Sugar Prospects

Jul 26, 2010 Editorial

American Sugar Refining’s purchase of all Tate & Lyle’s (T&L) sugar operations in Europe brings to the fore once again the long term prospects for our beleaguered sugar industry.
But before we expand on that problematic we ought to correct some misreporting that occurred in our report of the announcement of the sale.
Tate and Lyle is a separate entity from Booker Tate that was let go from its management contract of GuySuCo a few months ago. Booker Tate had been formed in 1988 by a merger of Booker PLC and Tate and Lyle’s sugarcane management and consultancy divisions.
They were hired by the Hoyte administration to manage our sugar industry in 1990. In 2000 the firm was bought out by a South African company, Murray and Roberts, which in turn sold it in 2004 to Tsb, a huge agricultural entity that is itself a subsidiary of the South African conglomerate Remgro. Booker Tate is South African; T&L’s sugar operations are now owned by a US company operating under the EU sugar regime.
In the local reports of the sale, few focused on the import of Tate & Lyle’s decision in (as was reported in the London press) “bailing out of the business in which it built its fame and fortune”. As one analyst noted, “cane sugar refining in the EU is a challenged business model” but just as significant is the fact that Tate & Lyle would now be focusing on sweeteners such as Splenda which it sees as much more lucrative in the long run.
Presently, we know that adverse climatic conditions last year led to a dramatic world production shortfall of 20 million tons and world sugar prices skyrocketed to historic highs – over US .25 cents per pound – exceeding the .20 cents we now receive from the EU. After their pusillanimous unilateral price cuts.
Unfortunately, we were not able to enjoy the potential windfall from this contingency because of the well-known travails our sugar industry has been experiencing: almost all of our production had to be shipped to T&L under existing contracts, which extend to 2015.
This year, while world production is expected to recover somewhat, a projected shortfall of 9 million tons should still keep prices relatively high – but once again this is no benefit to us.
Over the short-medium haul – within three years and certainly before 2015 – sugar prices are expected to return to its historic levels that hover around US .12 cents per pound. And this is why we have to get our act together fast if our sugar industry is to survive.
Our production costs industry-wide still average around US .20 cents per pound and while the EU preferential price was in force our structural imbalance was masked. The Skeldon expansion was intended to produce its 100,000 plus tons at US .08 cents per pound and in so doing reduce the industry-wide cost near the US .12 cents benchmark.
As we have repeated in this space, it will assist our efforts immeasurably if we could obtain Geographical Indication (GI) protection for our Demerara sugar. The premium price that our authentic Demerara Sugar would command, in conjunction with the packaging facility at Enmore would even eliminate the need to cross-subsidise our higher-priced Demerara production.
When we last heard, GI protection was in the hands of the Caribbean Negotiating Machinery and we would appreciate if the administration would comment on the results of the efforts of this august body.
It was reported that negotiations for the next round of prices for our sugar to Europe has already begun with the new (ownership-wise) management of T&L.
The timing is fortuitous for us: sky-high world prices. We might as well strike while the iron is hot. Improved prospects for sugar means brighter prospects for all Guyanese.

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