Editorial | Delving into sugar

We note last week’s urging of farmers by Agriculture Minister Floyd Green to get back to growing sugar cane, which we hope signals brighter days for the industry, without taxpayers being called on again for subsidies and bailouts.

In other words, Minister Green’s exhortation should be based on something other than optimism or whim, or even the fact of the announced US$1-million investment by Pan Caribbean Sugar Company (PCSC) on upgrades at its Frome, Westmoreland sugar factory.

Put another way, we look forward to Mr Green providing further and better particulars on his strategic plan for the industry, upon which farmers are being exhorted to take a risk, and how this fits into a larger strategic programme for the agricultural sector. Further, he should say how the agricultural project will fit into a national industrial policy.

The Gleaner raises these issues not to be contrarian or with an intention of undermining the prospects of farmers grasping an opportunity to earn money. Indeed, this newspaper is a strong advocate of Jamaica building a strong, modern agriculture sector in pursuing its economic development and, in part, to underpin food security.

However, the island’s extended history with its sugar industry, and especially over the past decade and half, insists on thoughtful decision-making with respect to the sector.

STEADY DECLINE

Sixty years ago, Jamaica produced around 500,000 tonnes of sugar. Output has been in a steady decline since then, accelerated over the last decade by the island’s loss of its preferential market in the European Union. Indeed, the 32,900 tonnes produced in 2023 was less than six per cent of the high point of the mid-1960s. Jamaica’s output is a blip in the context of global sugar production.

Moreover, where six decades ago 18 sugar factories operated in Jamaica, now there are only two that function. Five have been shuttered in the past 15 years.

Until 2009, the bulk of the island’s sugar industry was in the control of the government, to which it passed when private foreign owners pulled out in the 1970s. At the time when the government put up several factories and thousands of sugar lands for divestment, its Sugar Corporation of Jamaica was over J$30 billion in debt and its factories were bleeding around J$5 billion a year.

Pan Caribbean Sugar, a subsidiary of the Chinese firm COMPLANT International Sugar Company, bought three of the factories, including Frome, a factory which has a rated capacity of 65,000. Thousands of acres of land came with the purchases.

The Seprod Group acquired the Golden Grove factory in St Thomas, and Everglade Ltd, owned by the Hussey family, bought Hampden in Trelawny.

Pan Caribbean immediately closed Bernard Lodge in St Catherine and ran Monymusk, in Clarendon, for a while before deciding that it was an unviable prospect. The government took a shot at its operation, anticipating a harvest, then concluded it would be a money pit.

Everglades, having wracked up big losses, ended sugar production at Hampden to concentrate on distilling rum.

Six years ago, Seprod closed Golden Grove, but kept some of its associated lands under sugar cane as feed for its dairy cattle. In 2020, J. Wray and Nephew, the rum producer, now owned by Italy’s Campari Group, ended sugar production at its Appleton Estate factory in St Elizabeth.

UNABLE TO SELL

The bottom line is that Jamaica, having lost its preferential markets (but for 11,834 tonnes it will be able to sell to the United States this year under the WTO Tariff Rate Quota arrangement), is unable to compete with the big global sugar producers in the Americas such as Brazil, as well as those in the Asia-Pacific region. It lacks economies of scale in growing sugar cane; its farm yields are mostly below its regional and international competitors, as are its conversion rates from cane to sugar; and most of its costs are high.

In the past, sugar producers in Belize (200,000 tonnes), Guyana (60,000-70,000 tonnes) and Jamaica have asked the Caribbean Community, of which the three countries are members, to impose a higher common external tariff (CET) on refined sugar to protect domestic markets. The community subsequently ruled that the CET would be implemented once regional production was 75 per cent of demand, but many technical issues remain outstanding in the matter.

However, during a tour of Pan Caribbean’s Frome factory, at which the company’s largest investment was disclosed, Minister Green was optimistic about the industry’s resurgence.

“I am now saying to farmers, invest in farming and go back into sugar cane production, because Pan Caribbean has raised their efficiency,” he said. “They have looked at the price of cane and now it is profitable.”

Indeed, supply and demand deficit, some of it related to weather, pushed up the global sugar price, which has been reflected in Jamaica in a higher ex-factory price of the commodity, which increased nearly 20 per cent in 2023.

This ought to be good news for sugar cane farmers and factories. But the question to be asked now is about the industry’s sustainability and the long-term framework in which farmers are being invited back into the industry.

That is part of the conversation that Minister Green is being invited to open.