Camilo Thame, Business Reporter

JAMES

The current sugar crop has ended the year behind target, heightening fears in an already jittery sector that Jamaica won't have a sugar industry in 2009 unless 'drastic' measures are taken within three months.

For Karl James that means wrapping up the divestment of the factories and estates.

The estates churned out 147,000 tonnes of sugar over the season, but players said it could have done better if factories were up to par.

James, head of Jamaica Cane Products Sales, the government entity responsible for offloading cane to respective markets, says cost reduction and increased productivity need to take place within the next crop year for the sugar industry to stay afloat.

He believes that investments in some of the factories before December could yield significant improvements next year, but is ultimately dependent on "how anxious Government is in concluding arrangements."

"A decision has to be taken on the divestment of the factories," said James.

"We could have something done between now and the next crop year. Little can be done for investment in the field but for the factories, the same amount of cane used this year could have yielded over 170,000 tonnes of sugar."

Of the 147,000 tonnes produced by the state factories and the two private estates - Worthy Park and Appleton - the European Union got 125,000 tonnes of sugar, or more than 85 per cent of output. The rest went to the United States.

When Bernard Lodge's last parcel of sugar came out in July to complete the production year for the Government's five factories, total output of sugar was just over 100,000 tonnes, representing a 23 per cent increase in output over the previous year that recorded the lowest output on record that came behind the devastation wreaked by Hurricane Ivan in September 2004.

30,000 tonnes short

However, this year's production numbers fell 30,000 tonnes short of target, and more importantly, efficiencies as measured by the conversion ratio of tonnes of cane to tonnes of sugar, decreased significantly during the current crop year, which ran from December 2005 to July 2006.

"The 2005/06 budget was predicated on the production of 1,430,400 tonnes cane and 130,000 tonnes sugar at a TC/TS ratio of 11.00," said the Sugar Company of Jamaica's (SCJ) Agriculture Services unit in response to Wednesday Business queries.

Actual production outturn at end crop was 100,006 tonnes sugar produced from 1.27 million tonnes cane at TC/TS of 12.73.

"This reduction represents a shortfall of 29,994 tonnes sugar or 23 per cent, and 157,025 tonnes cane or 11 per cent," said the SCJ.

The conversion rate worsened at three of the five factories - Frome, Bernard Lodge, and Duckensfield in St Thomas. while, of the two factories to see improvement - Moneymusk in Clarendon and Long Pond in Trelawny - only the Clarendon factory came close to target at 11.13 TC/TS.

"Fall-off in cane quality resulted in the loss of approximately 17,700 tonnes sugar," said the SCJ. "Quality fallout is a consequence of significant rainfalls experienced during the latter part of 2005, after the drought experienced earlier.

"This variation in rainfall pattern negatively affected the growth cycle of canes particularly in the rain-fed areas, thus the expected maturity at harvest was not achieved in some cases."

The shortfall in cane harvested, due mainly to what the SCJ described as industrial unrest and illicit fires, accounted for the other 12,300 tonnes of sugar that was not produced in the current year.

Low cane yields

It is not clear how the shortfall and fall-off in conversion rates have affected the SCJ's $400 million loss target for the year ending September 2006. But last year, when the company produced 81,000 tonnes of sugar at better conversion rates, it made a $1 billion loss, putting the accumulated deficit above $8 billion as at the end of September 2005.

But in the year before the first price cut on sugar destined to the EU - 5.1 per cent reduction implemented in July of this year - affects the local sugar industry, Allan Rickards, chairman of the All-Island Jamaica Cane Farmers Association, thinks the sub-par performance is indicative of a more fundamental problem of low cane yields from lack of replanting.

"I don't subscribe to the argument that labour issues had anything to do with the shortfall," said Rickards. "The shortage is a direct result of shortage of cane supply caused by a breakdown in the replanting programme."

It is believed that replanting should be 16 per cent above the previous crop to sustain cane yields in Jamaica.

However, Rickards said that over the last decade, the programme has not been followed and he estimates current replanting among small farmers at around three per cent on average and at around five per cent for state-run cane lands.

Private cane farmers provide approximately 40 per cent of the cane needed at the state-owned factories and about 35 per cent of the private factories input.

"If we lift our yield from around 40 tonnes per hectare to 65 tonnes, we may be able to compensate for a 36 per cent price reduction," said Rickards about the possible impact of the EU phased price reduction which will be phased up to 2009.

"A major factor affecting the farmers is the availability of equipment, or lack thereof, particularly hauling and harvesting," added Rickards.

Drastic changes

Incidentally, major developments in another industry - construction - has caused some of the problems faced by the sector. Highway 2000, according to Rickards, provides greater incentives for truck drivers who haul marl and other raw materials, including incentives on GCT and cost of diesel used in transporting the material to the roadway development sites.

Private farmers also have to make drastic changes to supply the factories with the quality and quantity needed for higher conversion rates at the factories.

For instance, private firms such as Worthy Park estate saw its conversion rate worsened during the current year, from 7.75 to 8.72, due to "the two hurricanes last year that brought tremendous rain," said managing director Peter McConnell.

The rain, he said, washes away fertiliser, and stunts cane growth much as a drought would. However, considerably higher conversion rates for the cane harvested from private farms pushed up Worthy Park's conversion rate to 9.22 this year.

Having come out of this year in the black, McConnell believes he will be able to manage the five per cent price reduction, but he remains uncertain about the future of his business after the 12 per cent reduction scheduled for July 2008.

"I can live with the five per cent reduction this year, but the reduction scheduled for the year after next ... We may have to close down," said McConnell. "Our rum, which we started last year, takes about three years to age. We currently sell rum to the foreign market, but it takes some time for any new business to become profitable. Our rum business may be seriously affected by the reduction in EU prices as well."