Tue | Nov 20, 2018

Editorial | The future of sugar

Published:Tuesday | September 4, 2018 | 12:00 AM

 

No Jamaican industry has been analysed, studied and enquired into as has been sugar. In the last 60 years, there have been at least seven government-inspired commissions of enquiries or reviews akin thereto, into the industry. The latest was in 2010 when a team, headed by the economist, Alvin Wint, looked into the efficacy of the industry's regulatory agencies. This list, of course, doesn't include a raft of academic studies, management reports and other official documents on the economics and social import of sugar produced over those six decades.

It may seem strange, in the circumstance, that this newspaper should be recommending, as we are, another formal commission of enquiry into the industry. In this case, though, unlike those of the past to cobble support regimes for sector, this one would be to provide cover for the Government to free itself of moral hazard, honourably extricate itself from sugar, and establish the environment for replacement industries.

Recent developments, especially J. Wray & Nephew's ceasing of production at, and handing back to the Government, two sugar estates in St Elizabeth have caused us to return to this matter that has long exercised not only this newspaper, but others with concern about the survival of an industry that has long existed on life support.

JWN's action will displace more than 220 workers, most of them seasonal employees. While the company has insisted that it is committed to sugar production and will maintain its Appleton Estate and factory, this assurance can't, over the longer term, be deemed to be bankable, for the very reason why there have been so many studies and enquiries into Jamaica's sugar industry. Except for the periods when it was buoyed by preferential markets in Europe, as occurs occasionally when the world market price of the commodity is high, sugar production in Jamaica is unprofitable.

The industry and the tracks of land on which it operates are too small to achieve the economies of scale to be competitive with producers in India and Brazil. At the same time, sugar cane yields in Jamaica per hectare are up to 20 per cent lower than in those countries.

When the industry is in trouble, Government steps in to bail it out, as has been the case recently with transportation subsidies to farmers in regions where private mills have mothballed their plants because of losses. Indeed, a decade ago, when the Government, for the second time in 15 years, divested itself of its sugar assets, it had debts of J$30 billion and annual losses of J$5 billion.

Government has been drawn into this position because sugar employs upwards of 30,000 people, mostly as seasonal harvesters, and the industry helps to bolster rural economies. Often, the industry is treated as social welfare rather than hard-nosed business.

 

Look at alternatives

 

The enquiry we propose would be mandated to look at economic alternatives to sugar production, without the 1967 presumption of Sir John Mordecai that the replacement has to be a single crop, or his assumption that any substantial saving of foreign exchange, by utilising sugar cane land for domestic food production, "lacks substance and viability".

Jamaica's annual food import bill is upwards of US$700 million and it is estimated that up to a quarter of that, or US$175 million - more than four times the foreign exchange earned from sugar exports - could be replaced via import substitution. Indeed, many agro-processors in Jamaica can't find the source raw materials locally for their operations.

Government, through the agriculture ministry and its business-promotion agency, would provide technical information on land availability, crop suitability and potential business/economic opportunities, leaving private people to do the rest, with two provisos. First, the best agricultural lands can't be allocated to housing and for establishing new cities, as is proposed for Bernard Lodge. Nor can land be allocated on a politically partisan basis. The process has to be transparent. The displacement of sugar workers is likely to be a real social and political issue. But the Government would likely find it cheaper to provide these seasonal employees with direct financial transfers, like with the PATH, than subsidising sugar production.