Our Sugar Conundrum

Oct 18, 2010 Editorial

The President’s recent exasperated outburst that the sugar industry will be “dead” if the new Skeldon Sugar Factory does not perform as had been planned, has stirred much comment. On the face of it, the statement is irrefutable. If the price to produce any product cannot be brought below that at which it can be sold, sooner or later the business will become bankrupt.
The price of producing sugar in Guyana for the longest while was far higher than that of most of the major producing and exporting countries such as Brazil and Australia, which would normally have set the world market price.
We, however, were protected by the preferential prices that were secured from the EU by Britain in 1973, when the latter joined the former regime. The world price was therefore a residual price – that which fell outside the preferential arrangements.
The EU had its own reason for agreeing to a price which was about three times the average on the world market: namely to subsidise its own inefficient beet sugar production. With the rationalisation of world trade initiated by the WTO from the nineties, it was always going to be a matter of time when those subsidies would be challenged – and discarded. It is a credit to those in charge of the industry that as far back as 1998, a plan was conceptualised to rationalise our sugar production.
Basically, the plan took cognisance of one irrefutable fact of sugar production in Guyana: because of soil conditions, weather and available cultivable areas, production costs in Berbice were always lower than Demerara’s.
In fact, even at the conditions of 1998, Berbice could have survived on world market prices while Demerara, at almost double their cost, would have soon perished. The plan was to increase production in Berbice while consolidating that of Demerara – until a final decision on their fate could be made as the plan unfolded.
While there were various scenarios for increasing Berbice’s production – such as boosting Albion’s, Rose Hall and Blairmont’s outputs – the Skeldon option that was eventually chosen, was always on the cards.
The three factors that favoured production in Berbice in general, were most pronounced at that location. It is for this reason that we hold that it is rather pointless to second guess the Skeldon decision at this stage. But as so often has been the case, the best laid plans of mice and men, often go awry.
And because the Skeldon plans have really gone awry, the overall price of producing sugar in Berbice is probably as high at this point as that of Demerara. It is because of this reality that the President’s comment, as he explicitly made it against the intervening 36% price cut by the EU, was made.
If we cannot get costs at Skeldon under control, we will have to be continuously subsidising sugar; which we just cannot afford – even with the still higher-than-world-market-prices of the EU for 167,000 tons.
But the question in these matters is always, to quote Lenin, “What is to be done?” It would appear that the President agrees with Komal Chand of GAWU, who a few months ago, rejected proffered reasons for GuySuCo’s travails such as the fall of the Euro (in which the bulk of sales is denominated), and the weather (El Nino) and pointed to the “extravagance” of management.
He brusquely declared, “We need to stop with excuses and get the work done.” From the outside it would appear that something is either structurally defective with the Skeldon Factory or we do not have technically competent management. The Minister of Agriculture has mentioned the sourcing of foreign expertise; this must be expedited.
While we appreciate the President’s threat to become personally involved in the turnaround efforts, we reoffer Mr. Beni Sankar’s suggestion that we need more sugar savvy members of the Board, which should be mandated to play a more hands-on role on the implementation of the turnaround Blueprint. Sadly, the problems in the fields have not yet been rectified on the other estates – especially in Demerara and Skeldon only remains the most visible symbol of our sugar conundrum.

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