Sugar Production vs Profitability

Feb 01, 2015 Editorial

At the end of 2010, 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 that 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 then 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 the then Agriculture Minister, Robert 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 since then. The targets have grown smaller and smaller. The target for this crop has not been set even. By this time last year it was known. In 2011 the first crop was identified as possibly the longest first crop in history. It ended at 114,000 tons.
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 chipped in, but the target was still short by some 30,000 tonnes.
The situation has not changed, crops have grown progressively smaller. A few years ago the experts concluded that something had to be radically wrong with the planning unit of GuySuCo to be so far off target. Today the authorities are still to come to grips with the reality that sugar could be dying.
We cannot keep blaming the rains: even though we had some unseasonable rains, 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.
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.
The cist of production is way above the world market price for sugar. In addition, because of the recent proroguing of parliament and certain challenges, the European Union opted to withhold its budget support. The result is more suffering for GuySuCo.
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. 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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Sugar Production vs Profitability

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