Required Report - public distribution

**Date:** 4/20/2005

**GAIN Report Number:** JM5003

JM5003

**Jamaica & Dep**

**Sugar**

**Annual**

**2005**

**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 rebounded during 2003/04 from a
historic low of 152,000 MT to 184,000 MT. Sugar production for the
2004/05 crop is projected to decline to 158,000 MT, primarily due to the
effect of hurricane Ivan on crop quality and productivity.

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 5](#consumption)

[Trade 6](#trade)

[Stocks 6](#stocks)

[Policy 7](#policy)

# Executive Summary

Production of 96-degree sugar in Jamaica is expected to decline by
approximately 14 percent to 158,000 metric tons (MT) during the 2004/05
sugarcane crop, primarily due to the negative effects of hurricane Ivan
on crop quality and productivity. During the 2003/04 crop, production of
96-degree sugar and sugar cane rebounded from the historic lows
experienced during 2001 and 2002, to record 184,000 MT and 1,993,000 MT,
respectively. The performance of the crop was attributed to increased
quality and productivity, which resulted from the influence of better
weather conditions during the growing and harvesting periods.

During the 2003/04 sugar cane crop, Jamaica exported 160,000 MT of raw
sugar under the EU/ACP (African Caribbean and Pacific) protocol, Special
Preferential Sugar and the U.S. Tariff Rate Quota. However, during the
current crop, exports of raw sugar are projected to decline to 141,000
MT, while imports of refined sugar should increase to 42,000 MT.

Over the last five years, annual sugar consumption has been stable at
approximately 124,000 MT. As the sugar industry continues sub-optimal
performance, Jamaica will fulfill an increasing proportion of its demand
from imports over the medium-term. However, in the long-term, Jamaica is
expected to focus on fulfilling domestic demand, as export markets
become less attractive, primarily due to the erosion of the EU/ACP
preferential price.

# Production

Statistical Data

+----------------+-----+-------+------+-------+-------+-------+------+
| Jamaica & Dep  |     |       |      |       |       |       |      |
|                |     |       |      |       |       |       |      |
| Sugar Cane for |     |       |      |       |       |       |      |
| Centrifugal    |     |       |      |       |       |       |      |
+----------------+-----+-------+------+-------+-------+-------+------+
|                | **  | *     | **20 | **    | **2   | **    | **U  |
|                | 200 | *Revi | 04** | Estim | 005** | Forec | OM** |
|                | 3** | sed** |      | ate** |       | ast** |      |
+----------------+-----+-------+------+-------+-------+-------+------+
|                | **U | *     | **   | *     | *     | *     |      |
|                | SDA | *Post | USDA | *Post | *USDA | *Post |      |
|                | Of  | Est   | Offi | Est   | Off   | Est   |      |
|                | fic | imate | cial | imate | icial | imate |      |
|                | ial | \[Ne  | \    | \[Ne  | \[Ol  | \[Ne  |      |
|                | \[O | w\]** | [Old | w\]** | d\]** | w\]** |      |
|                | ld\ |       | \]** |       |       |       |      |
|                | ]** |       |      |       |       |       |      |
+----------------+-----+-------+------+-------+-------+-------+------+
| Market Year    |     | 12    |      | 12    |       | 12    | MM/  |
| Begin          |     | /2002 |      | /2003 |       | /2004 | YYYY |
+----------------+-----+-------+------+-------+-------+-------+------+
| Area Planted   | 39  | 35    | 39   | 35    | 0     | 0     | (    |
|                |     |       |      |       |       |       | 1000 |
|                |     |       |      |       |       |       | HA)  |
+----------------+-----+-------+------+-------+-------+-------+------+
| Area Harvested | 35  | 30    | 35   | 31    | 0     | 31    | (    |
|                |     |       |      |       |       |       | 1000 |
|                |     |       |      |       |       |       | HA)  |
+----------------+-----+-------+------+-------+-------+-------+------+
| Production     | 1   | 1776  | 1980 | 1993  | 0     | 1738  | (    |
|                | 907 |       |      |       |       |       | 1000 |
|                |     |       |      |       |       |       | MT)  |
+----------------+-----+-------+------+-------+-------+-------+------+
| TOTAL SUPPLY   | 1   | 1776  | 1980 | 1993  | 0     | 1738  | (    |
|                | 907 |       |      |       |       |       | 1000 |
|                |     |       |      |       |       |       | MT)  |
+----------------+-----+-------+------+-------+-------+-------+------+
| Utilization    | 1   | 1776  | 1980 | 1993  | 0     | 1738  | (    |
| for Sugar      | 907 |       |      |       |       |       | 1000 |
|                |     |       |      |       |       |       | MT)  |
+----------------+-----+-------+------+-------+-------+-------+------+
| Utilizatn for  | 0   | 0     | 0    | 0     | 0     | 0     | (    |
| Alcohol        |     |       |      |       |       |       | 1000 |
|                |     |       |      |       |       |       | MT)  |
+----------------+-----+-------+------+-------+-------+-------+------+
| TOTAL          | 1   | 1776  | 1980 | 1993  | 0     | 1738  | (    |
| UTILIZATION    | 907 |       |      |       |       |       | 1000 |
|                |     |       |      |       |       |       | MT)  |
+----------------+-----+-------+------+-------+-------+-------+------+

+---------------------+------+------+------+------+------+------+------+
| **Jamaica & Dep**   |      |      |      |      |      |      |      |
|                     |      |      |      |      |      |      |      |
| **Sugar,            |      |      |      |      |      |      |      |
| Centrifugal**       |      |      |      |      |      |      |      |
+---------------------+------+------+------+------+------+------+------+
|                     | **20 | **R  | **20 | **Es | **20 | **Fo | **U  |
|                     | 03** | evis | 04** | tima | 05** | 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 |      |
|                     | \]** | \]** | \]** | \]** | \]** | \]** |      |
+---------------------+------+------+------+------+------+------+------+
| Market Year Begin   |      | **1  |      | **1  |      | **1  | **M  |
|                     |      | 2/20 |      | 2/20 |      | 2/20 | M/YY |
|                     |      | 02** |      | 03** |      | 04** | YY** |
+---------------------+------+------+------+------+------+------+------+
| Beginning Stocks    | 8    | 8    | 6    | 6    | 5    | 10   | (    |
|                     |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| Beet Sugar          | 0    | 0    | 0    | 0    | 0    | 0    | (    |
| Production          |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| Cane Sugar          | 152  | 152  | 170  | 184  | 153  | 158  | (    |
| Production          |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| TOTAL Sugar         | 152  | 152  | 170  | 184  | 153  | 158  | (    |
| Production          |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| Raw Imports         | 35   | 35   | 20   | 40   | 20   | 42   | (    |
|                     |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| Refined Imp.(Raw    | 68   | 68   | 68   | 70   | 75   | 70   | (    |
| Val)                |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| TOTAL Imports       | 103  | 103  | 88   | 110  | 85   | 112  | (    |
|                     |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| TOTAL SUPPLY        | 263  | 263  | 264  | 300  | 243  | 280  | (    |
|                     |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| Raw Exports         | 129  | 129  | 131  | 160  | 98   | 141  | (    |
|                     |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| Refined Exp.(Raw    | 0    | 0    | 0    | 0    | 0    | 0    | (    |
| Val)                |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| TOTAL EXPORTS       | 129  | 129  | 131  | 160  | 98   | 141  | (    |
|                     |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| Human Dom.          | 128  | 124  | 128  | 130  | 128  | 132  | (    |
| Consumption         |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| Other Disappearance | 0    | 0    | 0    | 0    | 0    | 0    | (    |
|                     |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| Total Disappearance | 128  | 128  | 128  | 130  | 128  | 132  | (    |
|                     |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| Ending Stocks       | 6    | 6    | 5    | 10   | 17   | 7    | (    |
|                     |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+
| TOTAL DISTRIBUTION  | 263  | 263  | 264  | 300  | 243  | 280  | (    |
|                     |      |      |      |      |      |      | 1000 |
|                     |      |      |      |      |      |      | MT)  |
+---------------------+------+------+------+------+------+------+------+

As of April 6, 2005, the 2004/2005 sugar cane crop was 117 days into
harvest and had produced 84,548 MT of 96-degree sugar from 876,270 MT of
sugar cane, at a tons of cane necessary to produce a ton of sugar (TC/TS
ratio) of 10.36. When compared to the previous crop these indices
reflect a 34 percent decline in 96-degree sugar production and a 36
percent decline in sugar cane delivered to the factories. The TC/TS
ratio of 10.36:1 improved marginal over the 10.68:1 achieved during
2003/04. However, the quality of the crop is expected to deteriorate, as
more of the hurricane-affected and least productive fields come into
harvest. When compared with the first 120 days of the 2002/2003 crop,
which recorded the lowest sugar production in over fifty-six years, the
performance of the current crop shows a startling 19 percent decline in
96-degree sugar production and a 25 percent decline in sugar cane
ground.

The relatively poor performance of the 2004/05 crop is principally
explained by the effects of hurricane Ivan that hit Jamaica during
September 2004, resulting in extensive foliage damage, stem breakage,
and flooding of sugar cane fields, which ultimately compromised crop
quality and productivity. Additionally, wage disputes at two of the
major sugar factories have added to factory downtime and affected the
quality of sugar cane that was harvested during that period. Given the
expected lower yield and sugar cane quality, the production of 96-degree
sugar during 2004/05 is projected to decline by 14 percent to 158,000
MT.

Production of raw sugar rebounded during 2003/04 from the historic lows
of 174,000 MT and 152,000 MT during 2001/02 and 2002/03 to 184,000 MT.
The 20 percent increase in 96-degree sugar production from a
disproportionate 12 percent increase in sugar cane is attributed to the
effects of favorable weather conditions on crop quality and
productivity.

The TC/TS ratio and productivity for the crop improved from 11.64:1 to
10.85:1 and 58.42 tons cane /hectare (TC/Ha) to 64.39 TC/hectare,
respectively.

Despite extensive direct financial support by the Government of Jamaica
(GoJ), the Jamaican sugar industry consistently performs below its
minimum economic viability target. The 1999 sugar industry plan
establishes a minimum industry viability target of 311,000 MT of raw
sugar. However, the industry currently performs at 50 to 60 percent of
that target.

Sugar industry players are highly pessimistic of 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,
i.e., access to capital, high production costs, inefficient factory
operations, low yields, poor cane quality, heavy debt burden, poor
infrastructure, low soil fertility, poor agronomic practices on
independent farms, and high levels of illicit cane fires.

## Crop Area

The area under sugarcane cultivation has been reduced over the last five
years from approximately 40,000 to 35,000 hectares. The decline is
expected to accelerate, as more farmers exit the industry in
anticipation of reduced earnings, due to the cut in the EU preferential
price. Approximately 82 percent of the area under cultivation is
typically harvested each crop. For the 2002/03 and 2003/04 crops an
estimated 35,000 hectares of land was planted with sugar cane, of which
31,000 hectares were harvested. Farmers and estates accounted for
approximately 42 and 58 percent of acreage 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 and increase the proportion of ratoon (two years and
over) fields.

Current production cost of US\$650 per MT and yield of 64 MT/hectare
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, improved during the 2003/04 sugar crop. The
improved quality of the crop is attributed to favorable weather
conditions and improved harvesting techniques. With the impending
changes in the EU/ACP sugar preference, Jamaican farmers are placing
greater emphasis on improving cane quality by adopting harvesting
techniques that limit the percent of extraneous materials in the sugar
canes that are delivered to the factories.

## 

# 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 126,000 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 the
growth in the carbonated beverages and bakery industries. Production of
carbonated beverages, which utilizes most of the 60,000 to 70,000 MT of
refined sugar imported into Jamaica each year, grew by 10 percent during
2003 and is projected to grow by three to four percent per year over the
next three to five years.

During 2004, the Jamaica Cane Product Sale (JCPS), the sole legal
supplier of refined sugar to the retail market, sold 395 MT of refined
sugar on the retail market and 3,653 MT to food processors. This
reflects a 6 percent decline in refined sugar sales on the retail market
and a 26 percent decline in refined sugar sales to food processors. An
additional 70,000 MT of refined sugar was imported and consumed in the
manufacturing sector. With the liberalization of the refined sugar
market, there is an increase in direct imports by manufacturers and a
possible diversion of sugar imported for manufacturing to the retail
trade.

During the same period, the JCPS sold 49,374 MT of raw sugar in the
local market comprising of 15,380 MT of local sugar and 33,994 17,541 MT
of imports. Only a small proportion of the population uses artificial
sweeteners, mostly for health purposes. The relative stability of sugar
prices has helped to retain current consumption levels.

## 

# Trade

Jamaica continues to satisfy its various export quota allocations 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. Jamaica supplies 11,580 MT under the U.S. tariff rate
quota.

During the 2003/04 sugar cane crop Jamaica exported 159,908 MT of raw
sugar valued at 77,523,528 Euros, a 24 percent increase in quantity
exported relative to the previous crop. Of the total export, 136,005 MT
was shipped under the EU protocol; 12,677 MT under the SPS arrangement;
11,165 MT under the US TRQ; and 62 MT to "other" destinations. No
shipment was recorded under the USTRQ for the 2002/03 sugar crop. Output
from the industry was insufficient to fulfill Jamaica\'s total quota
allocation and domestic demands.

In order to fulfill domestic demands, Jamaica increased its imports for
raw sugar by 14 percent, from 35,000 MT during 2002/03 to 40,000 MT.
Belize and Guyana were the only two countries that exported raw sugar to
Jamaica during the year. Given the expected decline in sugar production
for the current crop, total importation of raw sugar is projected at
42,000 MT. In the medium-term, Jamaica will increase its emphasis in
supplying the domestic market with raw sugar, as the EU market becomes
less attractive due to the erosion of the preferential price.

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. During
2003, Colombia was the major supplier of refined sugar to Jamaica,
followed by Guatemala and the United States. Total annual imports of
refined sugar have remained within the proximity of 68,000 MT over the
last three years. Total importation of refined sugar is projected at
70,000 MT for 2004/05.

# 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, 2004 the JCPS held 6,000 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. 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/hectare.

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 megawatts of power from bagasse.

The proposed 37 percent price reduction for raw sugar under the UE/ACP
agreement has triggered immediate policy dialogues in the Jamaican sugar
industry. Despite being one of the highest cost and least efficient
agricultural industries, the GOJ and sugar industry stakeholders are
committed to its preservation. Although there is no consensus, present
discussions favor diversification within the industry. Other
discussions, and possibly the most realistic, support a drastic
downsizing of the industry to the core efficient private farms and a
consequential focus on supplying the domestic market demand for raw
sugar.

The GOJ has not modified its 1994 liberalization policy for the
importation of refined sugar (see previous sugar report for details).