In an earlier study, LMC International estimated that the average cost of producing raw cane sugar by major exporters, was 10.39 U.S. cents per pound during 1994/95-1998/99, and the average cost of producing refined cane sugar was 14.25 cents per pound (Table 6). The estimates covered 63 cane-producing countries rather than only ACP countries as shown in Figure 5. LMC bases its estimates on an engineering cost approach that accounts for the physical inputs of labor, machinery, fuel, chemicals, and fertilizers used in field and factory operations. The estimates are of actual average costs, and estimates include the impact of policies that protect producers in certain countries. Such cost estimates are useful for comparing average costs of production for different countries using a consistent methodology. Actual raw cane sugar prices are provided for comparison.

**Table 6. Average Costs of Producing Cane Sugar by Categories of Producers, and Actual Sugar Prices 1994/95 – 1998/99**

|Category|1994/95|1995/96|1996/97|1997/98|1998/99|
|---|---|---|---|---|---|
|||U.S.|cents per poun|d /1||
|Raw cane sugar||||||
|Low cost producers /2|7.43|8.10|8.18|7.78|7.58|
|Major exporters /3|10.37|10.60|10.72|10.52|9.73|
|Cane sugar, white equiv.||||||
|Low cost producers /2|11.02|11.75|11.84|11.41|11.19|
|Major exporters /3|14.23|14.48|14.61|14.38|13.53|
|Actual Market Prices||||||
|Raw cane sugar /4|13.53|12.23|11.21|10.71|7.05|

1/ Measured in nominal U.S. cents per pound, ex-mill, factory basis. 2/ Average of five producing regions (Australia, Brazil–Center/South, Guatemala, Zambia, and Zimbabwe). 3/ Average of seven countries (Australia, Brazil, Colombia, Cuba, Guatemala, South Africa, and Thailand). /4 Raw cane sugar prices are is U.S. cents per lb, July-June average of monthly prices, fob Caribbean ports (note that production costs are ex-mill while the actual market prices are fob prices).

Source: LMC International as reported in Sugar and Sweetener Situation & Outlook, Economic Research Service, USDA, September 2001. Actual market prices are from World Bank databases.

National average production costs do not reflect cost differences within a country and these differences can be substantial. In Jamaica for example, the cost of the private sector estates are about one-half of those of the state-owned and managed estates. These differences are due partly to variations in natural climatic conditions for sugar cane production, but mostly to better management. Thus, it may be possible for part of an industry to be competitive while other parts are uncompetitive.

Most Caribbean sugar industries have accumulated large debts from years of unprofitable operation. This debt reduces competitiveness by increasing interest costs, constraining equipment maintenance and replacement, and limiting application of production inputs such as fertilizer. Deferred equipment maintenance and replacement leads to more frequent equipment failure and increases factory downtime. Debt of cane growers, in those countries that have private sector cane growers, constrains their ability to undertake sugar cane replanting and apply adequate fertilizer, which in turn reduces yields and leads to further losses and additional debts. Once begun, debt escalation is difficult to escape. In St. Kitts & Nevis, the debt of the sector has accumulated over the past 15 years and totaled EC$286 (US$106) million by the end of 2003—40 percent of 13