Gov’t sweetening sugar with $4B

-rice earnings expand

Government will inject $4 billion into sugar this year since although there was an increase in production last year output continues to lag in comparison to projections and industry finances are being negatively affected.

Sugar production grew by 7.1% to 236 506 tonnes in 2011, Minister of Finance, Dr. Ashni Singh told the National Assembly as he presented the 2012 budget yesterday. “Notwithstanding the increase in production achieved by the industry and the fact that the 2011 output represents the highest level of sugar production since 2008, output continues to lag the production trajectory anticipated by the industry’s long term business plans, and industry finances are being adversely affected,” he said.

The minister said that efforts will continue to ensure that the industry is placed in a position of long term profitability. He later disclosed that the budget provides for a transfer of $4 billon from central government to GuySuCo “in order to ensure that the sugar industry is financially able to meet its operating and investment requirements.”

The production and financial turnaround that is expected to be aided, with this support from government and other initiatives taken by the industry will ultimately redound to the benefit of the industry’s 18 000 workers and their families along with the industry’s suppliers of goods and services bringing the total number of beneficiaries to 120 000 persons, the minister said. Because of its importance, he said: “we will spare no effort to ensure that the sugar industry is transformed to a viable and competitive one.”

Last year, export earnings on sugar increased by 21.6% to US$123.4 million due to a 16.8% increase in average export price coupled with a 4% increase in export volume to 211 762 tonnes.

Singh said that Guyana’s sugar industry has the potential to achieve and sustain annual production of over 400,000 tonnes of sugar in the medium term. Government’s intention, he said, is to enable the industry to realise this potential and, in particular, to do so while steadily increasing the share of value added products in total output, particularly of packaged and processed sugar.

Underperformance

The minister said that the industry’s underperformance in recent years has been attributed principally to the devastating financial impact of the changes in the European sugar regime, compounded by the ongoing reasons of low labour turnout, a complicated industrial relations climate, less than favourable weather conditions, and the need for greater managerial effectiveness. “These factors notwithstanding, it would appear that we are now in a position to be cautiously optimistic with respect to the industry. In 2011, while work progressed on rectifying the Skeldon factory to expand sugar processing capability, the commissioning of the Enmore Packaging Plant resulted in an immediate boost in capacity to package sugar. In the fields, mechanisation advanced with the company achieving 55% mechanisation at Skeldon and 70% mechanisation at Enmore and La Bonne Intention estates, he said.

Further, the minister said that management has outlined additional efforts to improve the domestic conditions for production and the industry’s financial performance. “With the increased mechanisation of the Skeldon estate, the beginning of 2012 has seen only about 20% dependency on complete manual harvesting and the mechanisation effort is set to expand further at other estates later this year,” he noted.

“The ongoing programme of technical improvement of the Skeldon Factory to address the defects is expected to ensure that the factory will function at full capacity by the second crop this year. The recently established Enmore Packaging Plant is expected to operate at full capacity subject to the availability of canes as the industry increases acreage under cultivation including in collaboration with private farmers,” the minister said.

The aim is to raise the industry average of private cane production from 8% in 2011 to 12% in 2012. The industry will also expend $2.7 billion in 2012 towards the operational plant and field infrastructure at all eight sugar estates, and work will advance in replanting, land conversion to layouts suitable for mechanisation, and capital replacement of drainage works, Singh said. “Taken together, these developments are expected to see the industry attain the targeted medium term production and profitability trajectory,” he declared.

At the start of 2012, the sugar industry set a target of 265 000 tonnes but given developments since then including industrial relations issues, sugar production is currently projected at 250 000 tonnes, 5.7% above the 2011 level of production.

Rice

In contrast to sugar, 2011 was an excellent year for rice with production amounting to 401 904 tonnes representing an 11.3 % growth in output which is the industry’s highest level of annual production ever. Acreage under cultivation has expanded to approximately 170 000 acres and higher yielding varieties of rice have been introduced while investment and production in the sector were also bolstered by the benefit of stronger external market prices.

Rice export earnings expanded by 14.5% to US$173.2 million mainly attributed to 26.1% increase in average export price to US$567 per tonne, while export volume contracted to 305 382 tonnes due to a decline in stock levels at the beginning of the year.  The minister said that it is anticipated that the commissioning of an additional paddy seed plant in 2012 will result in the production of 20,000 bags of high quality paddy seed annually while work is ongoing with the Guyana National Bureau of Standards to certify the rice testing laboratory and to achieve ISO-Standards which is a critical step in strengthening export capacity and improving access to wider markets. The expansion of hinterland rice production will also continue with work ongoing to encourage private investment in large scale rice production including in new areas such as the Rupununi.

Rice is projected to grow from 401 904 last year to 412 425 tonnes this year- a 2.6% increase in value added to the industry. “This record output target places the industry in a favourable position to exploit new and emerging markets,” Singh said.

Meanwhile, he said that the other agriculture sub-sectors grew by 5.7% which, according to the minister, reflected returns on the Grow More Food campaign and the Agricultural Diversification Programme coupled with more integrated market access especially with the bridging of the Berbice River. The livestock sector expanded by 5.8% mainly attributed to higher production of eggs, poultry meat and mutton. On the other hand, the fishing industry contracted by 5.3% reflecting a reduction in the number of operating vessels and fishing trips associated with the increased cost of fuel and the risk of piracy and also the continued depletion of fishing grounds.

Forestry

In addition, the forestry sector contracted by 9.3% as a result of improved monitoring and enforcement of sustainable forestry practices, according to Singh. He said that last year, timber exports amounted to US$39. 1 million, a contraction of 19.5% as production of logs declined aided by improved monitoring and enforcement of sustainable forestry practices. For this year, the sector is projected to decline by 8.2% reflecting the implementation of programmes to improve stakeholder capacity in areas of forest policy and sustainable forestry management.

Meanwhile, the minister said that $1.4 billion was expended in 2011 on government’s agro-diversification programme while a number of important legislative initiatives were undertaken.  He said that efforts are ongoing to improve genetic stocks and varieties that will improve quality and yield for crops, and captured fish. Singh said that over 8000 farmers were trained in crop and animal husbandry and farm management. Additionally, the hinterland rice and bean project and spice project commenced he said adding that the spice project included the cultivation of onions, carrots, turmeric, black pepper, ginger, nutmeg and potatoes in communities such as Kato, Kurukubaru, Paramakatoi and Bamboo Creek.

For this year, $1 billion has been allocated to the agriculture sector to advance efforts towards the diversification and modernisation of the sector.

This year over 50 large scale farmers will benefit from the use of improved technology on their farms which would result in increased production for the domestic and export markets and another 30 producer groups will be provided with credit to enable them to finance their own businesses. Further, 49 business plans will be financed to support the introduction of new technologies in agriculture. In aquaculture, efforts will be concentrated in pond construction, acquisition of brood stock and the setting up of hatcheries.

In the livestock area focus will be placed on genetic diversification. NAREI will enhance its capacity through the equipping of a modern germplasm and tissue culture laboratory capable of producing over 50,000 seedlings. “We will introduce international standards to 100 farmers and agro-processors with particular emphasis on the 5 large agro-processing facilities, 4 poultry processing plants and 9 aquaculture farms,” Singh said. He also identified the completion of a genetic bank, artificial insemination laboratory, and quarantine stations at St. Ignatius and Mabura as initiatives that will be pursued this year.

According to the minister, this year, the livestock industry is expected to grow by 4.9% while the other agriculture sector is also projected to expand by 4%. “The continued expansion in these two sub-sectors positions Guyana to take advantage of regional market opportunities while ensuring domestic food security.” The fishing sector is expected to return growth of 5% supported by government initiatives to combat piracy, he said.