General — 27 November 2015 — by Johnelle McKenzie
EU sugar price plunges; local price to rise

BELIZE CITY, Tues., Nov. 24. 2015–The Belize Sugar Cane Farmers Association held their Annual General Meeting on Sunday where the members passed a resolution to increase the domestic price of sugar by $1.00 per pound. This increase is as a result of the lower cane price of $35.33 per ton that will be paid to farmers for their sugar, Oscar Alonzo, Chief Executive Officer of the Belize Sugar Cane Farmers Association (BSCFA) said. Alonzo added that a second resolution was passed that the Sugar Industry Act be amended which would take away the sole responsibility in locating a market and the best price for the cane farmers’ sugar from the American Sugar Refinery/Belize Sugar Industries Ltd (ASR/BSI).

As we reported two weeks ago, the cane farmers were not satisfied with the new cane price which the (ASR/BSI) had estimated at $41.56, which meant that the first payout to the farmers would be $35.33 per ton. As a result of their dissatisfaction, the BSCFA sent a letter to the ASR/BSI in an effort to bargain for a better price. Also, BSCFA sent a letter to Hon. Gaspar Vega, Deputy Prime Minister who is the Minister of Agriculture, for him to intervene on their behalf.

Alonzo told Amandala that ASR/BSI not only mills their cane but competes with the cane farmers since the company also harvests cane. Alonzo said ASR/BSI will be increasing their production of cane from 95,000 tons to approximately 158,000 tons, and he added that, in light of the new cane price estimate, such increased production could have an adverse effect on the cane farmers, since their quota would be decreased as a result. They are therefore seeking to cap ASR/BSI production through the assistance of the Sugar Industry Control Board, Alonzo said.

Belizario Carballo, Chief Finance Officer (CFO) of ASR/BSI, told Amandala, “BSI saw it necessary to return to cane harvesting in 2001 given the decline in cane supply from the cane farmers to the mill, which was straining viability.” Carballo added that ASR/BSI’s cane production quota stands at approximately 9%. He went on to say that in the recent years their production has increased in “tonnage,” but made it clear that the increase has not been “disproportionate to overall growth.”

Javier Keme, the chairman of the BSCFA finance committee, said “The new price would short the cane farmers by $5, since it costs the farmers close to $41 per ton to harvest their cane.” Keme explained “The members of the association pays $1.00 per ton as membership fee to the association, $10 per ton in debts to the commercial banks, cutting $8 per ton and loading $5 per ton and transportation an average of $16.”

Carballo said that a correspondent was sent to the three cane farmers’ associations — CSPA, PSCFA and BSCFA, to explain the factors that were considered in arriving at the new price. The correspondent reviewed the three assumptions: the exchange rate of Euro/US, the production targets for both cane and sugar that result in ton cane to ton sugar, Ts/Tc, and freight rates for shipment to the European markets which determine the cane prices.

In reviewing the assumptions, the correspondent said that the estimated raw sugar will be bought by Tate &Lyle at US $370 per metric ton. This is based on Tate & Lyle’s purchase of raw sugar from countries which are exempted from paying duty for the delivery period of the October to September 2016 crop season and this figure is based on a Euro $1.00 to US $1.08 exchange rate. Also, the correspondent noted that for the 2016 crop season, the price will not be fully established until September 2016 when the crop seasons end, at which time payments will be audited and any additional payments that need to be made to cane farmers will be made.

Keme said that the US $370 figure is based upon Tate & Lyle prices for purchasing; instead they should use the Euro price in the European market. ASR/BSI in their letter stated that the figure the association wants them to use is not an accurate one since it is based on data from the European Commission which is a compilation of values which is in relation to imports to European Union and typically these prices relate to contracts for sugar determined by the prices in the previous year.

Keme said that the ASR/BSI estimation exchange rate of Euro $1 to US $1.08 is too low, since the Euro/US exchange rate presently stands at Euro $1 to US $1.10; however, ASR/BSI in their letter said that the present exchange rate is Euro $1 to US$1.065, and therefore their estimation is more realistic.

Secondly, the letter addressed the cane famers’ request for a “more ambitious estimate for cane quality”, to have it improved to 9.0. Presently it stands at 9.5, which means that it takes 9.5 tons of cane to produce 1 ton of sugar. The letter from BSI explained that the Tc/Ts are determined by several factors, which include factory efficiency and cane quality. The letter listed the trends for the past four years, which were 9.34 to 1 ton, 9.12 to 1 ton; 9.87 to 1 ton and 8.36 to 1 ton and further stated that the Tc/Ts fluctuates and is beyond their control.

The letter went on to state that, “based on the Tc/Ts of 9.5 the sugar production will be 129,000 ton for the crop season 2015/2016.” It added that this represents “the second highest crop on record.” Keme disagrees with ASR/BSI’s estimate of the Tc/Ts at 9.5, saying it is too high since last year’s crop season ended at 8.38.

Where the freight rate is concerned, Keme said that the cane farmers are not disputing the cost, because even if they could get it lowered, it wouldn’t be by a significant amount.

The letter to the cane farmers from ASR/BSI stated that a way to lessen the effect of the lower prices would be to start the crop season on time. In so doing they would be able to maximize the amount of cane delivered to the mill.

Already the start date has been changed from November 30 to December 7. The result of last year’s late start resulted in 200,000 tons of undelivered cane that BSCFA officials told Amandala in a previous interview translated to a loss of $7 million.

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