Could Guyana lose key buyer? Push down production cost of sugar, UK envoy warns

Nov 06, 2015 News

By Abena Rockcliffe

Reduce the production cost of your sugar or risk losing a major buyer.
That is the subtle message that United Kingdom High Commissioner, Gregory Quinn seems to be sending to those in management of Guyana’s sugar industry.
Guyana’s largest sugar buyer is Tate and Lyle—a UK based multinational agribusiness.
During a recent exclusive interview, Quinn said that while, from all indications, Tate and Lyle has every interest in remaining one of Guyana’s largest buyers, that continued relationship is based heavily on whether the price is right.
And of all the problems in the sugar industry, the UK envoy deems the high production cost to be the most troubling.
Guyana produces sugar at a cost three times that of other countries. This has pushed Guyana off the competitive market as the country sells its sugar higher than others producing the same commodity.
Quinn told Kaieteur News that everything he is hearing from Tate and Lyle indicates that the company wants to continue to buy from Guyana and “they will buy as much as they possibly can buy, but it is a commercial business. So we need to start getting used to the fact that they will be acting more as a commercial business.”
Between those diplomatic lines is a message that just should not be ignored by key decision makers in Guyana’s sugar industry.
Quinn said that in the short to medium term future, it is unlikely that the price of sugar will ever return to where it was some years ago and this reality needs to be embraced.

UK High Commissioner, Gregory Quinn

“I think people need to start looking at the possibility that the sugar prices might remain low for the foreseeable future. It might not remain as low as 16 cents per pound but it is not going to go up to the prices as was the case 10 to 15 years ago…so it goes back to trying to push down the cost of production,” said Quinn.
Despite the high production cost, Quinn said “There will always be a market for Guyanese sugar at Tate and Lyle. Tate and Lyle can refine Guyanese sugar in a way that not every refinery can and it is set up to do that. It produces large amounts of molasses as part of the process. This (molasses) is key to some of Tate and Lyle syrup products. But there are other Caribbean sugar producers.
“Any good business buys if the price it right which reflects on what they then sell their product for, keeping in mind that there is a global reduction in demand for sugar and sugar based products. So therefore the prices which Tate and Lyle can actually charge is also being pushed down as the demand is not the same as it was. Tate and Lyle has to think commercially if it buys at x price then it has to process then sell; so it is obviously not going to buy at a price which means it sells at a loss.”
The sentiments expressed by Quinn harmonize with that which was conveyed by Tate and Lyle representatives earlier this year.
In late July, Tate and Lyle representatives met with members of the Commission of Inquiry (CoI) into the sugar industry.
The company warned that cane sugar is facing its toughest test yet and will soon be competing more with beet sugar.
Beet is being grown right in Europe. It is rivaling cane sugar in the market.
Tate and Lyle has been one of Guyana’s oldest customers for cane sugar.
With the removal of preferential prices which Guyana and other member of the African/Caribbean/Pacific (ACP) group had enjoyed, the developing situation dictates that producers have to be more efficient and that demands disciplined management.
The Tate and Lyle officials noted that the price situation will become even more complex for Guyana when the cap on beet sugar production is deregulated.
They advised that the EU will be dominated by beet. “Even in countries that are major producers of cane sugar, some factories have been closing,” the COI statement said yesterday.
Tate and Lyle officials indicated their willingness to provide technical advice to GuySuCo.
Guyana’s sugar industry has been steadily sliding downhill for the last decade.
Government has plugged more than US$50M in the last five years into sugar industry.