Belize Sugar Industries Limited (BSI) is in dispute with the Belize Sugar Cane Farmers Association (BSCFA) over payments for bagasse used by the Belize Cogeneration Facility (BELCOGEN) to produce co-generated electricity. BSCFA argues that under the terms of an agreement signed in 2002 between BSI and BSCFA, “whenever a by-product of sugar cane delivered is identified as having economic value, both BSI and BSCFA would determine how the income will be distributed”. BSCFA is reportedly looking for an additional payment of B$10/tonne (€3.67/t) of cane delivered. In total this would require BSI to make an additional payment of between B$10 and 11 million (€3.67–4.04 million) to sugar cane farmers.
However, BSI maintains that “there is no legal obligation on the part of BSI or BELCOGEN to share the revenue from the sale of electricity with BSCFA,” since “cane sold to BSI upon delivery becomes BSI’s property,” and so the clause in the 2002 agreement “does not apply”. BSI points out that it was the sole investor in the co-generation facility (investing some US$55 million), which has yielded only US$2.5 million in profit since the opening of the facility in 2009. BSI would like to see the dispute resolved in a court of law.
On 29 October 2013, BSCFA representatives walked out of a forum convened to discuss the future of the industry beyond 2017, maintaining that “BSI and ASR have been frustrating the process by their delays in coming to the negotiating table and their outright rejection [of the demand] to negotiate the payment for bagasse.” The meeting continued without BSCFA representation. Subsequently BSCFA threatened to delay the start of cane deliveries to the mill if the issue of bagasse payments was not addressed and the 2002 agreement not respected.
There is now a danger that the dispute could escalate. The northern caucus of the opposition People’s United Party (PUP) has called “on BSI to honor the revenue-sharing agreement for bagasse as a by-product” and for the government of Belize “to ensure that negotiations resume and that farmers be justly and equitably rewarded for their efforts and hard work and investment”.
Decisions on the bagasse payment issue have reportedly been taken by BSI, not ASR. Following an aborted meeting between BSI and BSCFA, Richardo Lima, Vice President for Technical Services at ASR, expressed the hope that the dispute could be “resolved amicably for the betterment of the farmers, BSI, and the country of Belize”.
While the Banana Growers Association expressed sympathy with the plight of sugar cane farmers, the citrus growers’ group, Belize Citrus Mutual, noted that “once a price is agreed and the product is sold to the processor, it is theirs to manufacture, market and sell.” However, it pointed out that in the citrus sector animal feed is manufactured and sold as a by-product, with the company that buys oranges from the farmers having “a ten-year grace period to recover its investment, after which there will be revenue sharing with farmers”.
Pooling and sharing of income from new sugar-cane-based revenue streams is a growing issue of concern across the ACP. As raw sugar prices on the EU market fall, millers are increasingly seeking to maximise the commercial value of the cane processed by opening up new revenue streams. While traditionally growers only shared in revenues from sales of raw sugar and molasses, in some ACP countries this is being reviewed. This is most advanced in Mauritius, where cane growers share in a number of revenue streams, while pooling and sharing of revenues from co-generation are under consideration at Tongaat Hulett’s operation in Zimbabwe (see Agritrade article ‘ Tongaat Hulett CEO highlights income gains from electricity co-generation’, 16 July 2012).
In the EU, as part of the June 2013 CAP reforms, inter-professional agreements (IPAs) between sugar beet farmers and millers have been made mandatory (see Agritrade article ‘ Impact of CAP reform agreement on the sugar sector’, 6 August 2013), with these IPAs in some instances dealing with pricing for the cane delivered in the light of the uses made of that cane. This suggests a role for ACP governments in establishing an appropriate regulatory framework for the internal functioning of their sugar sectors, as the revenue per tonne of raw sugar sold on traditional markets falls.
Regardless of the legal merits of the BSI/BSCFA dispute, the dispute could potentially harm the reputation of Tate & Lyle Sugars (an ASR subsidiary), which has committed to converting all its direct-consumption sugars to fair-trade. Access to fair-trade-certified producers was reportedly one of the factors behind the ASR decision to purchase BSI (see Agritrade article ‘ Fair-trade component a key factor in BSI acquisition by ASR’, 2 December 2012). The adoption by BSI of a hard line against the sharing of electricity co-generation incomes in an era of falling raw sugar prices is likely to sit uneasily alongside the principles of social justice that underpin the fair-trade movement.
The issue of sharing of new revenue streams is also likely to raise challenges for the fair-trade movement. The sugar sector accounts for a major component of UK fair-trade sales. Yet, with raw sugar prices falling and further price pressures expected on the EU market in the coming years, diversifying the revenue streams to which sugar cane farmers have access is likely to become an increasingly important issue if the benefits of fair-trade certification are to result in improvements in net incomes for ACP sugar farmers.