Last week’s column carried a schedule listing the key specifications for the new Skeldon factory. This included those technological developments which experts felt then were necessary to improve factory efficiency and lower unit cost of production. However, both factory and agricultural technological developments must go hand-in-hand, if there is to be overall efficiency, however measured (output per hectare of land; unit of labour, capital or other item).
There is no point in expanding factory capacity, output, or productivity, if there is insufficient cane grown for grinding and conversion into sugar. By similar parity of reasoning, it would be futile to increase output of cane beyond the efficient grinding capacity of available factories. Consequently, factory and agricultural technological improvements need to be applied together in order to raise general industry efficiency, and reduce the unit cost of supplying sugar.
Private cane farming
The Skeldon Sugar Modernization Project (SSMP) has been predicated on nurturing a substantial cadre of private independent cane farmers who would supply cane to the Skeldon factory. In addition to this cadre of private independent cane farmers, the SSMP envisaged several other roles for the farming community in the Berbice/Corentyne region, including: 1) participation in the “design and operation of the Skeldon Expansion project”; 2) producing adequate numbers of developers and managers for lands leased to them by GuySuCo; and 3) their involvement in operating and designing the water management system on the estate (drainage and irrigation). The privatisation of cane farming is one of the principal planks of the SSMP.
Apart from governance benefits, which were expected to flow from involving the local farming community in the project, this approach was also intended to cheapen the cost of producing cane. This would only occur to the extent that, cane supplied by private farmers is indeed cheaper than that supplied by the estate. In such an event the out-sourcing of cane supply would be fully justified on grounds of cost.
From a purely commercial standpoint, this result would depend heavily on the arrangements under which the price of private cane supplied to the estates is determined. This, however, is a highly complicated and complex issue. I have previously addressed it in this column, several years ago. I do not intend to repeat that discussion here, except to recall a few of the thorny questions which arise: 1) since the farmers’ cane is not processed separately from estate cane, how is farmers’ cane quality to be determined? 2) when should payment be made for private farmers cane, at the time this is accepted by the factory, or when the sugar is eventually sold? 3) if the latter, who should carry the cost of this deferred payment, bearing in mind that “time is money”?
It is obvious though that, at the end of the day, the distribution of the benefits between farmers and estate has to be analysed very carefully.
Technological
developments: agriculture
Let us consider the technological developments in agriculture, which the SSMP identify as crucial. The first of these is a more scientific selection of land for cane cultivation. Thus the SSMP called for “maximizing the proportion of Class I and II land.” Second, improvement in planting methods including, a) fallowing policy (flood or legumes?); b) high density planting (to limit weed control costs); and c) the optimization of the gross cropping period was also considered urgent.
The third set of improvements lay in the area of water management, especially the rehabilitation and maintenance of canals, which are crucial to the drainage and irrigation networks of the estates.
Fourthly, the application of chemical refiners to enhance sucrose content, as well as field and laboratory research directed at securing higher yielding cane varieties were considered as key scientific innovations.
And, finally, the estates hoped above all to mechanize as much of the cane growing and harvesting operations as possible, given the rising cost and growing scarcity of labour. Like privatisation, mechanization of cane cultivation was considered another main plank of the SSMP.
Pumping up benefits
As indicated last week, Booker Tate and GuySuCo have been very generous in their portrayal of the benefits that would flow to Guyana and the Berbice/Corentyne region from the expansion project. I had promised to provide this week a sample of these portrayals as described in their official documents presented to the Government of Guyana. This is given below.
Referring to existing operations in the Berbice/Corentyne Region, the BookerTate/Guysuco Strategic Plan advanced the view: “The local economies remain relatively small compared to Georgetown and its environs, lack diversity and suffer ‘leakages’ as many intermediate inputs, particularly spares, are purchased outside the region.”
It then proposed: “the establishment of a large new export orientated sugar project in the Skeldon area is expected to bring benefits to Guyana, the Berbice and Corentyne region and to local communities and businesses.”
These benefits would be derived from “incremental value added,” “tax receipts” and at the local level the provision of “significant direct and indirect investment and employment opportunities.” Importantly also, commercial linkage benefits were projected for local businesses engaged in construction; infrastructure works; housing; utilities; agricultural machinery supply and servicing companies; local fabricators; small businesses (shops etc); banking services; and social amenities.
These optimistic prognostications were implicitly, if not explicitly, premised on Guyana continuing to market its sugar overseas at prices and in quantities largely configured by the marketing scope of the EU-ACP Sugar Protocol. However, once this premise is removed or becomes threatened, the high and rising unit cost of producing sugar in Guyana pulls the rug from under the large financial, administrative and governmental investments required to expand a shrinking sugar industry to a level of output above 450,000 tonnes annually.
Next week I shall look at the marketing arrangements which face the industry before proceeding to conclude the series with a broad appraisal of the Guyana sugar industry, and then make suggestions for the way forward.
