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Editorial: Wary of mission creep in sugar

Published:Friday | November 6, 2015 | 11:00 AM

No one couldn't but be empathetic with the Government in wishing to provide a cushion to those segments of the sugar industry facing stress but are wary of mission creep. If the administration and people are not vigilant, in short order, the industry could be back in the hands of the State, which would then be rummaging through the pocketbooks of taxpayers to pay for the misadventure.

The matter of immediate concern is yesterday's announcement by Derrick Kellier of the Simpson Miller administration's decision to effectively provide sugar cane farmers in the northern parish of Trelawny transportation subsidies because they will have, in the coming crop, to deliver the commodity much further, to the southwest, to the Appleton factory in Siloah, St Elizabeth. At the same time, the Government will rehabilitate roads in three parishes - Trelawny, St James and St Elizabeth - to facilitate this movement.

In the normal course of things, the second element of the initiative would hardly be a matter for comment. The establishing and upgrading of public infrastructure is part of what governments do to encourage enterprise. In any event, once these roads are upgraded, it is unlikely that sugar cane-hauling tractors would be the only vehicles travelling on them. They will have broader economic and social value.

But there are legitimate economic questions to be raised about the specific subsidies relating to the administration's fiscal programme, and more important, the danger of presuming that the Government's hand is better than the market's, and, therefore, that it has a right or obligation to prop up what may well be a failed industry.

The Government has taken these decisions, for which a dollar figure has not been announced, because the Long Pond Sugar Factory, owned by the Hussey family-controlled Everglades Ltd, will not operate this season because it will be uneconomic to do so. There are two reasons for this: One is the weak price for sugar, although it has recently edged up to near US$0.15 per pound. The other is that though improved, Jamaica doesn't operate a very efficient industry - or one that benefits from economies of scale.

Last year, for instance, the island's sugar output was 134,224 tonnes, a 13 per cent reduction on the previous year. It required 11.71 tonnes of cane for each tone of sugar produced, or 1.4 per cent more than the previous year.

 

CONTENDING WITH VAGARIES

 

These are various reasons for this, including the weather. These are the vagaries, including bad market conditions, with which private businesses may have to contend. Indeed, that would have been in the mix when Everglades paid US$1.5 million for Long Pond and the Hampden sugar factory and rum distillery in a broader government divestment of its sugar holdings aimed at extricating taxpayers from decades of losses and more than J$5 billion of debt.

Moreover, at the time of those sales six years ago, buyers were aware that Jamaica was on the verge of losing its preferential market in Europe for sugar, where the price for the commodity was already being slashed.

There is a lot of sentiment and social history knitted into Jamaica's sugar industry. But as Mr Kellier indicated, sugar is also business. And in a free market, especially a global one, businesses sometimes have to make tough choices.