With the background to the broad configuration of the global sugar industry provided in this column over the past three weeks, we can now turn attention to an examination of the regional industry, and locate it in the context of the global trends and developments that have already been identified. I have tried to make these trends and developments as understandable as possible, given the complex nature of the global sugar and sweetener markets. The sad truth is that, readers who do not get past that hurdle will really not be in a position to properly appraise, or for that matter offer intelligent comments on, the future direction of the industry in Guyana and the wider CARICOM region. This would be regrettable as sugar still is the leading sector of the Guyana economy. In this regard I would like to stress how crucial was the point made last week that the world free market price of sugar, despite its "residual" or "remainder" character, has been statistically established as the best indicator of costs in the long run for a competitive sugar industry. With sugar prices on this market in the range of only 5 - 8 cents per lb for significant periods of time, this is the benchmark target against which our sugar industry will have to compete, if the industry becomes fully liberalized and if a truly free global market for sugar is established. Clearly this observation is of the utmost significance for assessing the future of the industry in the Caricom region.
How is the mighty fallen?
In the mid 1950s sugar was king in the region. As a group, the West Indian sugar-producing countries ranked as high as ninth in terms of global production. As a group, they also ranked second among exporters, after Cuba. In stark contrast, today Caricom sugar is a marginal player on the world stage as its production averages only about 0.7 percent of global output and its export about one percent of total global export.
What does this small fraction represent in tonnage? The peak output of the regional sugar industry was achieved in 1965, when 1.4 million metric tonnes of sugar was produced. Its lowest output over the past few decades and more was in 1989 when output fell to 0.6 million metric tonnes. Because sugar is a crop whose output fluctuates annually, due to weather and other such exogenous circumstances, it is customary to take a three-year average of production to eliminate this type of fluctuation. Utilizing this approach, we find that for the period 1961-63, output averaged about 1.2 million metric tonnes. The same held true for the next three-year period (1960-1964). Indeed up to the period 1970-72 average output exceeded one million metric tonnes. Since that period however, the trend-line has been strongly downward.
One striking feature of this decline is that over this period the number of Caricom sugar-producing countries has fallen from ten to six at present. Furthermore, among the present six at least three are evaluating whether to continue long-term production in the industry as an exporter, or to quit (Barbados, St Kitts-Nevis and Trinidad and Tobago).
Belize: the only exception
This decline has been uniform for all producers, with the exception of Belize. I have prepared the table below, which summarises production based on three-year averages and provided growth rates for the six producers over the period 1961-2002. The table shows that the overall regional decline has been of the order of minus 1.97 percent per year. Belize is the only country with a positive growth rate, which was 2.92 percent per year. Two countries, Barbados and Trinidad and Tobago, had rates of decline greater than minus 3.80 percent. Indeed, for Barbados, current output is about one-quarter of what it was in the early 1960s. And, in Trinidad and Tobago it is about one-third of the former level. Jamaica's decline has also been substantial - about 33 percent since the early 1960s.
Guyana's decline was minus 0.85 percent per year over the period. Here the industry reached its lowest trough in the period 1988-1990 when output averaged 145,000 metric tonnes. Since then output has nearly doubled. But, growing from such a low base, current output still remains below the pre-Independence level of 305,000 metric tonnes.
NB: Exponential growth rates were measured for the entire period (1961-2002).
Source: Clive Thomas, The Inversion of Meaning: Trade Policy and the Caribbean Sugar Industry (2004, forthcoming)
The graph below depicts regional output and the trend line for the convenience of readers.
Source: Clive Thomas (op cit)
Next week we continue this discussion of the regional sugar industry.