Thu | Aug 6, 2020

SIA disapproves sugar price hike

Published:Wednesday | July 1, 2020 | 12:09 AMKarena Bennett/Business Reporter
CEO of Sugar Industry Authority, George Callaghan.
CEO of Sugar Industry Authority, George Callaghan.

A recent hike in prices by Jamaica’s sugar producers and marketers has not found favour with the Sugar Industry Authority, SIA, which views the decision as tone-deaf, coming as it is in the middle of a pandemic and a slew of job losses.

The 9.2 per cent increase for 50-kilogramme bags of bulk brown sugar, and 6.2 per cent for retail sugar was initially slated to take effect on April 27 but was delayed following directives by the SIA to first clear the planned increases with Audley Shaw, the minister in charge of the Ministry of Industry, Commerce, Agriculture and Fisheries, MICAF.

Last Monday, an update from MICAF on Jamaica’s agricultural sector confirmed that the price increase had been implemented.

“There has been an increase in the price of sugar, due to the rise in production cost by local manufacturers,” the ministry said, but gave no other information.

However, Gordon Clarke, the managing director of Worthy Park Estate, a sugar producer and marketing agent, said the adjustment was largely due to the fluctuations in the price of foreign currency. Worthy Park is one of three marketing agents, the others being Pan Caribbean Sugar Company Limited and J. Wray & Nephew Limited, JWN.

“It is related to the exchange rate,” said Clarke. “We have to purchase most of our inputs like fertilisers, chemicals and spare parts,” he said, referring to imported inputs.

The monthly average exchange rate for the US dollar was $136.05 in March, $139.66 in April and $145.62 in May. The price for the US dollar goes through periods of dips and peaks due to supply and demand dynamics, which businesses have complained makes it difficult to plan. On Tuesday, the US currency closed at $140.01.

JWN, which co-owns the Jamaica Gold sugar brand with Worthy Park, said through that alliance it took a 6 per cent increase in sugar on June 1; and that Worthy Park and Pan Caribbean both applied increases to sugar produced on May 1.

The Italian-owned company, whose main line of business is rum, said declines in sugar production to 40,000 tonnes this year – a steep descent when compared say to the levels in 2014 of 145,000 tonnes – has contributed to rising costs, largely from fixed costs associated with production.

But George Callaghan, CEO for the SIA, is insistent that now is not the time to be passing on costs to consumers for a basic food item.

“There is no justification whatsoever to increase sugar prices, especially at this time when the COVID-19 pandemic is devastating Jamaican consumers’ income,” he told the Financial Gleaner.

His last attempt to speak out against the price hike was in the week of June 26.

“The justification and timing of this proposed price increase cannot be substantiated and if applied will give the impression of rapaciousness and price gouging at a time when large segments of the population are laid off or have significantly reduced incomes as a result of the COVID-19 pandemic,” the SIA head charged in a document placed before Minister Shaw.

But aside from voicing his displeasure, it appears the current price hike will stand. Callaghan seems to be focusing his efforts instead on policing future increases, hopefully with the blessing of Shaw’s ministry.

Sugar producers usually end up getting 53.3 per cent of the sale price per bulk back of sugar and 29.3 per cent for the retail packages typically found on grocery shelves, according to Callaghan.

Pre-COVID, the wholesale prices for both bagged and packaged brown sugar was around $135 and $142 per kg, respectively, while the retail price for sugar in grocery stores is about $246.40 per kg.

Multiple brands line the shelves, including Jamaica Gold, Worthy Park, Golden Grove, Eve and Grace.

With the increase in wholesale prices, bagged sugar would have climbed to about $147.42 per kg and packaged sugar to $150.52 per kg, while retail packages on grocery shelves would be about $261.67 per kg.

Up to 1994, the price of sugar was determined by SIA. That function was passed on to Jamaica Cane Products Sales Limited which was initially the exclusive marketing agent for SIA.

But with the privatisation of the sugar industry in the past decade, the marketing of sugar was decentralised in phases after 2009, and over time individual sugar producers secured their own marketing licences from SIA – a development that eventually led to the demise of JCPS.

However, under the provisions of the Sugar Industry Control Act, SIA is still empowered to make arrangements for the marketing of sugar and molasses for local consumption and for export. The statute also allows the SIA to appoint agents; regulate payments to such agents; and to review all existing policies in relation to the marketing of sugar and molasses.

In that regard, Callaghan has recommended that MICAF issue an order giving it the authority to bar any further increases in the price of sugar by its three marketing agents.

The SIA also wants any future increases above current levels to be subject to tripartite approval of the Sugar Prices Committee, the Sugar Industry Authority and MICAF prior to implementation.

karena.bennett@gleanerjm.com