Short-term earnings windfall projected in Jamaican sugar sector
06 September 2011
According to a press report, ‘sugar producers will receive a 115 per cent increase on sugar prices for the 2011/2012 crop’. Agriculture Minister Robert Montaque said ‘the existing private manufacturers, with the consent and agreement of COMPLANT … signed an Agreement with ED & F Man Sugar Limited for the supply of some 80,000 tonnes of sugar for the 2011/2012 crop year, at a price of US$936.98 per tonne.’ This however is only a 1-year deal. Appeals were therefore made for sugar cane farmers ‘to wisely invest earnings they make in the lucrative year ahead’, since ‘subsequent years will see a substantial reduction once the agreement ends’.
Analysis in the press noted two contracts signed for the supply for sugar from government-run estates, ‘one with Eridania Suisse of Italy (79,000 tonnes at €333.20 per tonne) and the other with Tate and Lyle of Britain (100, 000 tonnes at €370 per tonne).’ According to Robert Montaque, by 15 August the Jamaican sugar industry ‘will be completely in private hands for the first time in many, many years’.
Editorial comment
The wide range of basic prices obtained from the sale of Jamaican sugar this crop season highlights the challenges facing ACP sugar exporters in managing sales on highly volatile markets. Since the beginning of 2011, raw sugar prices on the world market have fluctuated widely, losing 26% of their value nearly from January to May before recovering virtually all of the lost value in July 2011. US raw sugar import prices showed similar fluctuations, while EU prices showed more stability (moving only within 3.4% window). However this more stable EU price saw fob world market prices above EU cif prices in January, February and July 2011. Analysts suggest that prices could fluctuate within a 30% band until the end of the year, ranging from a high of 31c/lb to a low of 21.5 c/lb (see Agritrade article ‘ Price volatility a growing feature of global sugar markets, while confus...’, September 2011).
It is likely that the Eridania Suisse and Tate & Lyle contracts involve both a basic price and some form of profit sharing arrangement. The deductions made by the processing companies prior to determining the profits to be shared will be critical to the effects of these arrangements. These could vary considerably from company to company, and between ACP countries.
In this context there would appear to be a need for greater transparency in the distribution of revenues along ACP–EU supply chains, given the growing concentration of ownership in the EU sugar sector.
