Newport Fersan expected a client but found a rival in Pan Caribbean Sugar
Published:Friday | March 9, 2012 | 12:00 AM
Marcella Scarlett, Business Reporter
Pan Caribbean Sugar Company (PCSC) has started to import fertiliser from China for its own use, denying business to local manufacturer Newport Fersan Jamaica which had been banking on the estates to drive up the market.
Chief executive officer of , He Francis, told the Financial Gleaner this week that the first shipment of 3,000 tonnes arrived in January and deployed to its newly acquired sugar estates.
PCSC is the subsidiary created by Chinese company COMPLANT group to operate the three sugar estates - Frome, Monymusk and Bernard Lodge - acquired from the Jamaican Government. The sale was agreed in 2010, but the deal closed last year.
"Overall 7,000 tonnes is to come. The rest is to come in June but we can't import anymore until we have storage space. The issue now is warehouse to store the fertiliser," said He.
"We are bringing it in to provide assistance to our registered farmers. No, we are not thinking about supplying to other players in the industry," he said, responding to queries about supplying other sugar interests as well as farmers in other industries.
Frome and Monymusk are said to account for half of the fertiliser used by the sugar sector annually. Newport Fersan's product sells in that sector for about J$3,340 per bag, according to the lobby for cane farmers.
Sourcing its own fertiliser
Pan Caribbean's He first disclosed back in November that Pan Caribbean would be sourcing its own fertiliser, herbicide and equipment from home country China to reduce operating costs by 30 per cent while growing out to 700,000 tonnes of cane in three years.
Jamaica's estates and independent farmers currently produce some 1.5 million tonnes of cane per annum. Jamaica's eight estates account for more than half the total.
Kingston-based Newport Fersan - Jamaica's sole manufacturer of fertiliser - is portraying the imported commodity as inferior to the quality that it produces.
"It is not comparing like with like. Think about a regular Chinese quality product," said managing director Dennis Valdez in February.
"It is not a good idea," Valdez said, adding that the government needed to investigate the imported product.
Sugar farmers and technologists disagree with Valdez.
Newport Fersan produces 35,000 tonnes of fertiliser annually for the local market and intermittent amounts for exports, well below half the plant's 83,000-tonne capacity. Some 10,000 tonnes were exported to Cuba last year in a one-off deal.
The fertiliser company continues to supply other sugar estates, but had been anticipating increased local demand for its products as a result of the successful divestment of the sugar factories to the Chinese firm COMPLANT.
Expecting rise in demand
Valdez told the Financial Gleaner back in September after the divestment programme had wrapped up that with the plans for expansion by the Chinese, demand for inputs should rise.
"So we are expecting to see a higher demand for our products, especially from the sugar divestment in the sugar sector," he told the Financial Gleaner in an interview back then as he was shipping his first batch to Cuba.
"Divestment was realised, so there is light at the end of the tunnel," he said.
Allan Rickards, Chairman of the All-Island Jamaica Cane Farmers' Association, said the Chinese are importing fertiliser of the same NPK or nitrogen-phosphorus-potassium formulation that Fersan sells to sugar farmers.
The NPK formulation of 16- 9-17, which is the most popular mix, and the formulation of 17-0-17 are the varieties imported by PCSC, said Rickards.
These formulations are the recommended mix used for cane crops, added Clarence Fearon, sugar cane nutritionist at the Sugar Industry Research Institute in Mandeville.
"While the research institute can advise cane farmers, including the Chinese, about the grade fertiliser they are to use, they cannot dictate; therefore the farmers are free to use the fertiliser they choose" Fearon said.
"We have a system in place to guide farmers, but in a private enterprise we cannot tell them what to do. For the most part they stick to the guidelines. Some do their own thing, but it is to their disadvantage when they don't."
Rickards told the Financial Gleaner that no licence or permit is required for the importation of fertilisers.
"All they need is for the Bureau of Standards to test to ensure that what the product is on the label is what is in the bag. As long as it is not on a list of banned substances, there is no problem. There is no duty on fertilisers; it is duty-free," he said.
"If they are going to sell it to other farmers, then the Bureau of Standards has to test the fertiliser to attest to the quality and safety, which in the Chinese case has been done."
Rickards said Fersan's market among sugar producers will likely be greatly impacted by the Pan Caribbean's decision to import the commodity, as Frome and Monymusk are two of the largest buyers of fertilisers.
The two estates demand almost half of the more than J$500 million worth of fertiliser that the sugar industry uses annually, the AIJCFA chairman said.
For the 2012 crop, which runs from December to July, output of 153,000 tonnes of sugar is projected across the industry, of which Monymusk and Frome are expected to produce 73,685 tonnes.
At current efficiency ratios of 10-12 tonnes of cane per tonne of sugar, the industry target would require cane production of about 1.6 million tonnes.
Up to last year, most of the fertiliser used in the sugar industry was supplied locally by Fersan with "very little, very insignificant" amounts coming from imports of the Diamond R brand, Rickards said.
Input cost concern
"We welcome any competitive entry into the market. The same way we welcomed Diamond R is the same way we welcome the Chinese. We welcome any situation in which the price of fertiliser can be reduced. All stakeholders are concerned about the price of the input," he said.
"The bottom line is that farmers are crying, and with the Chinese they have the opportunity to source fertiliser cheaper. Nobody is supposed to be able to import fertiliser from as far as China and seriously underprice Fersan, who is manufacturing it here; it just does not compute."
Rickards said that there is no quantity restriction for the importation of fertiliser, neither is there any frequency restriction.
Valdez said he was not able to respond to questions about the likely impact on his business, telling the Financial Gleaner that he was dealing with other things.
He said Pan Caribbean Sugar was likely to import higher volumes of fertiliser above this year's 7,000 tonnes for the next crop year.