Sugar Industry likely to lose millions

[posted 6 June 2009,1030]

The sugar industry is likely to suffer losses running into millions of dollars this season according to the National Farmers Union.

The blame for this lies squarely with the Fiji Sugar Corporation.

Farmers should note that they will bear 70% of the losses thereby adding to the hardship they already face on account of escalating costs of cultivation, harvesting and transportation of cane.

FSC and the Sugar Industry Tribunal appear to have colluded in announcing an early start to the harvesting and crushing of cane despite the total lack of preparedness of all the four mills.

Penang Mill

As an example, the Penang Mill was to begin crushing on 19 May but as of today (3 June) has only crushed some 1800 tonnes of cane over a period of two weeks without making any sugar. The mill has been plagued with mechanical failures ever since it started. Farmers are now reluctant to harvest their cane unless the mill can be shown to be operating efficiently.

Lautoka Mill

FSC had announced 26th May as the date for the start of crush at the Lautoka Mill. This was later deferred to 9 June and has since been moved to 16 June. This is clear proof of FSC and the Sugar Industry Tribunal declaring crushing dates without giving due consideration to the poor state of the mills.

Labasa and Rarawai Mills

These mills are scheduled to begin crushing on 9th and 14th June respectively. However, cane growers fear major disruptions to harvesting and crushing in these mill areas considering the extremely poor state of cane access roads and the reluctance of many lorry operators to haul cane until road conditions improve.

Supply of Fertilisers

Farmers have expressed dissatisfaction over the high price and irregular supply of fertilisers. NFU has been monitoring the situation and it seems that there will be a substantially reduced intake by farmers thus adversely affecting the 2010 season crop. This has been forced on farmers in the face of the current high price of $31.50 per bag as opposed to the $19.50 per bag last season.

Meanwhile, the State has still not paid its promised $14 per bag grant to South Pacific Fertiliser Ltd (SPFL) intended as a subsidy to keep the cost per bag to farmers at $31.50 (the actual cost per bag being $45.50). It is believed SPFL is experiencing serious cash flow problems and is unable to stock up adequate supplies for the 2010 season crop.

The Sugar Cane Growers Fund (SCGF) which has been financing SPFL and which was recently compelled by the Sugar Ministry to convert its $14 million outstanding loan to equity in this technically insolvent company, is fast running out of funds and will be unable to support the SPFL for much longer.

Strangely enough FSC was permitted to offload its 40% shares in SPFL thus escaping its liabilities as a shareholder of the company. The two farmers institutions, SCGC and SCGF have been forced, despite their objections, to bear the burden of the huge financial liability of SPFL.

The sum total of this financial juggling is the likely demise of both entities unless bailed out by the State which seems unlikely in any event.

EU funding

The EU has announced that its assistance package of $F420million (post devaluation) is now inaccessible unless Fiji’s political problems are resolved and a democratically elected government is in place. This is a huge blow to the industry, cane growers and landowners in particular. The State will not be able to match the huge EU financial allocation which would have put new life into the industry assisting in its modernisation through the implementation of good husbandry practices, research and infrastructure upgrade.

Replanting of Cane

The replanting programme has suffered a severe setback because of adverse weather conditions and delays in disbursement of EU funds to farmers with proven track record who had applied for it. Instead, substantial funds were wasted on non-performing farmers who have failed to meet their obligations under the scheme. It is unlikely that the targeted crop size of 4.2 million tonnes will be achieved by 2011 as envisaged in the industry restructure plan.

Progress has been extremely slow in the matters of lease renewals as well as reverting to the industry land previously under cane. Apart from these, government is yet to reimburse farmers for premiums paid or payable on renewals or issuance of new leases, as was agreed by Cabinet in 2008.

FSC is quick to blame cane growers for its own failures. If the mill stops crushing because of mechanical breakdowns, it is reported as “stoppage due to low cane supply”. FSC continues to breach with impunity many of its obligations to the growers under the Master Award. The Sugar Industry Tribunal has ignored such repeated breaches because of its failure to properly monitor the state of the industry as is required under the Sugar Industry Act.

In a bid to fix things at FSC, the Corporation has recruited the services of four CSR trained former FSC executives who had all emigrated to Australia after the 1987 coup. It is believed that many of their recommendations are likely to erode the growers’ share of the cane proceeds by transferring FSC’s obligations and expenses to the growers’ account.

This will further frustrate cane growers and may threaten the future viability of the industry.

NFU has made comprehensive submissions to the Sugar Ministry on the way ahead but has not so far received any reasoned response to issues raised therein.