All not sweetness and light in the sugar industry

Press, 6 December 1985, Page 12

All not sweetness and light in the sugar industry

KEN COATES reports on a juggling act in the Fijian sugar industry.

Keeping everyone sweet by getting the best price for Fiji’s sugar crop is a constant juggling act that even means importing thousands of tonnes into a country that produces the stuff.

Everyone means practically all of the 700,000 population of Fiji, for sugar is the backbone of the economy and the biggest foreign exchange earner. Growing cane is also a livelihood for 22,000 small farmers, most of the Fijians of Indian origin, direct descendants of indentured workers shipped from India as cheap labour for mainly British plantation owners.

The Fiji Government bought out the Colonial Sugar Refining Company in 1973; since then production has increased by about 100,000 tonnes, although annual output varies with conditions.

In a world greatly over-supplied with sugar, it is a shaky foundation for prosperity. Cane fields can be withered by drought, as in 1983 when production dropped drastically, or they can be flattened by cyclones. This happened earlier this year, and 1985 production will be down by 92,000 tonnes. Selling all their sugar at the current low world market price would hardly enable Fiji’s farmers to keep their heads above the cane. But a life-saver is Fiji’s status as a developing country, and the commitment by European Economic Community countries to import a specific quantity of sugar each year at much higher European prices, for an indefinite period. This year, the preferential arrangement has given guaranteed access and price for half the country’s sugar output. Simitar purchases are made from other Third World countries in Africa, the Caribbean, and the Pacific. It is vital for producers like Fiji to fill European quotas. Much of Fiji’s goes to Britain. This priority to cash in on the higher price, based on European production of beet sugar, is behind Fiji’s decision this year to import 11,250 tonnes of Malaysian sugar. As John May, managing director of the Fiiji Sugar Marketing Company, puts it: “Our raw sugar to the United Kingdom is worth much more than what it costs to import from Malaysia.”

He adds that some Caribbean countries import sugar all the time in view of the price they can get from the E.E.C., compared with the cheap world price.

To make sure imported sugar sells at home, the Malaysian order is for raw brown sugar, similar to the Fiji product. The last time imported sugar was sold, it was white, and the locals did not like it. Just how long the favourable European price, really a form of overseas aid, will last depends more on world politics than on sugar supply and demand. In the early 19705, when the protocol was signed, the E.E.C. imported sugar. Today, the community exports between 4.5 and 5 million tonnes.

“Production has outstripped consumption on a global scale with a big over-supply in the past four years,” says Mr May. “In more sophisticated markets, artificial sweeteners have taken over.”

Now, although the E.E.C. does not need sugar from Fiji or anyone

else, it is still obliged to buy it. New Zealand has bought Fiji sugar at a protected price under an agreement /between governments, but because of the present Government’s free market policy, supply will be based on a contract for 60,000 tonnes a year at free market prices. "Previously, we have protection from very low prices, while under a new commercial arrangement we take what the market offers,” comments John May. Even so, there is still a commitment ’by New Zealand to supplement returns when the world price falls below a certain level.

Deciding which markets to supply can be a dicey business. The Fiji Sugar Corporation came under fire recently for breaking a contract with Japan, thereby paying a penalty of $1,200,000.

This action was based on the need to supply the more lucrative E.E.C. market. Earlier, a bonanza crop had been expected, but because of cyclone damage this did not eventuate. The decision to sell on the free market in Japan was also influenced by storage problems at Lautoka because of cyclone damage. A lighter-than-usual crop meant marketing had to be revised. China and New Zealand were supplied with a total of 110,000 tonnes, but deliveries were not made to Portugal or Singapore. By re-arranging available sugar supplies, making shipments out of next season’s crop and using new storage facilities, the all-important E.E.C. and American markets will be supplied. Sugar is so important to Fiji that the Sugar Corporation has the benefit of Government influence in marketing. Advantage over competitors such as Thailand and the Philippines is that in Fiji a single miller, the corporation, is able to control quality. Because of its size, Fiji poses no threat to major producers like Australia, and can therfore pick specific markets.

All-important to ihe industry are ’ the Indian cane farmers, many of« whom work hard to scratch aj living. John May sees the smalls holdings they lease as a: strength, j “because farmers who work the J land themselves can reduce costs i considerably and still survive.” j Some cane farmers on meagre ? incomes on small holdings splits from larger family units, might-, well take a cynical view of such a■? comment. But John May em-3 phasises the Sugar Corporation’s ■? efforts to get farmers to see their'holdings as a business. Some are i too small, and others cannot sup- ; port paying for labour. 4 Planning for the future alsoposes problems. If too much sugar : is produced, the price to farmers is< reduced through selling more on i the open market. ( Too little cane can also bring i worries. “The real danger is that ! production will decline because of J the protracted period of low * prices,” says John May. “When the ■ next price rise comes, we will then > not have sufficient sugar to take' advantage of it.” I But his face brightens as he ’ adds: “If everyone in China took a teaspoon of sugar a day, it would • clean out the world sugar market; in no time.” <

(Fiji does have an agreement: with China to supply 50,000 tonnes a year for five years. It looks ' hopefully towards exporting more.) - Fiji is also trying to lift its: export earnings by making rum, vodka, gin, whisky, and brandy at the South Pacific Distillery, a subsidiary of the Fiji Sugar Corporation. The latest drive is the manufac- - ture of American Jim Beam bour-‘ bon under licence selling at $19.20. • Apparently its target is to be• American tourists, who, it is hoped, > will not notice too much from the real thing which in Fiji, sells at double the price. • Fiji has also sent off a trial" shipment of local rum, with each? bottle wrapped in a mat, to Australia.