Up the cane price
2 July, 2022, 4:56 pm
Until the post COVID-economic recovery is substantially realised, the sugar industry will need to be supported to provide economic and social stability to a significant part of our population who reside in the cane belt.
A strong, justifiable case exists for an increase in the minimum guaranteed price for sugar cane to meet ongoing escalating costs of cultivation, harvesting and delivery to the mills.
The National Farmers Union (NFU) has made a pre-budget submission to the Ministry of Economy arguing the need for the guaranteed price to be increased by at least 20 per cent from the current $85 to $102 a tonne.
In the past, farmers’ representatives in the Sugar Cane Growers Council (SCGC) sought periodic reviews or amendments to the Sugar Industry Master Award to keep pace with changing trends in the industry.
But this has not been done after the elected council was disbanded in 2010 and replaced with a government appointed entity which, in my opinion, now operates as a mere functionary of the Sugar Ministry.
There is no denying that in recent years growers have been getting a raw deal from government and the FSC. NFU’s case for an increase in the minimum guaranteed price to $102 a tonne is soundly argued in its submission to the Economy Ministry.
The case for increase
The cumulative effects of the COVID pandemic and the Ukraine war have had a debilitating effect on the sugar industry and, no doubt, other sectors of the economy as well.
Continuing hikes in fuel prices, in the cost of farm inputs and in the repair and maintenance costs of farm equipment and machinery have had a notable impact on the bottom line of cane farmers.
They are now paying more for harvesting and transportation of cane as per the recent determinations by the Fijian Competition and Consumer Commission (FCCC).
• The rate for mechanical harvesters has risen from $17.50 to $20.61 a tonne;
• cartage costs have increased by 10-15 per cent, depending on the distance covered;
• cost of tyres, batteries and spare parts have increased by between 50-75 per cent in some cases; and
• The cost of food supplied to cane cutters has also risen significantly.
Exorbitant demands for rent, premiums
Moreover, periodic increases in land rent and premiums demanded on lease renewals have added substantially to the farmer’s costs.
The demands can range from $16,000 for a small farm to $70,000 for a large farm. TLTB is also demanding five years rent in advance.
Such escalating costs are discouraging farmers from seeking renewals.
“Taking full account of the combined effects of these cost increases, NFU submits that the guaranteed minimum price of cane be increased by 20 per cent from $85 to $102 per tonne, effective from the 2022 season. Further, the guaranteed price be reviewed annually to keep pace with inflation,” the NFU submission said.
Why a guaranteed price?
A guaranteed minimum cane price of $85 per tonne was announced by the government in 2018, to be paid for three years, expiring with the 2020 crop.
It was extended for a further two years from 2021 and will lapse at the end of the 2022 season unless renewed.
Under this arrangement, the price paid to cane farmers as per the Sugar Industry Master Award was supplemented by the government if that price was below $85 per tonne.
A provision was made annually in the Budgets to meet the additional costs (Head 126.96.36.199). No doubt, the price supplementation was awarded to compensate for the rising costs incurred by the farmers as stated earlier.
The cane price of around $55-$60 per tonne, generally paid under the Master Award proceeds sharing formula, has not kept pace with these developments.
It has, over the years, led to farmers exiting the industry as is evident from the number of active farmers in 2006 (15,730) compared to 11,638 in 2019 ( FSC Annual Reports).
It could be argued that an industry that survives on subsidies or grants may not be worth keeping unless it can be reformed to become self reliant.
This question should, however, be directed at FSC and the government which must bear responsibility for the sorry state in which the industry finds itself today.
Sugar supports rural economies
As things stand today, the industry still supports, directly or indirectly, the livelihoods of around 20 per cent of our people – farmers, mill workers, landowners, lorry drivers and operators and cane cutters. It is also significant that a substantial part of the economies of the rural dwellers and towns such as Ra, Tavua, Ba, Labasa, Nadi and Sigatoka is inextricably linked to the sugar industry.
Not only that, the COVID-19 pandemic has strongly brought home to us the folly of concentrating all our development efforts on Tourism.
It has underscored the need to diversify our economy and focus on agriculture and other resource-based industries. Given these facts, it is unthinkable what consequences would follow should this industry be forced to wind up.
Every effort must be made to turn it around to become self-reliant and that is quite possible provided there is the political will to make it succeed.
Be that as it may, for the moment and until the post Covid economic recovery is substantially realized, the sugar industry will need to be supported to provide economic and social stability to a significant part of our population who reside in the cane belt.
Withdrawal of the guaranteed price will result in a decline of over 30% in the incomes of the cane farming community.
It will be a hard blow to them – something which they will not be able to sustain. It certainly could mean more farmers exiting the industry, leading to its demise.
The choices are clear. Withdraw the guaranteed price and put the future of the industry at great risk with its attendant consequences.
OR continue the guaranteed price while making a genuine effort to attain self-reliance with the cooperation and support of all stakeholders.
Dire state of FSC finances
A matter of great concern to all industry stakeholders is the rather precarious financial state of FSC. It has not had its AGM for year 2021 which is normally held around October/November. Its 2022 financial year closed on 31st May without its annual reports being released to shareholders. Although FSC is a public company, it was taken off the list of South Pacific Stock Exchange some time ago. According to its last annual report (2020) the total liabilities of the Corporation exceed its assets by $300m. The auditor’s report says (p64) that given the financial position and debt levels of the Corporation and its recurring losses, FSC will not be able to continue as a going concern without government support – not very reassuring!
• MAHENDRA CHAUDHRY is the leader of the Fiji Labour Party. The views expressed are the author’s and do not necessarily reflect the views of this newspaper.