When former ‘King Sugar’ is waiting to be pronounced dead

The news out of Europe this past week has not been good for cane sugar, a manufactured product that has been at the heart of the continent’s relationship with the English-speaking Caribbean for over 300 years and, at one point, was the mainstay of most regional economies, including Barbados.

Bloomberg, the global financial and business news service, reported that the European Union (EU) is planning from this October to fully liberalize its market for domestic beet sugar, a move which is expected not only to reduce demand for cane sugar imports from former colonies like Barbados which make up the African, Caribbean and Pacific (ACP) group but also bring down prices close to what obtains on the world market where only the most efficient producers can survive.

Jamaica, Belize and Guyana, which still export significant quantities of raw cane sugar to the EU, will be the Caribbean Community (CARICOM) countries hardest hit. In Barbados’ case, even though exports today are negligible compared with 25 or so years ago, they still bring in valuable foreign exchange which helps to boost the island’s stock of international currency reserves.

Does this latest EU move finally signal the death knell for the region’s sugar industry which generated great wealth for Britain, in particular, during its heyday as a colonial power, and also helped to support the birth of the industrial revolution? David Jessop, a leading United Kingdom analyst who has monitored Caribbean-European relations for four decades, suggests it may very well be, unless sugar interests in the region can develop a coordinated and concerted plan of action.

Otherwise, he predicted in a recent newspaper column, “it is quite possible that in a few years’ time, there will be little left of an industry that, for evil and good, has played a central role in the making of the Caribbean”. The threat to Caribbean sugar producers specifically lies in the fact that the pending change to the EU’s sugar regime will place regional producers at a disadvantage because inherent inefficiencies cause them to operate at high costs and render them uncompetitive against much more efficient EU beet sugar producers.

The issue for the region is further compounded by uncertainty related to Britain’s pending withdrawal from the EU as a result of the Brexit vote, given the fact that regional sugar exports, which once fetched guaranteed preferential prices on the EU market, have mostly gone to Britain. According to Mr Jessop, not only will the new EU sugar regime apply to Britain until it formally separates from the continental bloc in 2019 at the earliest, but it also means that Britain is unlikely, for some time yet, to be able to reconcile politically, how it will address the sugar issue.

It is against this backdrop that a high level meeting is taking place in Jamaica this week that will discuss the latest developments and explore options available to the industry. Organized jointly by the Sugar Association of the Caribbean, the Caribbean Community (CARICOM) and other partners, the meeting will bring together government ministers, officials and a wide range of industry partners to discuss the future of the industry, which is still a major employer in Guyana.    

Since the creation of the European Single Market in 1992, uncertainty has increasingly surrounded the future of Caribbean sugar exports. It was a major factor that prompted St Kitts, once a leading exporter, to exit the industry altogether, because the combination of rising production costs and declining EU market prices made remaining in production an unprofitable proposition.

Here in Barbados, despite similar uncertainty, there has been a reluctance to take a similar decision on the industry because of, perhaps, sentimental reasons, even though the industry has become deeply indebted and many plantations have gone out of production. A Government plan to restructure and transform the industry to shift the focus away from just producing sugar for export to Europe to include other cane-based products, is yet to get off the ground because of apparent financing challenges.

However, given the continuing uncertainty, a question which Barbados inevitably needs to ask and answer with clarity is whether it really makes economic sense ploughing scarce financial resources into an industry where the prospects are for diminishing returns given not only what is happening on the world market, where prices are already rock bottom, but also the growing campaign against the consumption of sugar, given its link to diabetes, obesity and other chronic non-communicable diseases.

We need to have this frank conversation to arrive at a decision. In so doing, however, we need to be guided, not so much by sentimentality, but by pragmatism.

6 Responses to When former ‘King Sugar’ is waiting to be pronounced dead

  1. Confused tax payer March 21, 2017 at 8:01 am

    Can someone please put some $ numbers to the sugar industry so that we can better understand the “contribution” it is making to the economy. We keep hearing the large sums going to support the industry, prop up BAMC & BCIC, pay outstanding bonds etc etc but we are not hearing what the tax payer is gaining from their contribution.
    We need solid numbers please not the tired old talk about the hospital, port, island aesthetics & so on. What is the industry’s debt? What is the cost of servicing the debt? What does it cost to run the industry from year to year? What is earned from the sale of sugar & molasses? ANSWERS PLEASE!!!!!

    Reply
  2. Helicopter(8P) March 21, 2017 at 10:32 am

    Sugar producers of Barbados I would be more than glad to see Barbados sugar labeled and placed on our supermarket and shop shelves. I’d like to walk into any supermarket and see Barbados Sugar in the New York metro, Montreal ,Toronto and Atlanta areas! Beautifully designed packets of two, five, and ten pounds each. I have used some very unrefined brown sugar here in the NY metro area! I have viewed in the E-paper a very good looking straw sugar from one of the factories during this crop. I don’t know of anyone here who bake or use sugar who ask for beet sugar that sugar is consumed mostly in processed foods.

    Reply
  3. Fed up March 21, 2017 at 10:41 am

    Time enough that we Bajans get to buy our own sugar instead of the imported ones…smh

    Reply
  4. Tony Webster March 21, 2017 at 1:52 pm

    To those seeking answers, perhaps our first source could be Mt.Gay//Remy Martin, who last year publicly announced a policy shift to rehabilitate idle sugar lands. While this might be more aimed at protecting their crucial interest in being able to produce “Barbados” rum, is yet begs the question / assumption, that we need molasses to make rum. Much preferably, Barbados molasses.

    @Confused Tax Payer: The figures are there….just obscured for reasons known to our Big-Brained Over-Lords, but not to taxpayers, or to Joe citizens who have a genuine interest in minimizing taxes….and maximizing good rum!

    Reply
  5. Confused Tax Payer March 21, 2017 at 2:39 pm

    Interesting perspective Mr Webster but throws up even more questions.
    Can or will the rum industry pay the true cost of the local molasses? I’m guessing not & therefore once again the tax payer’s pocket props it up. How can this be right?

    It would also be interesting to know how the Mt Gay/Remy project is going & if that too is struggling with the gross inefficiencies attached to the government run sugar industry.

    Reply
  6. jus me March 21, 2017 at 6:58 pm

    @Confused Tax payer
    Sir all you need to know is that ANYTHING in the control of Politicians will be a LOSER.

    They are the exception that PROVES the rule, that if YOU PAY PEANUTS YOU GET MONKEYS.

    Reply

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