Belize Sugar: Planning for the Future Celestino Ruiz and Mac McLachlan February, 2015

Strategic Development Plan SDP needs to be concluded within a year of signing the new commercial agreements. Government, farmers and BSI each need to sign the SDP for it to come into effect. SDP will be agreed by consensus. SDP will include a road map of how to overcome a range of inter- related challenges to make the industry sustainable. BSI contributing through a strategy paper. Key elements include: Crop productivity Mill efficiency Mill and power plant expansion Investment requirements, farm and mill, to achieve expansion How to achieve a suitable return on investment to realise the expansion What happens if we don’t.

Why Do We Need an SDP Changing global dynamics means status quo is not sustainable, current NY No 11 price for sugar US$14 cents; cost of production in Belize US$20 – 22 cents: need to reduce sugar production costs. World prices unlikely to increase significantly due to over supply of sugar. EU prices also falling, due to a change in EU regulation to liberate constraints on beet sugar production in 2017. Investment needed to ensure a sustainable and prosperous future for the industry, but investment needs to be viable. Present industry structure unable to deliver efficiencies required to remain globally competitive – small scale farming, size of mill, lack of credit, poor investment climate.

Fundamentals of a Sustainable Sugar Industry Mill Efficient Reliable Sufficient capacity Financially sound Farm Good cane quality/farm productivity Efficient harvesting and delivery Sufficient credit/resource to manage farm efficiently Sufficient equipment to reduce farming costs Right Political and Economic Conditions to Prosper Reliable market and competitive industry Regulation where regulation is needed; none where it is not Sound investment climate and resources to enable industry growth and development Government support for the industry

Challenges Facing the Sugar Industry of Belize

Mill /Power Plant What we have What we need Efficient mill at 1.3MT Co-generation plant providing power and steam for milling 1.3MT Solvent business Skilled workforce Good platform for expansion, but investment climate not currently conducive to make the investment Production costs for sugar (around US$ Cents 20 – 22 per lb) What we need Increased mill and power plan capacity: expansion to mill 1.8/2MT cane to reduce production cost of sugar to make it globally competitive (US$ Cents 15 per lb) Resources for expansion project (US$100 – 150m): additional turbine and boiler; bigger mill; enhanced logistics, investment only possible when: Sequenced with increased cane supply, by increasing cane productivity (to 1.8/2MT) and quality Investment climate which enabler a return on investment (investment needs to be economically and commercially viable, from 35% factory value share and against projected falling market prices), this requires: Government support and political climate to make investment possible Increase in prices paid for co-generated electricity; domestic sugar

Sugar Cane Production What we have What we need Around 1.3 MT of cane on approcimately77K acres of land Farm yields of around average 17 tons per acre 5,500 private cane farmers, dedicated to sugar production 95% hand cut cane, but taskforce established to expand potential for chopper harvested cane Poor farm information, but new SIMIS in progress Predominantly one cane variety, B79 Farmers resourced by commercial banks and EU re-planting fund What we need Increased cane supply, by increasing cane productivity and quality (to 1.8/2MT), achieved by: Systematic re-planting and improved husbandry practices Introduction of greater varietal selection to provide early, mid, late maturing cane harvests A harvesting and delivery system that reduces harvesting costs and is flexible to respond to changes in the industry while improving cane quality To protect small farmers from growing costs by shifting to larger farming units in the form of cooperatives Credit facilities provided by development partners at affordable terms, structured to farmers’ needs, to provide land and harvesting inputs (estimated around US$10 million per year) Autonomous extension services provided to farmers to improve productivity and feed information to SIMIS

Sugar Industry Farmer Profile: # of Farmers .

Logistics: Factory to Ship What we have Fleet of antiquated tugs and barges which navigate a 122 mile stretch to river/sea to load sugar directly to ship, at a rate of around 700 tons per day Current logistical capacity to transport 120K tons of sugar from factory to ship Costly movement of sugar and molasses from factory to alongside ship Slow loading rate adds to transport costs High stevedoring and harbour costs Lack of a deep water port means only smaller vessels can load Belize sugar, which often means more costly freight rates Knowledge of freight market which secures the best rates available, under the circumstances What we need A deep water port and storage/loading facilitates (unlikely within the next five years) Increased loading rate (to 4,000 tons/day) Improved transport logistics – new, larger barges/tugs, improved loading methods Investment climate which guarantees a return on the investment Investment to achieve this (estimated around US$20 million) , sequenced with: Increased sugar production to achieve greater scale economies thereby increasing efficiency and reducing costs of transporting sugar to ship

Infrastructure of Northern Belize What we have Inadequate conditions of sugar roads, on which farmers depend to deliver their crop Rain fed farms, subject to climatic variation Inadequate drainage, which leads to stand over and poor quality cane Government budget for infrastructure spread across a number of ministries What we need Greater government co-ordination and planning to maintain and improve the infrastructure of Northern Belize, utilising: Satellite-based topographical information to plan for a consolidated drainage programme District wide road development plans, utilising donor support where possible/necessary Long term budget set aside for this activity

Political and Economic Conditions What we need Political support for the SDP Amend legislation to facilitate the implementation of the SDP Sound investment climate to enable implementation of SDP Government resources committed to sustainability of the sugar industry Government support through development agencies to provide industry financing

Next Steps Stakeholders needs to develop a Strategic Development Plan (SDP) Launch of ASR/BSI contribution to SDP: a strategic plan SDP should be based on outcome of working groups formed to take forward different elements of the plan, which will present recommendations to a Steering Group comprised of industry stakeholders Membership of working groups should be drawn from a cross section of industry stakeholders, weighted to specific subject matter Need a dynamic process. Timelines need to be set for each component of the plan These need to be sequenced together to form the industry plan Steering Group should maintain an implementation monitoring role to deliver the plan

Credit Facilities for Cane Farmers Farmers need: Affordable credit Credit structured to lead to sustainable business units Must include re-financing, to move the industry beyond its indebted-past Industry needs to be able to re-plant 7,500 acres of cane per year to rejuvenate farm in 10 years This equates to around US$10 million per year Result will raise yields of cane from 17 tons per acre to around 30 This will increase incomes at a time that cane prices are falling With other elements of the SDP, this will contribute to reducing production cost of sugar to make it globally competitive and sustainable Need a farm credit working group to look at existing facilities and new facilitates to make this work: roles of commercial banking community, development banks and government.