane price at the farm level. The study reviews the current sugar policies with an aim of formulating better solutions to help protecting farmers and the local industries. In addressing the problems facing the sugar industry in Kenya, the study also evaluates the roles played by various sugar stakeholders in Kenya, their effectiveness, and impacts to the general performance of this vital industry. This study also investigated the sugar supply and demand factors resulting in low sugarcane price at the farm level using a price transmission model (Kinnucan 1987). In analyzing these sugar supply demand factors, the empirical results revealed that all the identified variables apart from cheap imported sugar has significant impact on the sugarcane price at the farm level hence could explain the low cane price. Coefficient of determination between sugarcane price and the supply and demand factors shows that 95.4% of sugarcane price is explained by the identified variables. The study concludes that among the factors identified, imported sugar price is not significant in explaining the sugarcane price at the farm level in Kenya. The study recommends that farmers diversify if they have to maximize revenues from their farms.