The costs and benefits of fair-trade certification in Fiji
23 June 2013
According to a presentation on Fairtrade certification of sugar cane in Fiji at a conference on Pacific Value Chains in April 2013, the first certification of a Fairtrade sugar producer was completed in early 2011. Two economic assessments of the costs and benefits of Fairtrade certification have since been undertaken. The presentation notes that the assessments need to be seen against the background of a reduction of 50% in the value of the proceeds of sale attributed to sugar cane growers since 2007, and the ongoing steady decline in the number of both registered and active sugar cane farmers in Fiji.
The assessments found that the benefit–cost ratio of Fairtrade certification was over 6.5. However, even with that ratio, a 33% yield increase to 60 tonnes per ha is required to make sugar cane farming profitable, regardless of whether or not farmers are certified Fairtrade producers. In addition, distance to the mill was seen as being a critical factor in profitability. If Fairtrade premiums were available, cane production within 24km of the mill was seen as profitable, otherwise cane production was only profitable within 13km of the mill.
The review maintained that “Fairtrade certification works for sugar because of the large volumes and sufficiently large premiums, coupled with fixed costs of running an SPO [small producers’ organisation] and staying certified.”
Editorial comment
Conversion to Fairtrade-certified sugar production in Fiji needs to be seen in the context of the Fiji Sugar Corporation’s (FSC’s) ongoing negotiations with Tate & Lyle Sugars (TLS) on the possible renewal of the current sugar supply contract (TLS is FSC’s only overseas buyer) and efforts to boost Fiji’s sugar production.
In 2008, TLS decided to convert its entire direct consumption sugar range in the UK to Fairtrade sugar, while in October 2012 the company announced a new partnership with the food ingredients buyer and distributor IMCD Benelux, aimed at supplying the growing demand of European manufacturers for Fairtrade-certified sugar (see Agritrade article ‘ Fair-trade component a key factor in BSI acquisition by ASR’, 2 December 2012).
Efforts to secure supplies from Jamaica within the context of moves towards Fairtrade certification were largely rebuffed, as the Pan Caribbean Sugar Company focused on securing its right to export its own sugar (see Agritrade articles, ‘ Tate & Lyle seeking long-term sugar supply arrangement’, 5 July 2011 and ‘ New marketing agency agreement signed with PCSC in Jamaica’, 18 June 2012). This saw the parent company of TLS, American Sugar Refiners (ASR), buy a majority shareholding in Belize Sugar Industries (BSI) in May 2012. This has secured direct access to 6,000 Fairtrade-certified independent growers (see Agritrade article ‘ ASR to take shares in Belize Sugar Industries’, 9 July 2012).
As British Sugar, TLS’s competitor, has a growing stake in millers of Fairtrade sugar in Southern Africa, a major expansion of Fairtrade-certified sugar production in Fiji would appear to be essential if existing commercial links with TLS are to be developed.
However, more fundamental than this is the prospects for successful reform of the Fijian sugar sector, where a whole package of reforms is needed – and the jury is still out on the success achieved to date. This much bigger question overhangs any prospect of Fairtrade certification making any significant contribution to the development of the Fijian sugar sector.
