Last week we observed that while the colonisation of the Caribbean centred on the production of agricultural commodities, particularly sugar, and that for centuries the Region was famed as the 'sugar colonies,' today agriculture, including sugar, is a shadow of its former importance. It still however, remains a significant foreign exchange earner, employer of labour, and source of livelihoods for a considerable number of Caribbean households, although this too has been drastically reduced over the past few decades. In today's article we begin a discussion of the Caribbean sugar industry in the context of the new agricultural trade order. As we shall see its present circumstances symbolize many of the dilemmas and contradictions inherent in the transition from the old agricultural trade order to the new post-WTO trade regimen.
The state of CARICOM's sugar industry
As recently as 1955, the West Indies was ranked as the second largest sugar-exporter in the world! The Region maintained a position among the 10 largest exporters worldwide until the mid 1960s. Its output of sugar peaked at 1.4 million tonnes in 1965. Recently, the Region has only produced on average over the past six years about 0.8 million tonnes, that is, less than 60 percent of the previous peak output level. In the crop year 1999-2000 production was 0.9 million tonnes.
On average about 80-85 per cent of the sugar produced is exported as raw sugar for overseas processing.
Only about 15 per cent is consumed within the domestic markets of the sugar-producing countries. The average value of these exports is about US$330-350 million. The bulk of sugar exports is sold to the European Union (EU) under the EU-ACP Sugar Protocol and the Special Preferential Sugar quota (SPS). Recently this has averaged about 85 per cent of the Region's exports of sugar. The other markets are the USA, where under the US Sugar Quota about 53,000 tonnes of sugar is exported, or about 7 per cent of total exports.
The Caricom market is next in importance accounting for about half the amount exported to the USA. Total regional consumption of raw and refined sugar is about 280-290,000 tonnes, or approximately 30 per cent of the total regional output. Raw sugar consumption is about 55 per cent of this amount and refined sugar about 45 per cent.
The bulk of consumption takes place within the six sugar-producing countries, which account for 91 per cent of regional consumption. World market sales are not regular, as there is no regular surplus above the requirements of the other markets.
There are at present remaining only six sugar exporting countries in the Region. This figure is down from 10 countries producing sugar at the end of World War II. These countries are, in descending order of importance: Guyana, Jamaica, Barbados, Belize, Trinidad and Tobago and St Kitts-Nevis. In all of these countries except Guyana and Belize, the sugar industry has been under close scrutiny over the past decade for possible termination of production. Several plans for reorganisation and restructuring have been tabled but none has achieved success to date, except that St Kitts-Nevis seems to be heading to final closure in a short while.
Factors in the decline
The main factor behind this crisis situation is the high cost of sugar production vis-a-vis world market prices, even though almost all the sugar is sold to protected markets with much higher prices than the world market. Sugar Association data for the three crop years 1995/96 to 1997/1998 show that on average costs of production ranged from 45 US cents per lb in Trinidad and Tobago to 16 cents per lb in Belize. In individual years the cost of production in Trinidad and Tobago can reach 55 cents per lb.
In Guyana, the average cost for this period was 22 cents per lb, although it has been as low as 18 cents in one year. This was the second lowest average cost in the Region. In the other territories costs were very high, with St Kitts and Nevis having a cost of 39 US cents per lb, Barbados 35 cents per lb, and Jamaica 33 cents per lb.
The weighted average cost of production for the 1999/2000 crop is roughly 31 US cents per lb, about five times the free market price. The average price received under the two arrangements with the European Union is 22 cents, so that only Belize and Guyana produce sugar profitably for sale to Europe.
Supporting these grim statistics is the fact that the decline in sugar output has exceeded the decline in the acreage of harvested cane, while the number of tonnes cane milled to obtain one tonne of sugar has risen. This means that there have been significant reversals in the productivity of sugar cane lands and sugar factories. Indeed, yields of sugar cane and sugar per hectare have declined by about one-quarter on average since the mid 1960s. At the same time the conversion rate of cane to sugar has declined in efficiency by about one-sixth over the same period.
Other limiting factors
There are many other limiting or negative features evident in the industry. Thus the workforce in most of the countries is aging or becoming otherwise unavailable. Industrial conflicts continue to multiply. Sugar cane lands are being alienated to housing and property development, particularly in the smaller land-scarce islands. Levels of re-investment are low because profitability has declined, which has adversely impacted on overall efficiency.
Husbandry practices have also deteriorated, particularly in the areas of ratooning, replanting, fertilizer use, cultivation, and reaping.
The physical infrastructure of sugar farms has generally deteriorated due to poor maintenance. Further, there has been a significant rise in 'kill-to-mill times', or in other words delays in getting reaped canes to the sugar mills. This has adversely affected cane quality and hence sugar yields.
To be sure these factors vary from country to country, as the variation in production costs referred to earlier partly reveal. Enough, however, has been shown to establish the fact that the sugar industry should be treated as having arrived at a critical juncture in the Region, where its very survival is at stake. At the moment its own internal inefficiencies place limits on the scope for possible future responses to this predicament.
From our point of view, the crucial aspect of all this is that ultimately sugar survives because it is being produced for sale in overseas protected markets under the EU-ACP Sugar Protocol/SPS and the US Sugar Quota. These protected markets offer prices that are far higher than the world market price. The problem however, is that under the rules of the new WTO liberal trade order, discriminatory preferences and protected prices are to be phased out. As we shall see in the course of the next couple of weeks this is not really the final word on the matter, since the EU-ACP Sugar Protocol is a Treaty, which cannot legally be terminated, unilaterally by one of the parties.