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Sugarcane Industry Under Threat

Sugarcane Industry Under Threat

BY: North Coast Courier 11 Apr 2019 Filed in: Sugar Industry News

Sugarcane farmers are facing more threats than ever and are desperately calling on government to help the industry survive.

Darnall farmer Dieter Lutge said they are sitting in a precarious situation. "Imports are killing us, especially sugar from Swaziland, and while it is done legally you have to ask if it is morally right. We are producing way too much sugar for our local demand. We need to export, but that means we have to sell our sugar cheaper. The whole industry is battling," said Lutge, who has now planted about 30 hectares of macadamias on his 600 hectare farm.

"Farmers used to rest on their laurels with sugarcane. In the next 10 years we will see much more diverse farming. Besides  macadamias, farmers are trying avocados, tea tree oils and granadillas. The problem, however, is that the soils are not great and farmers are stuck in a rut now because there is no capital to expand and diversify."

While the situation is looking bleak, Lutge said he believes there is still a future for sugarcane. "We are all feeling huge pressure and we are trying our utmost to make it work through good management. I believe if the strained relationships in the industry are amended and government comes on board to help, we will be OK. You have to work with the problem, not fight it."

His neighbour, Dave Clewlow, has about 20 hectaresof macadamias- a crop he said worked well with cane. "Sugar is a nine-month crop and macs will cover those three months when cane is done, so your labour force can stay pretty static. Sugarcane is our bread and butter though and farmers cannot afford to diversify completely."

Meanwhile, smaller farmers are drowning as South African Farmers Development Association (SAFDA) communications manager Ronda Naidu said a number of small-scale and land reform sugarcane farmers will be starting the new season this month in debt. "As a number of these farmers have no ready access to finance, they do not have the funds to manage their fields or replant," said Naidu. She said SAFDA has been instrumental in unlocking R172 million in immediate transformation funds within the South African sugar industry in the 2018-2019 season. "This has helped to alleviate some of the financial burden related to haulage and input costs. We are looking at ways to reduce costs through bulk buying programmes aswell as diversification so farmers can benefit from the full value of a stalk of cane."


SA Canegrowers Association chairperson Graeme Stainbank said there are three main reasons why sugarcane farming is in an  "unprecedented crisis" at the moment:

1. Sugar Tax
Since sugar tax was introduced a year ago, the industry has lost about R1,3 billion in revenue. Furthermore, 200 000 tons of sugar were exported to the world market due to a surplus in production caused by the drop in demand from the industrial market since the implementation of sugartax. For every ton that is exported the industry loses about R5 000 in revenue. This could put up to 10000 jobs at risk in the canegrowing sector alone, not counting the job losses in the sugar milling and non-alcoholic beverage industries.

2. Drought
Climate change has led to unpredictable weather conditions and farmers are still recovering from the three-year drought that dealt a huge blow to the revenue of canegrowers who lost over R2 billion in just one season.

3. Weak Protection Against Imports
Sugarcane farmers were plunged into another crisis when about 500 000 tonnes of imported sugar landed in South Africa.  Locally-produced sugar - which is some of the highest quality in the world - was summarily dumped onto the world market at a huge loss,  because the world sugarprice is currently very low. Many canegrowers were unable to cover their production costs. In 2018, the industry lobbied government to provide tariff protection against the dumping of cheap imports.

The International Trade Administration Commission (ITAC) finally agreed to raise the dollar-based reference price (DBRP) - an import tariff levied on products that come into South Africa - from $566 to $680. This is not even close to the $856 per ton level that the industry had applied for. The result: SA Canegrowers and other industry members were unable to recover their full costs, as the current duty is still below the costof production. Import tariffs should be basedon the cost of production; not the selling price of sugar.

Canegrowers will soon meet with Trade and Industry Minister Rob Davies to discuss solutionsto the myriad of problems in the industry.  Stainbank said possible diversification strategies and exploring alternative markets, such as ethanol production, electricity generation and cane based packaging are also on the table. "We believe an immediate solution to the current crisis is for government to enact a moratorium on the sugar tax until a full assessment of its effect on the economy and jobs has been done," said Stainbank.

"Canegrowers acknowledgethat the future of the industry hinges on more diversification. However, we believe that there will always be a market for sugarcane, especially if there is government-led investment in new innovations, which could potentially restore the well-being of the sector, make it more competitive and prevent imminent job losses."