Pan Caribbean shakes up sugar market, AIJCFA cries foul

Published: Wednesday | December 12, 2012 Comments 0
Pan Caribbean Sugar Company (PCSC) was officially granted agency status in May, this year, allowing the company to independently market the sugar it produces in Jamaica. Seen at the ceremony in St. Andrew on May 8 are He Francis, chief executive officer of PCSC (left); Minister of Agriculture and Fisheries, Roger Clarke. In the background is permanent secretary in the Ministry of Agriculture and Fisheries, Donovan Stanberry. - File
Pan Caribbean Sugar Company (PCSC) was officially granted agency status in May, this year, allowing the company to independently market the sugar it produces in Jamaica. Seen at the ceremony in St. Andrew on May 8 are He Francis, chief executive officer of PCSC (left); Minister of Agriculture and Fisheries, Roger Clarke. In the background is permanent secretary in the Ministry of Agriculture and Fisheries, Donovan Stanberry. - File

Marcella Scarlett, Business Reporter

Agriculture Minister Roger Clarke recently joined with cane farmers in bashing the business practices of Pan Caribbean Sugar Company (PCSC), whose operations appear to diverge from traditional commercial arrangements.

The Chinese firm has reportedly cancelled prepayments on the crop and instituted a different system for the distribution of a key input, fertiliser.

Clarke, who is a cane farmer, also charged that PCSC lacks transparency, noting, for example, that the company failed to advise farmers that it fetched a lower price for its sugar than the figure negotiated by the industry-affiliated marketing agent.

The All-Island Jamaica Cane Farmers Association (AIJCFA), however, is more immediately concerned about access to inputs and how that might be affected by PCSC's apparent shift from standard industry practices. The issues, accompanied by heated rhetoric, were central in the discussions at the association's annual meeting in Kingston recently.

Haggling over access

The farmers and Pan Caribbean Sugar are now haggling over access to fertiliser and the quality of the product imported by Pan Caribbean Sugar and the connected issue relating to prepayment for canes supplied to factories.

The AIJCFA is not sure it trusts the fertiliser supplied by PCSC.

"What is being imported as blends is not even the blend that we use in the majority," said AIJCFA chairman, Allan Rickards.

Pan Caribbean imports the 20-0-30 and 16-18-0 Nitrogen Phosphorus Potassium (NPK) blends to make the 18-9-15 NPK formulation.

However, the farmers generally use the 16-9-18 NPK formulation, Rickards said, adding that they also have no way of verifying that they are receiving the right inputs.

"Maybe the fertiliser needs to be certified by the Bureau of Standards and the weedicide by the Pest Control Authority," said John Plummer, a member of the AIJCFA executive and a cane farmer supplying cane to Monymusk in Clarendon.

Pan Caribbean Sugar is a new player in the Jamaican market, which it entered in 2009 when its parent, COMPLANT, acquired Frome, Monymusk and Bernard Lodge factories from the Jamaica government. The acquisition finalised government's privatisation of its six factories.

Traditional arrangement

Traditionally, the arrangement between factories is that their contracted farmers may access loans from factories for up to 80 per cent the value of cane they are expected to deliver in the next crop season, at 5.0 per cent interest, said Rickards.

Farmers would then use the proceeds to acquire inputs.

PCSC recently got approval to import its own fertiliser and, by extension, to supply input to cane farmers attached to their factories, Rickards added.

This resulted in the Chinese company discontinuing the loan scheme at its three factories, leaving farmers with the option to either purchase out of cash flows or use the Chinese imported blends, Rickards told the meeting.

Rickards acknowledged that the Chinese operators are considering a new loan programmme, which would give farmers the option to procure their own fertiliser, but he remained critical of the company's management.

"We do not appreciate the way He does business. In this country, if they are going to have a relationship with us, He must learn to come straight," said the AIJCFA president, referring to PCSC chief executive officer, He Francis.

"He needs to deal fairly with the farmers and come straight with them," Rickards said.

No comment

The PCSC chief executive officer was reached by Wednesday Business, but declined comment on any of the issues raised.

Rickards said of the 5,000 tonnes of fertiliser brought in by the PCSC so far, only 1,000 tonnes is of the 16-9-18 NPK blend that farmers generally use.

The Chinese-imported fertiliser is not available for sale on the retail market, said the chairman of the AIJCFA.

"They have written to the Ministry (of Agriculture) for permission to sell," said Rickards.

"The Government has not refused their application, the Government is actually considering it," he said.

Pan Caribbean Sugar was also granted 'agency status' this year, which allows it to market its own sugar. Prior to the privatisation of the industry, Jamaica Cane Product Sales was the sole marketing agent for sugar, whether produced by private or government-owned factories.

Rickards told the AIJCFA meeting that Pan Caribbean's first attempt to market sugar secured a price of only J$68,000 per tonne, while JCPS has negotiated and locked itself into a three-year deal with Tate & Lyle for J$75,000 per tonne.

Need for communication

The agriculture minister raised the issue while arguing for the Chinese firm to communicate more with the farmers it contracts.

"The manufacturers in the sugar industry must recognise that the cane farmers are equal partners. I have come under pressure for saying to a company you cannot export sugar at will without any arrangement to let the farmers know how much per tonne you get for the sugar when you sell it," said Clarke.

"They need to be transparent, man. That is not how we do business in this place," he added.

The minister's salvo against PCSC was also meant, it seemed, to dissuade other factories, which Clarke believes will eventually seek agency status to market their own sugar, from thinking "they too could act at will", leaving the farmers at a disadvantage, he said.

- marcella.scarlett@gleanerjm.com

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