Of the two disasters the composer Rossini witnessed in his life, one was that of a voluptuous woman carrying a roasted turkey on a silver tray above her head in Venice. He knew that an accident was about to ensue – she trips over the cobblestones and the turkey drops into the canal. As the Caribbean sugar industry stares at its possible demise or at least significant rationalisation amidst the distant thunder of the abolition of sugar quotas in the EU, and with it the liberalization of the sugar market imperilling the preferential access, one can only wonder at woeful leadership shown by the industry captains and what can only be described as comatosed policy makers being totally ineffectual in addressing the challenges the industry will face. Like Rossini foreseeing the loss of the turkey, the fate of the Caribbean’s sugar industry is the chronicle of a possible death foretold. As we report in this issue, Guyana is going to close down three sugar mills as it faces the loss of market access. As the EU producers expand beet sugar production, import of cane sugar is likely to drop from 3.2 million tonnes to 1.6 million tonnes in the foreseeable future.
For some two centuries (17th to 19th), “sugar was to the geopolitics…what oil has been to the 20th and 21st”1. Indeed, plantations in the West Indies “built from the 17th century to feed demand drove a nexus of commerce, capital and manufacturing that fomented the industrial revolution and modern financial markets.”2 But this legacy is likely to be overshadowed by the self-inflicted injury that is beginning to be exposed.
During the reform of the sugar regime in the EU, the proactive policy measures helped in good part by the excellent collaborative partnership between the growers, researchers and sugar companies supported the development of a globally competitive sugar industry which the policy makers felt confident of letting loose in the global market (save for one particular safeguard – that of preventing possible dumping in its market via hefty import tariff).
The industry leaders and policy makers in the Caribbean had known since 2013 about the abolition of sugar quotas and the subsequent loss of preferential access. But there was no urgency to make the industry competitive. The Cuban sugar industry, which enjoyed the captive market during the cold war with the Eastern Bloc countries, producing some 8 million tonnes, did not invest in modernising its industry from the largesse. The collapse of the USSR and the end of the cold war ushered in new market reality for the Cuban sugar industry for which it simply was not prepared. It barely produces around 2 million tonnes sugar currently. Similar fate awaits the Caribbean sugar industry.
The major sugar producing countries in the Caribbean are Belize, Guyana, Jamaica and Barbados. According to the LMC report3, Belize and Guyana have been shipping about 80% of their exports to the EU, while Jamaica at least 60%. The sugar industry is a major employer in these countries (see figure). But the problem is, they are high-cost producers. Belize and Guyana produce less than 6 tonnes/ha compared with the global giant Brazil producing over 10 tonnes. The cost of producing sugar in Guyana is almost USȼ35/lb, more than double the current world market price of sugar. As the vice president of corporate affairs at the London-based refiner Tate & Lyle Sugars (a major importer of raw sugar) Gerald Mason points out “It’s not that we want to leave those [high cost] suppliers behind, but if Europe has made the white sugar market really competitive, we have to have access to more competitive supplies.”
Various industry leaders in the Caribbean have suggested a variety of prescriptive measures to address the impending woe. It is quite apparent, that along with modernization of the sector to produce sugar cost competitively, the industry must diversify to survive the onslaught of market volatility and market access. Some of the highly diversified top sugar companies such as Mitr Phol derive only around 50% of their income from sugar. Diversification opportunities are vast – not only production of specialty sugars, cogeneration, biofuels, but also profitizing from waste streams and producing variety of high value substitute petrochemicals from the maturing technologies advanced in the emerging bioeconomy. It is within the wit of the industry to exploit available options and prosper. The governments have to find a way make this happen. Mauritius – a very similar small island ACP sugar producer – is a good example to follow. Facing similar loss in preferential access to the EU market, it rationalized and diversified its sugar industry – thereby ensuring its long-term survival.
1 Andrea Stuart (2010) Review of Sugar: A bittersweet history http://www.independent.co.uk/arts-entertainment/books/reviews/sugar-a-bittersweet-history-by-elizabeth-abbott-1854583.html
2 Agnieska de Sousa (2017) Europe is waving goodby to sugarcane https://www.bloomberg.com/news/articles/2017-03-16/sugar-trade-that-made-our-modern-world-longs-for-sweet-hereafter
3 LMC International (2016) Study on current and forecast market developments for ACP sugar suppliers to the EU market. (EU funded pp 220)