Business

Mark Titus, Business Reporter

Jamaica is yet to deliver all the raw sugar promised to Eridania Suisse SA, but has already paid back the funds seeded by the European trader and refiner and booked a profit from the monies collected on shipments to date.

The Government has paid off the US$15 million advanced from the forward sale of 79,000 tonnes of raw sugar from the 2009/10 crop.

John Gayle, general manager of SCJ Holdings, the vehicle used by Government to manage its remaining sugar assets, said the repayment included interest charges, which, from his comments, appear to have amounted to around US$500,000 paid from the first shipment to Eridania in February.

"So far, we made roughly US$24 million," Gayle said.

"They took US$15 million from that, so we got a little under US$9 million; this means we have no liability," Gayle told the Financial Gleaner this week.

The parties had agreed that a portion of the pre-financed amount would be deducted from each shipment of raw sugar delivered until the full payment plus interest is made.

"We have paid off the pre-financed amount, plus interest - US$5.5 million from the first shipment, US$5 million from the second and another US$5 million from the third," said Gayle - for a total of US$15.5 million.

The three shipments amounted to 61,000 tonnes - the Sugar Association of the Caribbean (SAC) puts Jamaica's exports to Europe at a more precise 60,802 tonnes up to theend of April - with the remaining 18,000 tonnes to be shipped by July, the sugar official said.

The two government-owned sugar factories which contributed to the supplies are Frome in Westmoreland and Monymusk in Clarendon.

The Bernard Lodge, St Catherine, facility no longer makes sugar, but the cane grown there makes up the 426,000 tonnes process at Monymusk.

Frome, with a 100,000-tonne sugar capacity, was projected to churn 42,000 tonnes by the end of the crop season, but has already fallen short by 9,000 tonnes, a deficiency the SCJ Holdings manager is blaming on a combination of drought and irregular rainfall.

For the same reasons, Monymusk will not meet its target of 37,000 tonnes of sugar either.

However, the sugar industry is so organised that producers - private and public - sell their output into a pool from which export quotas are satisfied.

But, a more efficient performance is required from both factories if SCJ is to meet its new contractual obligation to another European firm, Tate & Lyle, which displaced Eridania in a new pre-financing deal struck with the Jamaican Government.

Under the Tate & Lyle arrangement, the Government will receive US$46 million over two years in exchange for the supply of 100,000 tonnes of raw sugar annually. SCJ Holdings will receive US$26 million for the 2010 crop year and US$20 million the following year.

Approximately 40 per cent of the agreed supply must be delivered to Tate & Lyle by March 31, 2011.

While, for the 2009/10 crop year, US$6 million was spent - prepare the factories, including new equipment and the planting of cane, another US$4 million-US$5 million is being spent to ensure that for the 2010/11 season the factories achieve greater efficiency.

"We want to place automation in some areas to take the efficiency a little higher, but it is cane planting and irrigation that is going to take up the bulk of investments," said Gayle.

When quizzed about a contingency plan should the Government factories fail to produce the amount required by Tate & Lyle, Gayle said a pooling arrangement has been agreed by local state-owned and private sugar producers. In the event of a shortfall at Frome or Monymusk, the remainder will be sourced from private producers at Duckenfield in St Thomas, Long Pond in Trelawny, Worthy Park in St Catherine or Appleton Estate in St Elizabeth.

Sugar pooling arrangement

"All the sugar factories, through the sugar manufacturers' association, agree to a pooling arrangement, where all the sugar made in the country is pooled, and the various markets are supplied."

The cooperation among producers was also in place for the Eridania supply arrangement.

"What we had to do for the current crop is to exchange with Worthy Park, sending their sugar to Eridania and selling the sugar from Monymusk and Frome locally because Frome bags its sugar, but they (Worthy Park) don't," the SCJ general manager said.

"So Monymusk and Frome bagged for the local market and the rest of factories come together for the other obligation, but each party's volume is weighed and measured and you know how much each makes."

All proceeds from Eridania, both the premium and profit share, Gayle said, are shared among the industry.

"So everybody benefits."

For the current crop, of the total national supply, 79,000 tonnes is slated for Eridania; 12,000 tonnes goes to the United States, of which 6,012 tonnes have already been delivered, according to SAC data; and the remainder supplies the domestic market.

mark.titus@gleanerjm.com