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BSI boasts of high 2022-23 1st payment; BSCFA not impressed

HeadlineBSI boasts of high 2022-23 1st payment; BSCFA not impressed

Photo: First Cane Price Estimate chart (Photo by BSI/ASR)

“It’s only now that we are seeing a radical shift being demanded with[out] really any economic rationale, so you can understand from our perspective that that is a little bit bewildering… as I’ve said before, to meet those demands this mill would go out of business, and then there wouldn’t be a sugar industry,” Mac McLachlan, country manager at BSI, commented.

BELIZE CITY, Thurs. Nov. 10, 2022

On Tuesday, Belize Sugar Industries Limited (BSI) posted a graph on social media that depicts what it is claiming will be the highest first payment to cane farmers per ton of cane in the last 20 years. The estimated price of cane for the upcoming season is $54.54 per ton, and the first crop payment to farmers will include 80% of this value, or approximately $43.63, which is to be paid upon the first delivery.

“The first cane price estimate serves as a start, which then sets the first payment to farmers, and is lower than the final price for the crop, given the unknown variables such as market price and ocean freight at the beginning of the crop,” a statement that accompanies the infographic on the company’s social media page explains.

The first payment for this coming crop is to be $3.13 higher than last year’s, and as previously mentioned, one of the highest paid in the last 20 years, according to the company.

It has been reported as well by local media that the company’s third and final payment to cane farmers this week for the sugar cane they delivered during the 2021/2022 season was $13 37 cents per tonne and was based on a final cane price of $70.78 per ton.

According to 7News, the company has stated “that this year’s total price is the highest in the last five years. It is also the highest since the 2017 changes in the European Market, which removed Belize’s preferential pricing access.”

Yesterday, while members of the BSCFA were in Belize City to aid in the clean-up efforts being carried out by CitCo following Hurricane Lisa, the chairman of the Orange Walk branch of the association, Alfredo Ortega, said during an interview that the payment per ton of sugar cane that is being touted by BSI could have been higher and that the increase for the first delivery in the upcoming season is conditional on the level of the quality of cane being delivered to the mill – with payouts being lowered if that quality falls.

Minister of Agriculture, Jose Mai expressed a similar view — that the payment from the mill could have been higher — when he spoke to reporters during the cleanup efforts. He acknowledged, however, the fact that the payment for the final delivery of the season was the highest in five years, and noted that the increase is primarily the result of higher world prices.

BSI/ASR and the Belize Sugar Cane Farmers Association (BSCFA) have still not agreed on the terms of a commercial agreement that would have to be in place before the start of the upcoming sugar crop in mid-December. They will reportedly secure the services of a mediator in an attempt to expedite that process. The finalization of the agreement within the short term is of great importance to the industry, the millers, and the farmers.

But, according to Ortega, the mill is causing a delay in the mediation process by not being fully cooperative in the prompt confirmation of “who will be [the] mediator”.

“We have reached this point. We have a mediator, and still yet, BSI is playing jokes on not coming to the table so that we can get into an agreement on who will be our mediator so that we can continue. If that doesn’t happen, then we believe that the government, even though the Prime Minister has said many times that this is a private entity. But I think as a government they have a responsibility to see…. that something is stabilized within the industry,” he said.

Minister Mai, however, has indicated that the new season will have to start even if a new commercial agreement is not yet in place. He, in fact, believes that this will likely be the case.

“I believe that even if we do not have an agreement signed, we are going to have a crop starting. I am hoping— it is unlikely in my view and I may be wrong and I hope I am wrong…. To me it is unlikely that we will have an agreement before the crops starts, the way things are moving at a very snail pace. But I believe that we can have a crop ongoing while mediation and negotiation is ongoing,” Mai said yesterday.

Today, the BSI hosted a press conference at which its country manager, Mac McLachlan, addressed some of the public comments made by the leadership of the BSCFA. He remarked that any delay in this year’s crop would be a travesty and a loss for all parties involved, especially in light of the upturn of global sugar prices, which presents a great opportunity for increased profits.

In regard to claims that the company is dragging its feet in the selection of a mediator, McLachlan says that while a particular person has been recommended to fill the role of mediator, they have been awaiting a reply from the BSCFA for some days. And contrary to assertions by Minister Mai that the new season would start even if a new commercial agreement is not yet in place, McLachlan said that the company will simply be unable to accept any sugar cane from the BSCFA, which provides almost 50% of the sugar cane delivered to the mill, without such an agreement.

In reference to the BSCFA’s demand for a 60/40 split in the gross revenue generated from sales of the milled sugar cane, McLachlan explained that the expenses incurred to produce the direct consumption sugar and other products falls solely on the mill, and thus the BSCFA’s demands are unreasonable,

“If we looked at 60/40 on a gross revenue, so that means farmers not contributing to any of the mill costs; that’s the freighting, the handling charges, the manufacturing allowance to make direct consumption sugar, all of the calculation that goes into making it — a net strip value, that’s what it means. It’s the value of the sugar once you’ve taken out the cost associated to exporting that sugar and producing higher value sugar, direct consumption sugar.” McLachlan said.

Allowing the farmers to receive 60 percent of gross revenue without having to cover any costs would amount to a subsidization of the farmers by the mill — to the tune of 20 million dollars yearly, said McLachlan

“I’ve explained already how impractical and impossible that would be, because the mill has just completed 5 years of consecutive losses, so no business in their right minds would turn around and say ‘take this money, and we’ll go bankrupt’,” he commented.

McLachlan said that he hopes that the mill and the BSCFA can find some middle ground so that they can move forward with a productive business arrangement for the benefit of the sugar industry.

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