Winston Hay, Contributor
Workers walks along the Sao Fransisco sugar mill in Sertaozinho, about 344km south-east of Sao Paulo, Brazil, recently. New legislation in Sao Paulo State, Brazil's largest producer of sugar cane, requires farmers to begin phasing out manual methods in favor of mechanised harvesting to eliminate the need for large-scale burning and its negative environmental impact. Brazil is the world's largest producer and exporter of sugar and ethanol. - REUTERS
The following is Part II of a two-part paper on the sugar industry by Winston Hay. Part I was published yesterday in The Sunday Gleaner.
JAMAICA CURRENTLY produces ethanol, the alcohol resulting from fermentation of molasses, but what is being referred to in the announcements is a special type of ethanol. When the products of the fermentation process are distilled, what is obtained is generally referred to as 'hydrous ethanol' because it contains about five per cent water.
Hydrous ethanol can be commercially used, for instance, in the manufacture of rum, but it cannot be directly blended with gasolene for use as a motor fuel. Hydrous ethanol must be dehydrated to close to 100 per cent purity for mixture with gasolene.
Pronouncements from government officials and those in the industry imply that the ethanol to be produced in the restructured industry will be used as an additive to gasolene, thereby reducing our dependence on imported petroleum. It is not clear, however, whether the ethanol to be used for that purpose will be obtained from increased hydrous ethanol production in the local distilleries or from diversion of some of the product now used to manufacture rum.
GREATER ECONOMIC BENEFITS
Earlier studies indicated that rum exports bring greater economic benefits than would be achieved by use of the ethanol so employed to produce motor spirits. Rum exports are increasing and have reached the point where it is now necessary to import molasses to satisfy the demand for Jamaican rum.
Production of fuel ethanol without reducing rum supplies could be achieved by a number of alternatives, three of which are:
Increase sugar cane production to provide enough molasses to satisfy the requirements for fuel alcohol and rum. Planning statistics indicate that the acreage under cane cultivation could be economically increased to 46,000 hectares (from about 40,000) and the yield increased to 76 tonnes cane per hectare (from 64). However, until the expected yields per acre are shown to be economically achievable in large-scale tests, these projections must be treated as tentative only.
Reduce the production of sugar by extracting less sugar from the molasses and thereby increasing the amount of ethanol that can be produced in fermentation. This approach would produce sugar of higher quality and therefore, increased market value. In this way, the relative production of sugar and ethanol could be varied in response to market conditions. It would even be possible to divert some of the cane juice directly to ethanol production, as is done in some Brazilian factories producing fuel ethanol. Evaluating the economics of these strategies will require accurate forecasts of the sugar and fuel alcohol markets - a difficult task because of price uncertainties for both commodities.
Import molasses for distillation locally and/or of hydrous ethanol for local dehydration. The latter process is already being undertaken locally by at least one private company, the fuel ethanol being exported to the United States. Petrojam was also engaged in this activity in the late 1980s and has recently announced that it is about to re-enter the market with increased capacity, importing hydrous ethanol from Brazil. If the facilities to ferment imported molasses to hydrous ethanol or to dehydrate imported hydrous ethanol were to be located close to wharves there would be cost advantages over similar facilities located at inland sugar factories since the handling and transportation costs would be reduced.
UNRELATED SECTORS
However, if ethanol is to be produced from imported products - either molasses or hydrous ethanol - the activity is not really part of the sugar industry and will contribute little or nothing to increased sector efficiency. This circumstance is demonstrated by the fact that the companies now producing anhydrous alcohol have no direct ties to the sugar sector.
Jamaica's commitments for sugar exports to Europe and the United States are currently about 130,000 tonnes per annum. As the local market is approximately 60,000 tonnes per annum of brown sugar, Jamaica must sometimes import brown sugar to satisfy the local demand after honouring its export commitments. In addition, Jamaica currently imports about 70,000 tonnes per year of refined (white) sugar, which is not locally manufactured.
As the subsidies paid by the importing countries are reduced, Jamaica will probably lose its export market altogether, as it is unlikely to be able to produce sugar at internationally competitive costs. However, sugar manufacturing could possibly be maintained at about the current levels if manufacture of refined sugar were to be restarted here. It is uncertain whether current plans for the sector include production of refined sugar. Local production of brown and white sugar, as well as hydrous and anhydrous ethanol, would allow considerable flexibility in the relative production of end products from any given quantity of cane supplied.
This paper is not intended to suggest that no planning is being undertaken for restructuring of the Jamaican sugar industry or that such plans as have been developed are misguided. Neither does it make specific policy recommendations. The paper's objective is simply to suggest that the general public be brought more into the picture of what is being planned and that inputs to the planning process be invited.
Many Jamaicans are concerned because sugar appears to be an industry that we can neither afford to keep alive nor afford to shut down. Questions are being asked by many persons and it is quite possible that the concerns they reflect are being addressed by the policy makers, but the answers appear to be secrets.
Openness in the planning process has no apparent disadvantages, as the Government of Mauritius concluded when it put its restructuring road map on the World Wide Web. Dr. Kassiap Deepchand, deputy executive director of the Mauritius Sugar Authority, has expressed the opinion that the success of the Mauritian sugar industry is dependent on the "various stakeholders operating in an open environment with clearly defined government policies". Perhaps the same principles could be beneficially applied in Jamaica as well.
Email Winston Hay at winjhay@cwjamaica.com.
