Will the sugar industry survive?

[posted 21 July 2010,1515]

After an existence of some 130 years as an important mainstay of the Fiji economy, the sugar industry it seems is gasping for its last breath before being laid to rest in peace (RIP).

Here is how the season looks compared to what FSC CEO Deo Saran said in a company statement released on 30 June:

Said Deo Saran: “FSC is confident that the 2010 season would see a marked improvement over the previous season in terms of mill reliability and sugar recovery. A total of 2 million tonnes of cane forecasted [sic] for the 2010 season with an estimated sugar make of 190,000 tonnes.”

Deo Saran expects the average TCTS at 10.5:1, to produce 190,000 tonnes of sugar from 2 million tonnes of cane.

But the ground reality is entirely the opposite. We have reported that TCTS in Lautoka and Penang Mills is averaging at around 14:1, Labasa at 22:1 and Rarawai at an alarming 30:1.

If this trend continues and the mills keep breaking down frequently, as has been happening, then it is more than likely that only 1.8 million tonnes of cane will be harvested by the end of the season.

We can forget about a TCTS of 10.5:1 as assumed by Mr Deo Saran. This will not happen. The end of season average TCTS is likely to be around 16:1 at best, judging from the current recovery rate. This then means a sugar make of around 112,000 tonnes and not 190,000 tonnes as forecast by the FSC CEO.

The shortfall of approximately 78,000 tonnes will have grave implications for the industry as anticipated revenue from sugar sales would decrease by around 41% thus throwing in serious doubt FSC’s ability to pay the growers even the low forecast price of $45 per tonne.

Given such adverse circumstances, the constant difficulties and huge losses suffered by the farmer as a consequence of FSC’s incompetence, indifference and negligence, the industry is unlikely to survive.

Many farmers are switching to alternative crops and poultry/livestock to make ends meet. Cane cultivation is likely to continue to fall, making sugar milling unviable, as it has been for some years now.

The decline is now so rapid that the industry can collapse within a couple of years if urgent action is not taken to arrest it by overhauling the Fiji Sugar Corporation.

The entire Board and senior management of the FSC need to be replaced by people who have the wherewithal to turn things around.

The interim administration must also accept responsibility for the current plight of the industry because of its high-handed measures in dismantling the growers’ organisations, recruiting expatriates of dubious ability, and its so-called resolve to take politics out of the industry.

With all its doings, it seems they have succeeded only in taking the bottom out of the industry.