Third Cane Payment a shock to farmers

[posted 24 March 2010, 1500]

Cane farmers throughout Fiji are in a state of shock following the announcement by FSC of a measly $5.03 per tonne third cane payment due next week.

They were expecting at least $12 per tonne based on the $61 forecast price announced by FSC at the beginning of the 2009 crushing season.

The first two payments totalled about $49 and on that basis farmers were expecting $12 per tonne to make up the forecast price of $61.

But the forecast price itself was based on FSC’s estimates of exports of 240,000 tonnes of sugar to the EU market whereas actual sugar made for the season was only 165,000 tonnes i.e. 75,000 tonnes short of the target.

In an earlier report, NFU had said that the disastrous performance of the FSC mills had caused a loss of around $100 million to the industry of which the growers will have to bear $70 million. This has been proven correct.

No 4th Cane Payment?

Farmers are in for another big shock come May this year. The fourth cane payment due that month – just before the commencement of the harvesting season – may not be paid because all export proceeds will have been paid out in the first three payments.

All of this has happened because 40% of crushed cane just went to waste, as juice from it was not converted to sugar. Large quantities of cane juice were dumped as a result of seriously malfunctioning mills.

As reported in our 29 January story, FSC received approximately 2.3 million tonnes of cane at its 4 mills from which it should have made 255,000 tonnes of sugar on a TCTS of 9:1. Instead it produced only 165,000 tonnes of sugar at an average TCTS of 14:1, resulting in a massive loss of around $100 million.

Who will compensate the farmers?

The issue now is: who will compensate the farmer for this huge loss amounting to $30 per tonne of cane.

There is absolutely no question that the farmer fulfilled his obligations under the Industry Master Award by supplying the miller cane of good quality which the latter should have converted to sugar on an industry norm (TCTS) of 9:1. But as stated, FSC’s malfunctioning mills took 14 tonnes of cane to manufacture a tonne of sugar thus wasting about 40% of the entire crop.

Under the Master Award FSC is required to maintain its mills in good repair which it failed to do thus directly contributing to the massive loss.

Farmers have a right to fair compensation from the miller for losses caused as a direct result if its negligence and non compliance with the Master Award.

The loss is substantial ($30 per tonne of cane) and cannot be ignored.

“NFU is now examining the possibility of making a formal demand for compensation from the miller. It is an issue we must pursue vigorously in order to obtain justice for the farmers,” said NFU general secretary Mahendra Chaudhry.

It makes no commercial sense for farmers to increase crop production only to have their cane going to waste because of milling inefficiencies. It would be more rewarding for them to also concentrate on cash crops and livestock to earn higher incomes on a regular basis.

NFU has been advocating for sometime now that cane farmers must not place total reliance on cane as their only source of income. They should also engage in mixed farming to achieve better financial results.

Farmers must realise that FSC is a bankrupt entity with an uncertain future. It exists solely on the tax payers generosity as it is propped up by State guarantees on its borrowings. It has no operating capital and all its operations are paid for from borrowed funds.