It will be recalled that Jamaica's sugar was for many years exported to Britain under the Commonwealth Sugar Agreement, that provided certain preferential arrangements with respect to access and price. When the United Kingdom joined the then European Economic Community (EEC), it persuaded the EEC to adopt the basic tenets of the Commonwealth Sugar Agreement, to treat with sugar exports from the African, Pacific and Caribbean nations (ACP), into Europe. This preferential arrangement, guaranteeing specific quantities and prices for ACP sugar exporting countries was enshrined in the Sugar Protocol, attached to the Lome Convention. The Lome Convention was eventually succeeded by the Cotonou Agreement.
Faced with increasing challenges from non-ACP sugar producing countries within the World Trade Organization (WTO) Framework, the European Union (EU) was forced to effect a reform of its sugar regime, which manifested itself in a 36% reduction in our export price between 2006 and 2009. It was this reform that triggered the commencement of the restructuring of our sugar industry here in Jamaica, driven by our Sugar Adaptation Strategy outlined in Parliament in November 2005 by the then Prime Minister. The provisions of the Sugar Protocol were themselves renounced by the EU in 2009, to be replaced by the European Union/CARIFORUM Economic Partnership Agreement (EPA), which preserved duty free access to Europe but without a guaranteed price.
It is common knowledge that the restructuring of Jamaica’s Sugar Industry has been proceeding in tandem with those developments in Europe. We embarked on a privatization exercise which saw the Trelawny and St. Thomas sugar estates being divested in 2009. Last year July we signed an Agreement with COMPLANT of China for the divestment of Frome, Monymusk and Bernard Lodge sugar estates by April 15, 2011. This time table remains on track despite rumours to the contrary.
Even whilst we were divesting, we had to tweak the arrangements for marketing over the last two (2) years, as Jamaica as a State no longer had a contract with Britain for the supply of sugar under the Sugar Protocol, which was renounced in September 2009. As a result of this reality, through the initiative of SCJ Holdings Limited, the operator of the three (3) remaining Government estates, we supplied 79,000 tonnes of sugar to Eridania Suisse of Italy in the 2009/2010 crop year and this year we have a contract with Tate & Lyle of Britain to supply 100,000 tonnes. In both instances, the purchaser provided partial pre-financing, and significantly the private estates pooled with the Government estates in order to guarantee the supply. The price per tonne received under those two (2) contracts were 335.2 and 370 euros respectively.
With the prospect of the remaining three (3) Government estates being handed over to COMPLANT by August 15, 2011, for the 2011/2012 crop year, we will be faced with a scenario where the industry will be completely in private hands for the first time in many, many years. This prospect certainly has implications for the marketing of Jamaica’s sugar, going forward. In their wisdom, the existing private manufacturers with the consent and agreement of COMPLANT who would have been in control of Frome, Monymusk and Bernard Lodge, post August 15, 2011, after negotiating with a number of sugar refineries in Europe, signed an Agreement with ED& F Man Sugar Limited for the supply of some 80,000 tonnes of sugar for the 2011/2012 crop year, at a price of US$936.98 per tonne f.o.b. This represents a 115 % percent increase compared to the current price we are receiving from Tate & Lyle. This significant increase underlines the tightness of sugar supply in the world today. More importantly though, for us, it represents a significant incentive to the industry and to cane farmers particularly.
This increase is coming at a time when we expect to increase our production of sugar, having regard to the significant expansion by both estates and private farmers in cane production now taking place in the industry. I am advised that up to June 2011, some 1,700 hectares of new cane has been planted. I am heartened that in the absence of Government around the table, our private sugar manufacturers have found a convergence of interest with COMPLANT, as the reality is, outside of COMPLANT, none of the other estates had the critical mass to undertake exports of this magnitude.
The arrangement outlined above will subsist only for the 2011/2012 crop year. As we speak, the Ministry of Agriculture and Fisheries is implementing the recommendations of the Wint Sugar Industry Commission, which among other things addresses the reshaping of the institutional, regulatory and marketing arrangements within the industry, given the new market realities in Europe and privatization in Jamaica. It is significant to note that the Enquiry recommended the preservation of the Sugar Industry Authority (SIA). The Sugar Industry Control Act, which gave birth to the SIA, makes provision for the non centralization of marketing of sugar, through a licensing regime. In principle, therefore, individual manufacturers can market their own sugar under license from the SIA, provided that they subscribe to the uniform cane payment system. What this Agreement with ED&F Man demonstrates is that the private sector knows when it is their interest, to come together. I have no doubt therefore that going forward, any permutation of marketing arrangements can be accommodated under the Act.
This is a good day for sugar and a good day for cane farmers. It is my expectation that the stimulus that this increase price provides will encourage farmers who have abandoned cane farming to return to the land. We are happy to have been able to provide some $523 Million to date in the Cane Expansion Fund to facilitate this expansion. Going forward, up to 2015/2016, an additional estimated $1 Billion will be injected into the Fund by the Ministry to support further expansion and modernization in the industry.