Friday | March 6, 2015

Pan Caribbean shakes up sugar market, AIJCFA cries foul

Published:Wednesday | December 12, 2012
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