ORANGE WALK–In what has now become a disturbing period of uncertainty within one of the country’s most vital economic pillars, the besieged sugar industry, and just eight weeks away from the scheduled commencement of the 2014/2015 sugar crop season between late November and early December 2014, the Belize Sugar Cane Farmers’ Association (BSCFA) and factory owners Belize Sugar Industries (BSI)/American Sugar Refineries (ASR) remain at an impasse in their efforts to reach a definitive, refined commercial agreement due to major differences between them.
Indications are that neither side is even close to reaching a fixed accord anytime soon, especially as it relates to the troublesome dispute over payment for bagasse, which has been a major roadblock in the negotiations among the industry’s stakeholders.
The worrying situation, coupled with plummeting sugar prices in the international market, has prompted BSI’s multinational parent company, ASR, to dispatch a senior executive in the person of Mac McLachlan, ASR’s International Relations Advisor, in an effort to hopefully diffuse the volatile circumstances, but more importantly, to communicate ASR’s sense of urgency in its quest to reach a resolution and ensure the future of the sugar industry.
Yesterday, McLachlan visited Amandala to relate BSI/ASR’s side of the story, and convey the company’s concerns and expectations.
He said, “We are a company that is very much committed to the future of the sugar industry in Belize. We believe there is a good and strong future for that industry, but we believe that we need to get on a firm footing to help build that future. At the moment, we are concerned because we are in a position some 8 weeks before the due start of the crop, and we still do not have a commercial cane purchasing agreement with the BSCFA, who is acting on behalf of the [local] cane farmers. We are in discussion with the BSCFA about that, and our intention is that we will conclude an agreement before the next crop season starts, but there are a number of concerns we have about that process.”
McLachlan explained that the key concern of ASR at the moment is that there seems to be a “misconception” at the senior levels of the BSCFA leadership, about the way the sugar industry works.
He went on to say, “Since its inception, the Tower Hill mill has purchased sugarcane from cane farmers in Belize. The purchase of sugarcane is important for any sugar industry because once it [the millers] owns that sugar cane, and the sugar that is produced from it, that enables it as a business to get into commercial contracts to sell that sugar – in the case of Belize, mainly to Europe, but it needs to have the ownership of that sugar to go into such contracts.
“That is the way commerce and business works, and equally, it needs to have certainty of the ownership of the product that is being produced in order to have that for collateral for investment in the future of the business and how it works. This has always been the case; it’s the case in every sugar industry in the world, and it seems that through the discussions we are having with the BSCFA, that the leadership of the BSCFA are trying to move the goal post on us, and despite the $180 million investment that ASR has made in the industry here, they want to make this into some form of processing center for their sugar and retain ownership of their sugar, and it is very difficult for us to comprehend because it’s never been the case in the past, and it cannot be the case for any functioning sugar business, so we really have a very clear issue that we need to overcome with the BSCFA leadership, and I fear that in this discussion, there has been some misleading information that is being given to the local cane farmers. A sugar company that produces sugar needs to have the ownership of that sugar in order to operate and function.”
The ASR representative also spoke about other issues, apart from bagasse, that currently stagger the prospects of reaching an agreement between the two main partners in the industry, including the stunning revelation that BELCOGEN has not been profiting from the sale of bagasse.
McLachlan said, “Bagasse is another issue and again, this is an issue that had delayed the process of being in agreement for nearly a year now since we started discussing the issue of bagasse back in January 2013. At that point, BSI/ASR had conceded that we would work out a proper formula on which basis we could work out a payment for bagasse, but that formula had to articulate the amount of fiber which is used in the bagasse to produce electricity. We produced that formula and we have presented that to the BSCFA leadership, but up to now, we have not had a decent discussion on the basis of that formula.
“There’s been a lot of misleading representations about how much that formula adds up to, but the point is that we are discussing a proper sensible formula that is both fair to cane farmers and the business/industry. [Therefore], I just want to emphasize that we have provided certified audited evidence of our financial figures to BSCFA that determine that BELCOGEN has not turned a profit since its inception. In respect to the arguments of whether one believes that bagasse, which, in our view, is a waste product, from the process of making sugar, or whether you believe it is a byproduct — irrespective of that, there is no profit to share, and this has been a misconception throughout this entire discussion.
“We have, as good stakeholders in this industry, agreed to come up with a quantum payment for bagasse, but it must be based on scientific, grounded evidence of the use of the fiber in bagasse which is used to produce electricity, and that remains the situation at the moment, and BSCFA leadership has tried simply to put a price on this, and they have been trying to do some kind of bartering over it, but that is not how this industry works.”
In light of that point of contention made by McLachlan, we asked what would happen if BELCOGEN happens to make a profit in the long run.
McLachlan, however, responded by saying, “I want to emphasize that you can’t take one part of this business aside from another part. Our aspiration remains to grow this industry, and I think it is important to make clear the national importance and benefit from growing our industry to Belize as a country because this is one of the essential pillars of the Belizean economy.
“As we stand, we face very difficult market conditions in the world, and we have to improve our competitiveness if this industry is still going to be around in several years’ time. At the moment, the yields of sugar produced by the cane on the [local] farmers’ land are some of the lowest in the world, and that means that this is not a productive industry at the moment, but we intend to double the size of this business, at which time, the industry will be able to stand up on its two feet, and that will be to the benefit of the cane farmers, obviously because they will be more prosperous, but it will also be to the benefit of the nation of Belize. We would hope that if we double the production, we would be increasing the contribution that sugar makes to the GDP by another 4% at a time when there are lots of other strains on the Belizean economy, due to the falling off of petroleum profits and other things, so this is a really big issue.”
“On the bagasse issue, if the cane farmer is doubling his yields on his farm, obviously, using the same formula, his revenues would increase, so everybody needs to be in this game together, but the thing is that the investment climate in Belize at the moment is not suitable to withstand the industry. There are a number of different reasons for that, but one of the primary reasons is because we don’t have a good working relationship with our core supplier, the sugarcane farmers, and we buy 90% of the sugar cane that is produced in this country.”
ASR’s senior executive implied that they are not trying to “strong arm” the industry; however, an agreement is imperative for the hemorrhaging industry.
He said, “It’s our intention to have agreements in place for the purchase of sugarcane by the time the crop starts. Last year, it was postponed by weather, but also by the leadership of BSCFA who delayed the beginning of the crop, which cost the industry an estimated BZ$7 million. That is something we cannot have a repeat of this year; the country and the industry can’t afford it. It’s our intention to have the season ready to go and operating in the optimal time for the crop in November or December.”
We also prodded McLachlan to expound on the current situation regarding sugar in the European market, and its implications for Belize’s sugar industry.
He replied, “This is a crucial point and the reason why we need to improve productivity. In the past, prices in the European market have been much higher than global prices, and that is because there is a lot of regulation. In Europe, 80% of the sugar that is produced and utilized is beet sugar that is grown in Europe. Only 20% comes from imported sugar, not just from Belize. That regulation had to constrain the amount of beet that could be produced and utilized in the market. That is going to be lifted in October 2017, which means that the beet producers will be able to flood the market with sugar.
“That means that the prices which have been enjoyed by industries in the past will fall away, and we expect those prices to level out at global market levels. There is still a place for cane sugar, but what we need to do is to ensure the industry in Belize is competitive enough to stand on its own two feet in the global market. At that point, we will be able to push forward and grow the industry and improve the productivity and prosperity further for the farmers and the national economy, and that’s our objective.”
He mentioned that the company has made efforts to reach out to cane farmers to explain the situation; however, the leadership of the BSCFA does not seem to be comfortable with that initiative.
“We spent a lot of time talking to cane farmers, and this company, ASR, is a company of cane farmers, built on cane farming – that’s what we believe in. We came here with the intention of helping cane farmers and also helping ourselves in the process because you can’t have a mill without the cane, and you can’t have the cane without the mill; you need both sides of this industry to be working together.
“We are talking and explaining our position to many cane farmers, explaining how difficult the market is going to be, and that we will all have to come together in order to overcome those difficulties, and we also want to have that kind of discussion with the BSCFA and its membership. We had tried to explain our position on bagasse to the BSCFA at a general assembly. We wrote and asked if we can come and present our information; however, the BSCFA leadership did not allow us to do that. We have never walked away from a project, we intend to make this work and help cane farmers to improve their prospects of prosperity as well”, he concluded.
Today, Alfredo Ortega, the vice chairman of the BSCFA’s committee of management and the chief spokesperson for the local cane farmers, responded and told us that BSI/ASR came with a proposal that was not drafted in the best interests of the farmers.
“We met with them on September 8, and they gave us an agreement that they developed themselves. We sent ours to them from since 2012 when we informed them that we want to start negotiations for a new commercial agreement. We looked at theirs and we responded to them, and based on their proposals, the benefit will be very minimal to the farmers, so we have sent a counterproposal to them which we will be negotiating on in our next meeting”, Ortega informed us.
At this point, even though the two parties are not seeing eye-to-eye, they agree that reaching an agreement is mandatory before the start of the next crop season.
Ortega said, “The Deputy Prime Minister was at the meeting last Monday, and he spoke about the presentation that they [BSI/ASR] had done regarding the agreement that they developed themselves, and we will be looking into that, but those are things that we have been mentioning from 2012 in terms of reaching an agreement to guide the process for both the millers and ourselves as farmers.
“Now, we agreed to this interim agreement for the crop to go on – the crop that just finalized, but we are heading towards another crop and they would want us to finalize the agreement so that we can start a new crop with a new agreement, but the situation is that we are looking into incorporating an agreement for bagasse, but they are basing on the formula that they have developed, and not looking into reaching an agreement with a formula that would be fair to the farmers, and that is what we are asking for.
“They have also presented some changes in their proposal in terms of the harvesting and delivery of cane, to develop a new group between them and ourselves, and that is something that is presently being guided by the Sugar Cane Production Committee, so we are looking keenly at those issues to see how it will impact the farmers. We are seeing how we can finalize this issue, but at the same time, we want to make sure that farmers don’t end up losing due to the agreement.”
According to Ortega, the BSCFA’s main gripe is that BSI/ASR has basically cast aside many portions of the old agreement and created a new one in which they have the upper hand in regards to benefits and decision-making, citing that the only thing that was brought over from the old agreement is the payment scheme for sugar cane.
Both sides are scheduled to meet to continue their negotiations at the BSI Staff Club in Orange Walk next Thursday, October 9.
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