Implementing sugarcane quality-based payment systems using a decision support system
In sugar industries where growers and millers are independent economic entities, payment systems aim at sharing the annual sugar industry revenue. Payment systems are designed to create incentives to improve milling performance, cane yield and quality. Like most revenue sharing agreements, they tend to be a contentious issue between growers and millers. As far as quality is concerned, they are often based on complex and sophisticated formulae, and may be difficult for stakeholders to understand. In some industries, although modifying the payment system can be the key to increasing industry profitability, mistrust between growers and millers can hamper such improvements. The situation is currently exacerbated by the development of sugarcane co-products, such as ethanol, electricity or by-products for niche markets, which can generate higher profits than sugar, thus calling for a rethink of payment systems. This paper presents a decision support approach to assess new cane payment systems while increasing the transparency of revenue sharing and the effects of quality incentives on income. It is based on a decision support system called PEMPA, which helps to assess the impact of new cane payment systems on growers incomes and on revenue sharing between stakeholders. Simulations were performed to assess the situation of 3800 growers who supply two mills on Reunion Island. Results showed that both individual incomes and collective revenue could be increased by adopting a new payment system based on a relative formula. The simulation approach could facilitate understanding and implementation of the payment formula. PEMPA is now available as freeware for testing in different settings, especially for multiple-purpose sugarcane.
sugarcane by-products quality incentive participatory approach payment scheme