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Sugar Production vs Profitability

Jun 12, 2011 Editorial

At the end of last year, we were heartened when the Minister of Agriculture informed the National Assembly that 2011 would be a “landmark” year for the sugar industry. Alluding to the massive investments and support the government had poured into the industry, in addition to the turnaround blueprint that had been crafted, he announced a production target of 300,000 tonnes for 2011.
Against the 2010 background of the lowest production in two decades this would have been a remarkable achievement for the troubled but still key industry for Guyana.
A month later, the Head of the EU in Guyana, Geert Heikens, opined that in his estimation, the Guyana Sugar Corporation had set too ambitious a target for the year. Since the EU was the largest and most profitable market for GuySuCo’s production and was providing funding for the revamping of the industry through budgetary support, one would have thought he had some legitimate interest in the matter.
Not so claimed Minister Persaud: “The number set by GUYSUCO would have been based on a realistic assessment. I, myself, would have questioned the number, but they assured that based on the carry over which was about 40,000 tonnes and the work they would have done would make it possible.”
He suggested that Heikens would be better served if he confined his attention to ensuring the EU kept its commitments to the industry rather than speculating on its targets.
All of this might have been dismissed as idle byplay were it not for the production figures that have emerged as the first crop draws to a close. The target for this crop had been set at 138,000 tons and even though it has been extended beyond twenty weeks – possibly the longest first crop in history – the production as of last Friday was only 104,622 tonnes.
Three factories are still “grinding” – Albion, Enmore and Wales – with cane harvesters from the other locations being transported to their fields to augment the supply of canes.
What is very troubling is that even though Minister Persaud was assured that 40,000 tonnes was being carried over; the crop was extended and workers from other estates have chipped in but the target will still be short by some 30,000 tonnes. Something has to be radically wrong with the planning unit of GuySuCo to be so far off target.
We cannot keep blaming the rains: even though we had some unseasonal rains in March, the generally much heavier precipitation in May never materialised.
It should have been evident for several years now – but for sure after last year – that the shortage of cane harvesters is now a systemic one. As we have said, before, the government is now a victim of its own success. With alternative employment opportunities available, especially in the booming building sector, we predict that it is unlikely the trend will ever be reversed.
Yet the management of GuySuCo is still insisting that the 300,000 tonnes target for the year will be reached.
One concern we have is whether the EU budgetary support is linked to what is obviously an unrealistic and unreachable target. If this is so then we might lose “corn and husk” as we did last year: no EU support and no income from the missing production.
The other concern we have is the cost of production as GuySuCo pulls out all the stops to reach the “landmark” target.
Even though the total cane expansion for the Skeldon Modernisation was never reached it still exceeds the capacity of the “boilerless” plant. What is the fate of the excess cane for the last few crops? While we might be recovering the costs of fixing the boilers etc. from the Chinese, what about the higher costs of the sugar produced?
The other factories have all been operating on a stop-go basis due to intermittent supply of canes: this has to make the fixed costs astronomical.
Thirdly, the costs of transporting the workers from as far away as Blairmont to Enmore and LBI to Wales etc. has to be adding up. What is GuySuCo trying to prove?

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