Required Report - public distribution

**Date:** 4/15/2004

**GAIN Report Number:** JM4004

JM4004

**Jamaica & Dep**

**Sugar**

**Annual**

**2004**

**Approved by:**

![](media/image1.wmf)David G. Salmon

U.S. Embassy, Santo Domingo

**Prepared by:**

Sylburn Thomas

**Report Highlights:**

Jamaica\'s production of 96-degree sugar is expected to increase to
195,000 MT during 2003/04. Imports of raw and refined sugar are
projected at 20,000 MT and 70,000 MT.

Includes PSD Changes: Yes

Includes Trade Matrix: No

Annual Report

Kingston \[JM1\]

\[JM\]

Table of Contents

[Executive Summary 3](#executive-summary)

[Production 3](#production)

[Consumption 6](#consumption)

[Trade 6](#trade)

[Stocks 7](#stocks)

[Policy 7](#policy)

# Executive Summary

While significantly below the industry's viability target, Jamaica's
production of 96-degree sugar is expected to rebound from a historic low
during the 2003/04 sugar cane crop. During the 2001/02 and 2002/03 sugar
cane crops output of 96-degree sugar fell to historic lows of 174,000
and 152,000 metric tons (MT) respectively. The 2003/04 crop is expected
to produce approximately 195,000 MT of 96-degree sugar. The improved
performance of the current crop is expected to be influenced almost
entirely by improvements in the quality of sugar cane supplied to the
factories.

Since the development of the five-year sugar industry plan in 1999, the
divergence between the actual output and the minimum industry viability
target continues to widen over successive years. Several factors will
continue to negatively impact sugar production, viz: unavailability of
replanting loan, high production costs, inefficient factory operations,
low yields, poor cane quality, heavy debt burden, poor infrastructure,
and high levels of illicit cane fires.

Over the last five years, sugar consumption has been relatively stable
at approximately 124, 000 MT per year. As the sugar industry continues
sub-optimal performance Jamaica will fulfill a significant proportion of
its domestic demand from imported raw sugar. During the 2002/03 sugar
cane crop Jamaica exported 128,629 MT, while imports of raw sugar
increased from 16,336 MT to 35,110 MT. During the same period, refined
sugar imports inched up by 3 percent from 66,000 to 68,000 MT. Total
importation of raw sugar for the 2003/04 crop is projected at 20,000 MT.

Jamaica's five-year sugar industry policy, which is currently in its
final year of implementation, has not produced any meaningful
accomplishments and is widely regarded by sugar industry interest as a
failed initiative.

# Production

# Statistical Data

+----------------+------+------+------+------+------+------+------+
| Jamaica & Dep  |      |      |      |      |      |      |      |
|                |      |      |      |      |      |      |      |
| Sugar Cane for |      |      |      |      |      |      |      |
| Centrifugal    |      |      |      |      |      |      |      |
+----------------+------+------+------+------+------+------+------+
|                | **20 | **R  | **20 | **Es | **20 | **Fo | **U  |
|                | 02** | evis | 03** | tima | 04** | reca | OM** |
|                |      | ed** |      | te** |      | st** |      |
+----------------+------+------+------+------+------+------+------+
|                | **   | **   | **   | **   | **   | **   |      |
|                | USDA | Post | USDA | Post | USDA | Post |      |
|                | Offi | Esti | Offi | Esti | Offi | Esti |      |
|                | cial | mate | cial | mate | cial | mate |      |
|                | \    | \    | \    | \    | \    | \    |      |
|                | [Old | [New | [Old | [New | [Old | [New |      |
|                | \]** | \]** | \]** | \]** | \]** | \]** |      |
+----------------+------+------+------+------+------+------+------+
| ## Mar         |      | 12/  |      | 12/  |      | 12/  | MM/  |
| ket Year Begin |      | 2001 |      | 2002 |      | 2003 | YYYY |
+----------------+------+------+------+------+------+------+------+
| **Area         | 38   | 38   | 39   | 39   | 39   | 39   | (    |
| Planted**      |      |      |      |      |      |      | 1000 |
|                |      |      |      |      |      |      | HA)  |
+----------------+------+------+------+------+------+------+------+
| **Area         | 34   | 34   | 35   | 35   | 35   | 35   | (    |
| Harvested**    |      |      |      |      |      |      | 1000 |
|                |      |      |      |      |      |      | HA)  |
+----------------+------+------+------+------+------+------+------+
| **Production** | 1965 | 1965 | 1907 | 1955 | 1980 | 2106 | (    |
|                |      |      |      |      |      |      | 1000 |
|                |      |      |      |      |      |      | MT)  |
+----------------+------+------+------+------+------+------+------+
| **TOTAL        | 1965 | 1965 | 1907 | 1955 | 1980 | 2106 | (    |
| SUPPLY**       |      |      |      |      |      |      | 1000 |
|                |      |      |      |      |      |      | MT)  |
+----------------+------+------+------+------+------+------+------+
| **Utilization  | 1965 | 1965 | 1907 | 1955 | 1980 | 2106 | (    |
| for Sugar**    |      |      |      |      |      |      | 1000 |
|                |      |      |      |      |      |      | MT)  |
+----------------+------+------+------+------+------+------+------+
| **Utilizatn    | 0    | 0    | 0    | 0    | 0    | 0    | (    |
| for Alcohol**  |      |      |      |      |      |      | 1000 |
|                |      |      |      |      |      |      | MT)  |
+----------------+------+------+------+------+------+------+------+
| **TOTAL        | 1965 | 1965 | 1907 | 1955 | 1980 | 2106 | (    |
| UTILIZATION**  |      |      |      |      |      |      | 1000 |
|                |      |      |      |      |      |      | MT)  |
+----------------+------+------+------+------+------+------+------+

+-------------------+------+------+------+------+------+------+------+
| Jamaica & Dep     |      |      |      |      |      |      |      |
|                   |      |      |      |      |      |      |      |
| Centrifugal Sugar |      |      |      |      |      |      |      |
+-------------------+------+------+------+------+------+------+------+
|                   | **20 | **R  | **20 | **Es | **20 | **Fo | **U  |
|                   | 02** | evis | 03** | tima | 04** | reca | OM** |
|                   |      | ed** |      | te** |      | st** |      |
+-------------------+------+------+------+------+------+------+------+
|                   | **   | **   | **   | **   | **   | **   |      |
|                   | USDA | Post | USDA | Post | USDA | Post |      |
|                   | Offi | Esti | Offi | Esti | Offi | Esti |      |
|                   | cial | mate | cial | mate | cial | mate |      |
|                   | \    | \    | \    | \    | \    | \    |      |
|                   | [Old | [New | [Old | [New | [Old | [New |      |
|                   | \]** | \]** | \]** | \]** | \]** | \]** |      |
+-------------------+------+------+------+------+------+------+------+
| ##                |      | 12/  |      | 12/  |      | 12/  | MM/  |
| Market Year Begin |      | 2001 |      | 2002 |      | 2003 | YYYY |
+-------------------+------+------+------+------+------+------+------+
| **Beginning       | 15   | 15   | 8    | 8    | 3    | 6    | (    |
| Stocks**          |      |      |      |      |      |      | 1000 |
|                   |      |      |      |      |      |      | MT)  |
+-------------------+------+------+------+------+------+------+------+
| **Beet Sugar      | 0    | 0    | 0    | 0    | 0    | 0    | (    |
| Production**      |      |      |      |      |      |      | 1000 |
|                   |      |      |      |      |      |      | MT)  |
+-------------------+------+------+------+------+------+------+------+
| **Cane Sugar      | 175  | 175  | 170  | 152  | 180  | 195  | (    |
| Production**      |      |      |      |      |      |      | 1000 |
|                   |      |      |      |      |      |      | MT)  |
+-------------------+------+------+------+------+------+------+------+
| **TOTAL Sugar     | 175  | 175  | 170  | 152  | 180  | 195  | (    |
| Production**      |      |      |      |      |      |      | 1000 |
|                   |      |      |      |      |      |      | MT)  |
+-------------------+------+------+------+------+------+------+------+
| **Raw Imports**   | 16   | 16   | 22   | 35   | 18   | 20   | (    |
|                   |      |      |      |      |      |      | 1000 |
|                   |      |      |      |      |      |      | MT)  |
+-------------------+------+------+------+------+------+------+------+
| **Refined         | 68   | 68   | 69   | 68   | 70   | 68   | (    |
| Imp.(Raw Val)**   |      |      |      |      |      |      | 1000 |
|                   |      |      |      |      |      |      | MT)  |
+-------------------+------+------+------+------+------+------+------+
| **TOTAL Imports** | 84   | 84   | 91   | 103  | 88   | 88   | (    |
|                   |      |      |      |      |      |      | 1000 |
|                   |      |      |      |      |      |      | MT)  |
+-------------------+------+------+------+------+------+------+------+
| **TOTAL SUPPLY**  | 274  | 274  | 269  | 263  | 271  | 289  | (    |
|                   |      |      |      |      |      |      | 1000 |
|                   |      |      |      |      |      |      | MT)  |
+-------------------+------+------+------+------+------+------+------+
| **Raw Exports**   | 138  | 138  | 138  | 129  | 138  | 156  | (    |
|                   |      |      |      |      |      |      | 1000 |
|                   |      |      |      |      |      |      | MT)  |
+-------------------+------+------+------+------+------+------+------+
| **Refined         | 0    | 0    | 0    | 0    | 0    | 0    | (    |
| Exp.(Raw Val)**   |      |      |      |      |      |      | 1000 |
|                   |      |      |      |      |      |      | MT)  |
+-------------------+------+------+------+------+------+------+------+
| **TOTAL EXPORTS** | 138  | 138  | 138  | 129  | 138  | 156  | (    |
|                   |      |      |      |      |      |      | 1000 |
|                   |      |      |      |      |      |      | MT)  |
+-------------------+------+------+------+------+------+------+------+
| **Human Dom.      | 128  | 128  | 128  | 124  | 128  | 128  | (    |
| Consumption**     |      |      |      |      |      |      | 1000 |
|                   |      |      |      |      |      |      | MT)  |
+-------------------+------+------+------+------+------+------+------+
| **Other           | 0    | 0    | 0    | 0    | 0    | 0    | (    |
| Disappearance**   |      |      |      |      |      |      | 1000 |
|                   |      |      |      |      |      |      | MT)  |
+-------------------+------+------+------+------+------+------+------+
| **Total           | 128  | 128  | 128  | 128  | 128  | 128  | (    |
| Disappearance**   |      |      |      |      |      |      | 1000 |
|                   |      |      |      |      |      |      | MT)  |
+-------------------+------+------+------+------+------+------+------+
| **Ending Stocks** | 8    | 8    | 3    | 6    | 5    | 5    | (    |
|                   |      |      |      |      |      |      | 1000 |
|                   |      |      |      |      |      |      | MT)  |
+-------------------+------+------+------+------+------+------+------+
| **TOTAL           | 274  | 274  | 269  | 263  | 271  | 289  | (    |
| DISTRIBUTION**    |      |      |      |      |      |      | 1000 |
|                   |      |      |      |      |      |      | MT)  |
+-------------------+------+------+------+------+------+------+------+

## 

As of April 5, 2004, the 2003/2004 sugar cane crop was 120 days (about
midway) in harvest and had produced 127,004 metric tons (MT) of
96-degree sugar from 1,357,313 MT of sugar cane at a tons cane per ton
(TC/TS) ratio of 10.69:1. Relative to the corresponding period of the
2002/03 sugar cane crop, these indices represent a 23 percent increase
in 96-degree sugar production, a 10 percent increase in sugar cane
ground, and an improvement in the TC/TS ratio from 11.2:1 to 10.69. The
current crop is expected to perform superior to the 2002/03 and 2001/02
sugar crops, which recorded the lowest sugar productions in more than
fifty years. When compared with the first 118 days of the 2000/2001
crop, the indices of the current crop represent an 8 percent increase in
sugar cane ground, a 6 percent increase in 96-degree sugar production,
and similar sugar cane quality as reflected by an almost identical TC/TS
ratio. Given that acreage harvested and average yield have shown only
slight variations within the neighborhood of 37,000 hectare and 59
MT/hectare (MT/Ha) over the last three years, the expected improvement
in 96-degree sugar production during the 2003/2004 crop will be
influenced almost entirely by improved sugar cane quality. Accounting
for losses due to illicit cane fires, and assuming the absence of
industrial actions and continued favorable weather conditions, the
2003/04 sugar can crop is projected to produce approximately 195,000 MT
of 96-degree sugar from 2,106,000 MT of sugar cane at a TC/TS ratio of
10.8:1. Though substantially lower than the industry's viability target
of 311,000 MT per crop, the expected 195,000 MT of raw sugar during
2003/04 will reflect a substantial improvement over the two previous
crops.

Despite extensive financial support by the Government of Jamaica (GOJ),
output from the sugar industry is sustained at sub-optimal levels. The
performance of the 2002/03 sugar cane crop was equally disappointing as
the 2001/02 crop. During the 2001/02 crop, 96-degree sugar and sugar
cane production plummeted by 14.59 and 11.89 percent to a 55-year low of
174,000 MT and 1,965470 MT, respectively. During the 2002/03 sugar cane
crop, out put of 96-degree sugar and sugar cane declined by a further 13
and 10 percent to new historic lows of 152,537 MT and 1,776,095 MT,
respectively. The TC/TS ratio also worsened during the 2002/03 crop from
11.21:1 to 11.64:1. The decline in sugar production during 2002/03 was
due to a combination of lower sugar cane quality and reduced sugar cane
production. The decline in sugar cane production resulted primarily from
the low levels of replanting, which typically falls 50 percent short of
the industry's 16.9 percent target. Within the Jamaican sugar industry,
the difference in yield between sugar cane fields at first ratoon (year
2) and old fields (year 4 and over) is approximately 20 MT per hectare
on average. The low levels of replanting during 2001/02 and 2002/03
resulted principally from delays in the replanting loan program and
unfavorable weather conditions. Cane quality was affected by weather
conditions, harvesting techniques, and excessive time laps between
harvesting and grinding which affected sucrose extraction.

Since the development of the five-year sugar industry plan in 1999, the
divergence between the actual output and the minimum industry viability
output continues to widen over successive years. Over the last three
crops (2000/2001 -- 2002/2003) total annual sugar production fell 35, 44
and 51 percent short of the industry's 311,000 viability target. Sugar
industry experts are pessimistic about the future of the Jamaican sugar
industry as a viable producer of raw and refined sugar. Several factors
will continue to negatively impact sugar production, viz: unavailability
of replanting loans, high production costs, inefficient factory
operations, low yields, poor cane quality, heavy debt burden, poor
infrastructure, and high levels of illicit cane fires.

# Crop Area

The area under sugarcane cultivation varies from year to year within a
narrow range of 40,000 to 46,000 hectares, of which 82 to 93 percent is
usually harvested. For the current crop, approximately 39,000 hectares
of land is estimated to be under sugarcane cultivation, of which 37,000
hectares is expected to be harvested. Farmers and estates are expected
to account for 16,000 and 21,000 hectares, respectively. Replanting
costs, which vary between US\$1,313 and US\$2,013 per hectare, and poor
administration of the cane replanting loan program will restrict
replanting efforts. Total hectare under ratoon (two years and over) is
therefore expected to remain high.

Current production cost of US\$650 per MT and average yield of 58 MT/Ha
more than justify the need to replant with higher yielding sugar cane
varieties. The Sugar Industry Research Institute continues to research
and commercialize higher yielding cane varieties.

## Crop Quality

Sugar cane quality, as measured by the Jamaica Recoverable Cane Sugar
(JRCS) and the TC/TS ratio, declined during the 2002/2003 sugar crop.
The reduced quality of the 2002/2003 crop is attributed to unfavorable
weather conditions, poor harvesting techniques, inappropriate agronomic
practices on private farms, illicit cane fires which affected harvesting
schedules, and excessive time between harvesting and milling.

## 

# Consumption

Since the 1990's, Jamaica's annual sugar consumption ranged between
118,000 MT and 137,000 MT. Over the last five years, sugar consumption
has been relatively stable at approximately 124, 000 MT per year. While
total sugar consumption is expected to remain stable over the
medium-term, consumption of refined sugar, which is used mostly for
manufacturing purposes, is projected to grow proportionately with
carbonated beverages and pastry production. Production of carbonated
beverages, which utilizes most of the approximately 60,000 MT of refined
sugar imported into Jamaica each year, is projected to increase by 2 to
3 percent per year over the next three years. It is estimated that the
manufacturing sector has an annual demand of 45,000 to 50,000 MT of
refined sugar.

During 2003, the Jamaica Cane Product Sale (JCPS), the sole legal
supplier of refined sugar to the retail market, sold 442 MT of refined
sugar on the retail market and 5,000 MT to processors. An additional
66,000 MT of refined sugar is estimated to have been imported and
consumed in the manufacturing sector. During the same period, the JCPS
sold 17,541 MT of local and 35,369 MT of imported raw sugar on the local
market. Total consumption of refined and raw sugar in Jamaica during
2003 was estimated at 71,442 MT and 52,910 MT, bringing over-all
consumption to 124,352 MT. Artificial sweeteners are used only by a
small proportion of the population, mostly for health reasons. The
relative stability of sugar prices has helped to retain current
consumption levels.

## 

# Trade

Jamaica continues to satisfy its export quota allocation from domestic
production, while importing raw and refined sugar to meet domestic
demands. The European Union's quota remains at 127,000 MT with an
additional 24,000 MT under the Special Preferential Sugar (SPS)
arrangement. The U.S. tariff rate quota of 11,580 MT is prized by the
Jamaica\'s sugar industry. In some instances the Certificate of Quota
Eligibility can be exchanged instead of delivering sugar.

During the 2002/03 sugar cane crop Jamaica exported 128,629 MT of raw
sugar valued at 134,340,986 Euro, a 7 percent decline in quantity
exported relative to the previous crop. Of the total export, 124,302 MT
was shipped under the EU protocol and an additional 4,275 under the SPS
arrangement. The remaining 52 MT was exported to \"other\" destination.
No shipment was recorded under the USTRQ for the 2002/03 sugar crop. The
low production output from the 2002/03 sugar crop was insufficient to
fulfill Jamaica\'s total quota allocation and domestic demands.

In order to fulfill domestic demands, Jamaica had to more than double
its imports of raw sugar from 16,336 MT during 2001/02 to 35,110 MT
during 2002/03. Given the expected increase in sugar production for the
current crop, total importation of raw sugar is projected to decline
during 2003/04 to approximately 20,000 MT. As the sugar industry
continues sub-optimal performance, raw sugar imports is expected to
fluctuate between 17,000 and 38,000 MT per year over the medium-term.

Jamaica satisfies its demand for refined sugar from imports. The demand
for refined sugar will be heavily influenced by the growth in food
manufacturing, particularly the carbonated beverages and baking
industries. Since the deregulation of the refined sugar import policy,
Jamaica imports refined sugar from over seventeen countries. The United
States is the main supplier of refined sugar to Jamaica, accounting for
approximately 42 percent of total imports. Other major players include
Columbia, the UK, Guatemala, Mexico and Brazil. Total annual imports of
refined sugar have remained within the proximity of 68,000 MT over the
last three years. During 2002/03 refined sugar imports inched up 3
percent from 66,000 MT to 68,000 MT. Total importation of refined sugar
is projected at 70,000 MT for 2003/04.

# Stocks

The liberalization of refined sugar importation allows the Jamaica Cane
Product Sales (JCPS), private brokers and manufacturers to import and
hold stocks of refined sugar. The JCPS still retains a monopoly on the
raw sugar market. All imports and exports of raw sugar are conducted by
the JCPS. As of October 31, 2002 the JCPS held 2,000 MT of raw sugar in
stock. With the deregulation of refined sugar imports and increasing
storage cost, independent importers do not hold significant stocks of
refined sugar for any extended period.

# Policy

Faced with very high production costs, low productivity and a generally
inefficient sugar industry, the GOJ and other sugar industry interests
crafted a major sugar industry policy in 1999 to bring the ailing sugar
industry to more competitive levels. The objectives of the policy
addressed investment priorities, operational efficiencies, and
established minimum productivity parameters. Now in its final year of
implementation, the master plan has failed to deliver any meaningful
accomplishments, and has unanimously been accepted by sugar industry
officials as a failed and unrealistic initiative. The current policy
document calls for the production of 311,000 MT of 96-degree sugar from
3,155,000 MT of sugar cane at a TC/TS ratio of 10.14. Acreage harvested
and average yield were established in the policy at 42,000 hectares and
75 MT/Ha.

In an effort to preserve the sugar industry, mostly on the basis of its
social and historic importance, the GOJ is currently exploring the
possibility of cogeneration and alcohol production as diversified output
from the industry. Three of Jamaica's sugar factories (Frome, Monymusk
and Bernard Lodge) have been identified in the current policy document,
which gives an exploratory account of cogeneration, as having the
potential to generate 30 to 50 mw of power from bagasse. However, the
general performance of the policy signals the need to accept this
projection with great caution.

The GOJ has amended its 1994 liberalization policy for the importation
of refined sugar. Prior to 1994, the JCPS, the central marketing agency
for the sugar industry, maintained monopoly power in the importation and
distribution of refined sugar. In 1994, when importation was
liberalized, a benchmark price was established to determine the duty on
imported refined sugar. The benchmark price regime identified a price
(related to refined sugar prices in the major international markets)
below which any refined sugar entering Jamaica would attract an
Additional Stamp Duty to equate it with this price. Due to international
price volatility and deliberate under-invoicing by importers, the system
was replaced with a two-tiered method of tariff determination. The
two-tiered tariff system accommodated duty-free entry of refined sugar
for manufacturing purposes, while refined sugar for the consumer
(retail) market attracted a 40 percent Common External Tariff plus an
Additional Stamp Duty of 63 percent. Due to the entry of duty-free sugar
(imported for manufacturing) to the consumer market and the resulting
disruption in domestic demand for brown sugar, the GOJ has proposed an
amendment to its importation policy. The new proposal would grant import
licenses to large manufacturers and the JCPS. Small and medium-sized
manufacturers would source refined sugar from the JCPS at duty-free rate
plus a marginal mark-up. Retail distribution of refined sugar would be
the responsibility of the JCPS.