Headlined by a whopping loss of $4.08b, GuySuCo’s Annual Report for 2008 lays bare the enormous challenge that sugar faces in coming to grips with the fundamental changes in the European market and the re-jigging of the local sugar industry vis-a-vis the new Skeldon factory.
The 2008 loss was the second highest in the last decade, the largest being the $4.3b in 2003. Not surprisingly, the loss reflects plummeting production: from 321,438 tonnes in 1999 – what now seems like halcyon days – to 226,267 tonnes last year. The last four years has seen production averaging around 250,000 tonnes per annum while 2004 was the last in which production surpassed the 300,000-tonne mark. Ideally the industry would like to see around 400,000 to 450,000 tonnes and that is the promise of the huge Skeldon factory with its putative voracious appetite for sugar cane.
Much of the blame for the recent poor production has been assigned to the weather. Indeed, after creditable production of 325,317 tonnes in 2004, output slid precipitously to 246,071 tonnes in the following year – the year of the Great Flood. Since then recovery has proven difficult and the interregnum has since the termination of the Booker-Tate management arrangement and the installation of an interim board which includes some members from the old board.
In the 2008 report, rain has been singled out again as the major culprit. Both the former Chairman and Chief Executive, Messrs Ronald Alli and Nick Jackson respectively, said that the mean annual rainfall was the highest in 53 years. According to Mr Alli “Extensive areas on all estates were subject to near saturated soil conditions for most of the first eight months of the year. In the latter months of 2008, very heavy rainfall resulted in prolonged floods particularly in East Demerara and East Berbice. The wet weather also hampered our land expansion plans at Skeldon where very little work was possible and in addition curtailed our routine land preparation and plant activities…” To say the least this was a rather dire predicament in 2008 and raises the question of what options are available to the industry as a hedge against the vagaries of increasingly unstable weather. As if to underline this, the Minister of Agriculture last week met with farmers to apprise them of the El Nino-like conditions that will affect the region. In this neck of the woods, El Nino has resulted in scorching, arid weather – a whole different challenge for the industry this season.
GuySuCo Field performance for 2008 was also below expectations. Only 63% of the targeted acreage was replanted and only 63% of the land preparation target was met. The industry average cane yield for 2008 was 57.71 tonnes compared to 80.60 in 2002 and in the words of Mr Jackson “This low performance is a cause for serious concern and a signal that major rehabilitation work will have to be done in 2009”. How much of the poor field performance and the low production is really attributable to the weather is unclear. There must be other factors at work such as reliability of the work force and the marshalling of the field work. The ending of the Booker-Tate management contract is also an indicator in this direction.
Whatever the shortcomings, they have come at the worst possible moment. GuySuCo was already reeling from the phased 36% cut in the price paid by Europe for sugar and the imminent end of the Sugar Protocol and found itself in a position where important markets could not be met last year. It has barely supplied the all-important European market and only through the importation of sugar for domestic consumption from Guatemala – an ironic throwback to 1989-90 when production had also fallen disastrously, necessitating the engagement of Booker-Tate. Further, it has also had to sacrifice two important growth markets – Caricom and the US. Far from prospecting for even more markets outside of the Caribbean, Guyana has once again had to interrupt bulk sugar supplies to Caricom deepening the image of the country as an unreliable supplier in a market that should never have to be sacrificed. Of lesser magnitude but nonetheless just as important, the bulk US market was forsaken.
As if this wasn’t bad enough, there were start-up problems with the much-vaunted US$110M Skeldon sugar factory. Whereas it should have been in place for grinding many months ago it only went into service recently. The financial loss from that period of inactivity must be substantial. Moreover, the factory is now in operation but the volume of cane required to feed it is still not available. A gargantuan 1.2 million tonnes is the rated capacity of the factory but supply from what should have been the Skeldon estate’s own expanded acreage and from private cane farms is far below the expected capacity and only slowly getting there. The losses mount up. This was an exercise in how not to manage an expansion project of extreme national importance. It is yet unclear who in the administration was assigned the premier responsibility of ensuring that cane production was brought up to the required level in tandem with the installation of the new factory and what urgent policies and steps were put in place to facilitate this. President Jagdeo should provide an explanation to the public.
The loss this year of a $6m Euros ($1.6B) tranche of funding from Europe, as part of budgetary assistance, following the late submission of a sugar plan by GuySuCo, did not help matters. A substantial wage cost and sporadic strikes are further complications.
The government has made a strategic decision to hitch the country’s fortunes to sugar. This it did without a very robust national examination of the issues at stake. Inauspiciously, the decision came around the same period as the challenge at the WTO to the EU sugar regime by Brazil, Australia and Thailand and amid signs in the Everything But Arms arrangement that a new mood was engulfing Europe and its trade relations with poor developing countries.
There is no immediate, foreseeable extrication from sugar for Guyana given the government’s substantial investment and commitment. The problems that face this centuries-old industry that has provided so much gain and pain to those who have been part of it must be grappled with in an open and decisive manner and should be reflected in the outlook of the interim GuySuCo board. The turnaround blueprint which was prepared by the board must become a widely available document that attracts the views and inputs from many knowledgeable Guyanese here and abroad. There are many who can contribute to the debate on the conversion of beds for mechanized farming and many who have concerns over the reduced number of working days for canecutters and how this might be impacting on attendance – a matter raised on Saturday by President Jagdeo at the GAWU congress. There are many who can contribute on how the industry’s drainage and irrigation system can be adapted to take account of the growing climate change problems. There are many who can contribute in a whole series of other areas including adding value to sugar.
The point is that the sugar industry faces a very difficult period ahead and those in charge have to be frank about the mistakes made, learn quickly from them and mobilize the best advice available.
