Mon | Aug 21, 2017

Is the sugar cane industry ready for 2017?

Published:Saturday | May 16, 2015 | 5:00 AMPaolo Amadei
Amadei

As global sugar prices continue to falter, it is no small wonder that the pages of local newspapers have been awash with speculation on the outlook for Jamaica's own sugar cane industry.

Record worldwide harvests in the past four years, Indian export subsidies, and the devaluation of the Brazilian real have all contributed to an oversupplied sugar market, driving down sugar prices to dramatic lows.

Fortunately, Jamaican sugar cane producers have been shielded from the full impact of this decline, largely because of a lucrative three-year supply deal with a British refiner, made possible because African, Caribbean and Pacific countries, including Jamaica, remain the only nations with duty-free and quota-free access to the European Union's (EU) sugar market.

Jamaican sugar cane producers have also benefited from the fact that EU prices have bucked the global trend, keeping a premium of about EU100/ton above world prices. Furthermore, for the past 10 years, Jamaican producers have benefited from a total of EU148.6 million worth of EU support to the local industry's modernisation process, which has reinforced its ability to weather the current storm.

The rationale behind this financial support can be traced back to a 2005 trade dispute. Ten years ago, the EU's sugar regime came under scrutiny after Australia, Brazil and Thailand successfully challenged the legality of the EU's facilitation of ACP imports before the World Trade Organisation's dispute settlement body.

In order to conform to the outcome of the WTO dispute, as well as to respond to internal policy developments, in 2005, the EU decided to gradually cut its support prices and bring an end to its sugar-beet production quotas. The initial September 30, 2015 deadline to end sugar production quotas was subsequently extended to September 30, 2017, thus providing ACP countries with more than 10 years to adjust to the new, and WTO-compliant, regime.

Accompanying measures

Despite the long adjustment period, the EU nevertheless recognised that several countries would require support to transition to this new market reality. For this reason, the EU set up the Accompanying Measures for Sugar Protocol Countries (AMSP) as a temporary adjustment instrument, working in parallel to the national strategies of sugar producing countries.

At the outset of the AMSP, the Jamaican sugar cane industry was uncompetitive for a host of reasons: lack of investment, low yields, poor cane quality, inefficient operations, and limited planting areas.

Since then, sugar cane production has not only stabilised, but also increased by nearly 25 per cent to 154,361 tons in 2014. A critical element of the strategy, the privatisation of state-owned sugar estates, was successfully completed with the support of all stakeholders, attracting private-sector investment to Jamaica and releasing the Government from its subsidy obligations. Furthermore, Jamaican sugar cane farmers now have better access to credit through the Cane Expansion Fund, which has supported the planting and replanting of 11,826 hectares of land since 2008. The AMSP has also effectively cushioned the Jamaican sugar cane industry from the negative social impact of the privatisation process through vocational training, business support, and access to social services and housing.

As of September 2014, more than 660 Jamaicans have been trained and certified in various vocational skills, while 39 social projects, mainly schools and clinics, have been completed. Around 400 families previously living in poor conditions on sugar estates have been provided with new, quality housing, improved access to social services, and a better standard of living.

The accompanying measures also strengthened the sugar cane industry's environmental credentials, in particular by encouraging the transformation of sugar cane into renewable energy, which has proven extremely valuable given high fossil fuel consumption costs in Jamaica.

Better equipped

As a result of the AMSP, the Jamaican sugar cane industry is now better equipped to face the vagaries of the global market. However, this does not mean that the industry can afford to rest on its laurels.

Private sugar cane producers must now rise to the challenge of consolidating these achievements. They should seek to capitalise from regional markets, as well as to explore new terrain such as exploring new markets for rum, processed fruit and other high-sugar products; fair-trade schemes, and origin labelling.

Crucially, they have much to gain from diversifying the sources of their income by investing further in the transformation of sugar cane into renewable energy, a win-win situation, as in that way Jamaica can reduce dependence on imported fuel and continue supporting an industry that guarantees the livelihoods of many families.

While the difficulties in the road ahead cannot be underestimated, as a result of the EU's long-standing support, Jamaican sugar cane producers now have the right arsenal of resilience, efficiency and flexibility necessary to adapt to new realities.

- Ambassador Paolo Amadei is head of the Delegation of the European Union in Jamaica. Email feedback to columns@gleanerjm.com.