Shocking sugar production

The Sunday Gleaner headline on the sugar production for 2017 is more shocking than the abysmally low production islandwide. Gleaner who captioned the story “Sweet smiles – 2016-2017 sugar crop gives main players reasons to hope.”
The reality there can be little hope for an industry that is losing billions of dollars and showing little sign of serious recovery.
The Gleaner report states,“Key stakeholders in the sugar sector are singing the praises of local manufacturers, who had to navigate a raft of challenges but still managed to produce a combined 87,990 metric tonnes of sugar from 1.13 million tonnes of cane for the just concluded 2016-2017 crop year.”
“Heavy rainfall in mid-May that left acres of cane fields inundated, numerous incidents of illicit cane fires in Clarendon, St Elizabeth and Westmoreland, as well as an abrupt end to production at Frome Estate were among some of the challenges faced by the industry, but Major Hugh Baker, general manager of Jamaica Cane Product Sales, remains upbeat for the future.”
“When we consider all that would have transpired throughout the crop, I am personally optimistic for the future of the sector,” said Baker.
“It was a marginal increase of just 2,000 metric tonnes over last crop, but when we consider Appleton which would normally be producing 30,000 tonnes easily, just returning after a year’s absence, and Pan Caribbean’s decision to end production at Frome prematurely, this season has given us reason to hope,” added Baker.
With Appleton returning to production having been closed for all of the 2016 to produce just 2,000 tonnes more sugar is terrible by itself. Viewed against the background that in the late 1970s into the early 1980s the Frome factory produced over 70,000 tonnes of sugar, almost what the entire country now produces, reveals the terrible state the industry is in.
Monymusk used to produce around 60,000 tonnes, according to the Gleaner report Frome produced just 20,451 metric tonnes down from a forecast of 28,000 tonnes and Monymusk did a mere 11,230 metric tonnes. Huge losses are going to be made at those low levels.
There are only three factories that show any signs of hope. These are Duckenfield with a production of just 11,297 tonnes, which is not too far from capacity, Worthy Park Estate in with 26,076 metric tonnes, Appleton Estate managed to churn out a creditable 19,132 tonnes but should be doing close to 40,000 tonnes by now.

Sugar cane growing in the field.

Duckenfield suffers from two major problems, one is the window to reap canes effectively, is very narrow, ranging from December to April, outside of this time line weather conditions are not favourable, secondly, the acreage suitable for canes tend to be limited, the operators say there is more land on which more canes can be grown and on which a profitable sugar operation can be carried out. Appleton can get their tonnage up to much more than they did in 2017 but Frome and Monymusk are disasters zones already and will make huge losses with the level of production they are putting out and so it will only be a matter of time before they fold and when they fold we can forget sugar production in those areas, although some cane can go from both areas to Appleton and Worthy Park for some time.
There is a ready market for around 120,000 tonnes for normal consumption and manufacturing locally, with another 120,000 tonnes in the export market. We are not even producing enough for local consumption and show no signs of exceeding current levels. One would expect the government to be pulling out all the stops to try and address the issue so as to prevent the government getting back in the sector to save jobs as is the case in Trelawny but no one seems to be treating the crisis in the sector with any urgency.

Jamaica’s Economy grows 1.8% in Q2

Agriculture was the star performer in Jamaica's growth in the second quarter

Agriculture was the star performer in Jamaica’s growth in the second quarter

The Jamaican economy grew by 1.8 percent in the second quarter of 2014, compared to the similar quarter of 2013, the Statistical Institute of Jamaica (Statin) reported. The second quarter growth rate, is slightly better than the 1.6 percent growth in this year’s first quarter.
The Statin report goes on to state, this performance reflects an improvement of 6.3 percent in the Goods Producing industries and a 0.5 percent increase in the Services industries.In the June quarter, Agriculture, Forestry & Fishing grew 16.6 percent, Manufacture 4.1 percent and Construction 1.2 percent. Mining & Quarrying industry declined by 0.4 percent.
Manufacture benefited from a 111.9 percent increase in the production of sugar and a 26.1 percent growth in petroleum refining. Higher output levels in Construction resulted mainly from an increase in expenditure on road work activities, including the continued work on the North-South leg of Highway 2000. Lower production levels in the Mining &Quarrying industry was due to a fall in alumina production, resulting from the stoppage of activities at one of the alumina refining plant. However, crude bauxite production increased by 13.3 percent.
Increased output was recorded for all industries within the Services industries with the exception of the Producers of Government Services, down 0.2 percent and Electricity & Water Supply, down 1.6 percent. Higher output levels were recorded for; Hotels & Restaurants 2.3 percent, Other Services 1.1 percent, Transport, Storage & Communication 1 percent, Real Estate, Renting & Business Activities 0.6 percent. The sharp jump in sugar production in the second which is not in line with increased production with the overall 2014 sugar crop, meant that growth in the first quarter would have been negatively affected by a late take off of the cane crop in 2014 which benefited the second quarter.

Sugar helps Seprod hike profit

Sep entrntSeprod reported a hike in profit of 14 percent for the six months to June this year, slower than the 34 percent increase in the first quarter. The company posted profit of $698 million for the half year, up from $614 million in 2013 and $298 million in the quarter versus $317 million in the 2013 quarter.
Seprod, involved in the manufacturing and processing of food products, oils, sugar, milk as well as a food product distribution business, enjoyed an 8 percent rise in revenues to $8 billion from $7.4 billion and 12 percent to $4.17 billion in the second quarter from $3.7 billion in the 2013 June quarter. While revenues climbed, Seprod suffered a reversal in the positive gains in investment income in 2013 with a fall of $110 million in the quarter and $118 million in the half year.
Gross profit grew a very strong 53 percent in the June quarter and a much lower 32.8 percent for the six months over the same period in 2013. Gross profit margins climbed to 29.70 percent in the June 2014 quarter, up from only 18.8 percent in 2013, for the six months 29.7 percent and 22.7 percent, respectively. These are good signs of an improving performance of the group. A major part of the improved performance, is the contribution the sugar manufacturing segment made.
Segment results show operating profit for the half year rising 61 percent, against revenues climbing only 11.4 percent, Distribution segment’s operating profit, fell from $99 million to $68 million. The group’s sugar operations made a loss of $15 million in the June quarter for the group net of minority interest and $30 million for the six months, a big improvement over the $166 million lost for the June quarter last year, and $200 million for the six months to June, 2013.
The group is now in the last six months of the year, when little income will be generated from the sugar operation at Golden Grove Sugar Factory in St Thomas. The cost associated with this operation will be absorbed and will dent profits in other areas. For the second half of 2013 the group picked up $322 million in losses from the sugar operation. Much progress has been made in reducing losses in the sugar operation but there is still some way to go to move to a profitable business. A lot will depend on increasing significantly, the amount of canes to be milled by the factory and by extension the sugar to be produced. They now need to produce around 3,000 to 4,000 tonnes more sugar, to break even.
Expenses| Selling expenses rose sharply by 43 percent in the quarter to $142 million compared with $100 million in 2013 and 22 percent for the six months to $241 million from $198 million. Administrative cost rose 25 percent to $428 million in the quarter versus $373 million in 2013. For the six months period, it rose only 7 percent from $784 million to $839 million.
Finances| Seprod has $4 billion in cash and investments. Borrowing stood at $2.55 billion up from $2.26 billion at June 2013, current assets are well in excess of current liabilities by more than 2 to 1 and equity stands at a strong $10 billion.
Longer term| For 2015 and beyond, a lot is predicated on the fortunes of the sugar operations in St Thomas, where the target is for the processing of 300,000 tonnes of canes and to produce around 25,000 tonnes of sugar. In 2013, Management indicated that the cane farms are already planted and increased production should be coming in from the 2014 crop. For the 2014 crop the factory, reached its highest-ever production levels, with 19,300 tonnes of sugar.
the group produced profits of $907 million last year and is expected to better this in 2014 by some. The stock remains buy rated.

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