The next two years will be very profitable for Guysuco, as it has entered into a hedging programme that will ensure higher prices for its sugar, says outgoing chairman Vic Oditt.

Briefing reporters at Herdmanston House yesterday, Oditt also says the Demerara estates are expected to achieve a cost of production of US 13 cents per pound next year, which will mean they are profitable. In such a scenario, he says, there is no reason to have these Demerara estates closed, sending some 8,000 workers home.

The sugar industry, embarking on a massive modernisation project including a new sugar factory at Skeldon and potentially a refinery and a co-generation plant, has made losses in the last three years totalling $1.6B. The losses in 2002 were not on the operational side but resulted from the provision for pension funds in the accounts. However, the expected upward movement in the euro compared to the dollar will see Guysuco making “healthy profits” in the next two years, Oditt says. Hedging looks to decrease the exposure of producers to sudden price swings by guaranteeing minimum prices for future sales.

But while markets will bring external difficulties for Guysuco, on the cost-of- production sid, the corporation will also have to address a huge wage bill and the issue of the Demerara Estates. These estates have been a drag on the industry, but an agriculture improvement programme launched a few years ago has seen the cost of production coming down. It is now US 18 cents per pound on the Demerara Estates, down from US 24 cents (and US 36.8 cents in 1990). The Demerara Estates’ cane production used to be 50% more expensive than the Berbice Estates.

“We do not intend to close any estate and the government of Guyana endorses that position. Once we get the Demerara estates to return to profitability, we are confident they will be sustainable well into the future,” says Oditt. He notes the lingering effects of the closure of the Diamond, Leonora and Versailles estates. Leonora today remains a depressed area with a similar situation at Diamond. The Versailles area benefited from the establishment of the Demerara Harbour Bridge.

But what happens if by 2006 the Demerara Estates fail to be profitable, Guysuco faces further threats to its marketing arrangements and the World Bank review on these estates is due? Oditt says the issue will have to be considered by the government at that stage.

He says nowhere in the region has it been proven that workers can be retrained successfully for any other industry. But he does concede that the pull factor of the city on sugar workers has seen the corporation sometimes resorting to trucking cane harvesters from Blairmont for the LBI estate.

Oditt notes an additional reason to keep the Demerara Estates is the demand for molasses. The new distillery for Skeldon would require 90,000 tons of molasses annually, while Demerara Distillers Limited will have to be provided with a further 80-90,000 tons.

In the case of the wage bill, Oditt says ways will have to be found to deal with this because as a percentage of revenue, the bill is very high. The employment cost($14.4B in 2002) is 56% of sales and has to be taken down to 41%.

Oditt sees a prosperous future for Guysuco, noting that the world market price is not the price by which the corporation should be judged given that it is a residual market. He says the region will put the corporation in a favourable position given the 40% common external tariff, which the corporation would like to see raised to 100%. He also sees a good niche for the corporation in the area of packaged products having launched Demerara Gold and moving in the future to launch Demerara Light and Demerara Dark. Packaged sugar sells at 30 US cents per pound against the world market price of US 7-8 cents per pound.

Guysuco also provided a press statement on the progress of the corporation over the last ten years, which saw production moving up by 154% and yields increasing by 48%. Oditt is quick to point out that he is not claiming credit for the achievements but that it was part of a team effort. The next two years will be very profitable for Guysuco, as it has entered into a hedging programme that will ensure higher prices for its sugar, says outgoing chairman Vic Oditt.

Briefing reporters at Herdmanston House yesterday, Oditt also says the Demerara estates are expected to achieve a cost of production of US 13 cents per pound next year, which will mean they are profitable. In such a scenario, he says, there is no reason to have these Demerara estates closed, sending some 8,000 workers home.

The sugar industry, embarking on a massive modernisation project including a new sugar factory at Skeldon and potentially a refinery and a co-generation plant, has made losses in the last three years totalling $1.6B. The losses in 2002 were not on the operational side but resulted from the provision for pension funds in the accounts. However, the expected upward movement in the euro compared to the dollar will see Guysuco making “healthy profits” in the next two years, Oditt says. Hedging looks to decrease the exposure of producers to sudden price swings by guaranteeing minimum prices for future sales.

But while markets will bring external difficulties for Guysuco, on the cost-of- production sid, the corporation will also have to address a huge wage bill and the issue of the Demerara Estates. These estates have been a drag on the industry, but an agriculture improvement programme launched a few years ago has seen the cost of production coming down. It is now US 18 cents per pound on the Demerara Estates, down from US 24 cents (and US 36.8 cents in 1990). The Demerara Estates’ cane production used to be 50% more expensive than the Berbice Estates.

“We do not intend to close any estate and the government of Guyana endorses that position. Once we get the Demerara estates to return to profitability, we are confident they will be sustainable well into the future,” says Oditt. He notes the lingering effects of the closure of the Diamond, Leonora and Versailles estates. Leonora today remains a depressed area with a similar situation at Diamond. The Versailles area benefited from the establishment of the Demerara Harbour Bridge.

But what happens if by 2006 the Demerara Estates fail to be profitable, Guysuco faces further threats to its marketing arrangements and the World Bank review on these estates is due? Oditt says the issue will have to be considered by the government at that stage.

He says nowhere in the region has it been proven that workers can be retrained successfully for any other industry. But he does concede that the pull factor of the city on sugar workers has seen the corporation sometimes resorting to trucking cane harvesters from Blairmont for the LBI estate.

Oditt notes an additional reason to keep the Demerara Estates is the demand for molasses. The new distillery for Skeldon would require 90,000 tons of molasses annually, while Demerara Distillers Limited will have to be provided with a further 80-90,000 tons.

In the case of the wage bill, Oditt says ways will have to be found to deal with this because as a percentage of revenue, the bill is very high. The employment cost($14.4B in 2002) is 56% of sales and has to be taken down to 41%.

Oditt sees a prosperous future for Guysuco, noting that the world market price is not the price by which the corporation should be judged given that it is a residual market. He says the region will put the corporation in a favourable position given the 40% common external tariff, which the corporation would like to see raised to 100%. He also sees a good niche for the corporation in the area of packaged products having launched Demerara Gold and moving in the future to launch Demerara Light and Demerara Dark. Packaged sugar sells at 30 US cents per pound against the world market price of US 7-8 cents per pound.

Guysuco also provided a press statement on the progress of the corporation over the last ten years, which saw production moving up by 154% and yields increasing by 48%. Oditt is quick to point out that he is not claiming credit for the achievements but that it was part of a team effort.