Presentation on theme: "Belize Sugar: Planning for the Future"— Presentation transcript:
1Belize Sugar: Planning for the Future Celestino Ruiz and Mac McLachlanFebruary, 2015
2Strategic Development Plan SDP needs to be concluded within a year of signing the new commercial agreements. Government, farmers and BSI each need to sign the SDP for it to come into effect. SDP will be agreed by consensus.SDP will include a road map of how to overcome a range of inter- related challenges to make the industry sustainable.BSI contributing through a strategy paper. Key elements include:Crop productivityMill efficiencyMill and power plant expansionInvestment requirements, farm and mill, to achieve expansionHow to achieve a suitable return on investment to realise the expansionWhat happens if we don’t.
3Why Do We Need an SDPChanging global dynamics means status quo is not sustainable, current NY No 11 price for sugar US$14 cents; cost of production in Belize US$20 – 22 cents: need to reduce sugar production costs.World prices unlikely to increase significantly due to over supply of sugar.EU prices also falling, due to a change in EU regulation to liberate constraints on beet sugar production in 2017.Investment needed to ensure a sustainable and prosperous future for the industry, but investment needs to be viable.Present industry structure unable to deliver efficiencies required to remain globally competitive – small scale farming, size of mill, lack of credit, poor investment climate.
4Fundamentals of a Sustainable Sugar Industry MillEfficientReliableSufficient capacityFinancially soundFarmGood cane quality/farm productivityEfficient harvesting and deliverySufficient credit/resource to manage farm efficientlySufficient equipment to reduce farming costsRight Political and Economic Conditions to ProsperReliable market and competitive industryRegulation where regulation is needed; none where it is notSound investment climate and resources to enable industry growth and developmentGovernment support for the industry
6Mill /Power Plant What we have What we need Efficient mill at 1.3MT Co-generation plant providing power and steam for milling 1.3MTSolvent businessSkilled workforceGood platform for expansion, but investment climate not currently conducive to make the investmentProduction costs for sugar (around US$ Cents 20 – 22 per lb)What we needIncreased mill and power plan capacity: expansion to mill 1.8/2MT cane to reduce production cost of sugar to make it globally competitive (US$ Cents 15 per lb)Resources for expansion project (US$100 – 150m): additional turbine and boiler; bigger mill; enhanced logistics, investment only possible when:Sequenced with increased cane supply, by increasing cane productivity (to 1.8/2MT) and qualityInvestment climate which enabler a return on investment (investment needs to be economically and commercially viable, from 35% factory value share and against projected falling market prices), this requires:Government support and political climate to make investment possibleIncrease in prices paid for co-generated electricity; domestic sugar
7Sugar Cane Production What we have What we need Around 1.3 MT of cane on approcimately77K acres of landFarm yields of around average 17 tons per acre5,500 private cane farmers, dedicated to sugar production95% hand cut cane, but taskforce established to expand potential for chopper harvested canePoor farm information, but new SIMIS in progressPredominantly one cane variety, B79Farmers resourced by commercial banks and EU re-planting fundWhat we needIncreased cane supply, by increasing cane productivity and quality (to 1.8/2MT), achieved by:Systematic re-planting and improved husbandry practicesIntroduction of greater varietal selection to provide early, mid, late maturing cane harvestsA harvesting and delivery system that reduces harvesting costs and is flexible to respond to changes in the industry while improving cane qualityTo protect small farmers from growing costs by shifting to larger farming units in the form of cooperativesCredit facilities provided by development partners at affordable terms, structured to farmers’ needs, to provide land and harvesting inputs (estimated around US$10 million per year)Autonomous extension services provided to farmers to improve productivity and feed information to SIMIS
9Logistics: Factory to Ship What we haveFleet of antiquated tugs and barges which navigate a 122 mile stretch to river/sea to load sugar directly to ship, at a rate of around 700 tons per dayCurrent logistical capacity to transport 120K tons of sugar from factory to shipCostly movement of sugar and molasses from factory to alongside shipSlow loading rate adds to transport costsHigh stevedoring and harbour costsLack of a deep water port means only smaller vessels can load Belize sugar, which often means more costly freight ratesKnowledge of freight market which secures the best rates available, under the circumstancesWhat we needA deep water port and storage/loading facilitates (unlikely within the next five years)Increased loading rate (to 4,000 tons/day)Improved transport logistics – new, larger barges/tugs, improved loading methodsInvestment climate which guarantees a return on the investmentInvestment to achieve this (estimated around US$20 million) , sequenced with:Increased sugar production to achieve greater scale economies thereby increasing efficiency and reducing costs of transporting sugar to ship
10Infrastructure of Northern Belize What we haveInadequate conditions of sugar roads, on which farmers depend to deliver their cropRain fed farms, subject to climatic variationInadequate drainage, which leads to stand over and poor quality caneGovernment budget for infrastructure spread across a number of ministriesWhat we needGreater government co-ordination and planning to maintain and improve the infrastructure of Northern Belize, utilising:Satellite-based topographical information to plan for a consolidated drainage programmeDistrict wide road development plans, utilising donor support where possible/necessaryLong term budget set aside for this activity
11Political and Economic Conditions What we needPolitical support for the SDPAmend legislation to facilitate the implementation of the SDPSound investment climate to enable implementation of SDPGovernment resources committed to sustainability of the sugar industryGovernment support through development agencies to provide industry financing
12Next StepsStakeholders needs to develop a Strategic Development Plan (SDP)Launch of ASR/BSI contribution to SDP: a strategic planSDP should be based on outcome of working groups formed to take forward different elements of the plan, which will present recommendations to a Steering Group comprised of industry stakeholdersMembership of working groups should be drawn from a cross section of industry stakeholders, weighted to specific subject matterNeed a dynamic process. Timelines need to be set for each component of the planThese need to be sequenced together to form the industry planSteering Group should maintain an implementation monitoring role to deliver the plan
13Credit Facilities for Cane Farmers Farmers need:Affordable creditCredit structured to lead to sustainable business unitsMust include re-financing, to move the industry beyond its indebted-pastIndustry needs to be able to re-plant 7,500 acres of cane per year to rejuvenate farm in 10 yearsThis equates to around US$10 million per yearResult will raise yields of cane from 17 tons per acre to around 30This will increase incomes at a time that cane prices are fallingWith other elements of the SDP, this will contribute to reducing production cost of sugar to make it globally competitive and sustainableNeed a farm credit working group to look at existing facilities and new facilitates to make this work: roles of commercial banking community, development banks and government.