The yield for the 2007/08 sugarcane season was 19 723 916t, representing a 2,74% decrease (550 000t) compared to the below par production of the 2006/07 season. T otal sugar production was 2 281 765t, representing a 2,07% (46 478t) increase season on season. This increase in sugar production, despite the smaller crop, is partly attributable to an improvement in cane quality.
Year-on-year industry average recoverable value (RV) increased from 11,68% to 12,27%. he smaller crop is attributable to a number of factors, including erratic rainfall in many of the cane growing regions, the continuing uncertainty surrounding the failure to resolve long-standing land claims and the difficult financial circumstances of the sector in general. Although the RV price remained flat season on season, the final RV price of R1 701,90/t for 2007/08 was insufficient to allow growers to earn any return on capital and, in some instances, they didn’t even cover costs.
From 1995 to date, the rate of change in the cane price index has been considerably lower than the rate of change in the index of primary farming input prices, leading to a cost-price squeeze. The rampant increase in fertiliser and fuel prices in recent months has exacerbated this to acute levels. Information gleaned from the South African Cane Growers Association’s audited cost surveys illustrate that since 2003, a grower producing on average 10 000t a season has incurred a shortfall between gross income and total cost.
These figures represent interest and a return on capital calculated at a modest 7%. Of even greater concern is that more recently, in both the 2007/08 and 2008/09 seasons, total costs excluding return on capital are higher than gross income, starkly illustrating the precarious financial circumstances of many growers. his is due mainly to the inability of growers to achieve realistic increases in the notional price of sugar, subsequent to the agreed decrease in the notional sugar price in the 2003/04 season following the recovery of the rand at that time. sugar price the SA Sugar Association’s world market exports achieved.
The preferential US market price was US,75/lb compared to US,92/lb during the previous season, a decrease of 28%. This year-on-year lower world-market price was softened by the weaker rand-dollar exchange rate, which was forward covered by the sugar industry at an average exchange rate of R7,40 to the US dollar. This was significantly better than the average exchange rate of R6,60 during in the 2006/07 season.
Unfortunately the effect of the lower world-market prices, despite a weaker exchange rate, resulted in a 20% decline in export revenue, with R1,6 billion earned in 2007/08, compared to R2 billion in 2006/07. Contact Jayne Ferguson on (031) 508 7200 or 083 381 3990 or e-mail [email protected].
A view to land and agrarian reform
CANEGROWERS is committed to playing its part in achieving government’s goals of land and agrarian reform. It has actively and constructively participated in many initiatives and 2007/08 saw extensive involvement. While there has been a measure of success with projects associated with the redistribution of land, the continued slow progress in resolving land claims in many parts of the sugarcane growing regions, particularly in KZN, has had a debilitating impact on claimants and current landowners.
CANEGROWERS has been involved in protracted discussions with the relevant government departments and officials, seeking to resolve outstanding land claims in terms of the law and to ensure that adequate post-settlement support measures are in place for land reform beneficiaries. Recent reports that the KZN Land Claims Commission’s office is enhancing its capacity to address the blockages in the process are encouraging. We urge government to ensure that sufficient skills and capacity are put in place to resolve this process.
Despite a slow turnaround time of land restitution cases, progress has been made in the transformation of the cane-growing sector by redistributing white-owned land to black cane growers. Statistics show that the willing-seller, willing-buyer process works and should remain the cornerstone of the land redistribution process. In 1999, 13 244ha of the area under cane was owned by black growers. By December 2007, this figure had increased by 220% to 42 397ha, about 14% of the total area under sugarcane. If one includes the area farmed mainly by small-scale growers in the communal areas, more than 40% of the area under sugarcane is farmed by black growers.
The challenges that face CANEGROWERS, government and other stakeholders are to ensure that appropriate support services are in place to sustain these communities into the future. It’s imperative that the sugar industry operates in an environment that supports its sustainability. In turning to the proposed Expropriation Bill, CANEGROWERS’ view is that within the sugarcane growing sector, such legislation is unnecessary and government’s problem is the limited capacity available to implement existing legislation. The far-reaching implications of the proposals contained in the Bill are draconian in nature and not required.
