Réunion’s sugarcane subsidies

Global farming conditions and practices can vary significantly. This could not be more evident when comparing sugarcane production
on Réunion Island with that of South Africa.

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Sugarcane farming in South Africa and on the French province of Réunion Island both have long histories. South Africa’s industry began in 1848, while Réunion’s is even older, dating back to the late 17th century. While on completely different scales due to geographic differences, both sugar industries are meaningful contributors to their respective economies. But whereas South Africa’s sugarcane farmers receive a relatively low level of government support, the situation for Réunion’s sugarcane farmers is quite the opposite.

This same contrast applies to other countries. Any tariff protections that South African farmers have on imported agricultural commodities generally pale in comparison with the production subsidies, among other subsidies, that farmers elsewhere receive. The global playing field for agricultural commodities is far from even.

Despite these and other differences, Réunion’s and South Africa’s sugar industries have much technical knowledge that can be shared with each other, and SA Canegrowers has established a five-year memorandum of understanding (MoU)with the island’s tertiary agricultural education and training facility, LEGTA Saint-Paul Agricultural College. Unfortunately, matters such as subsidies are out of the MoU’s signatories hands.

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EU subsidies
Last year, Guy Ducasse, Amatikulu regional manager for SA Canegrowers, two of his colleagues and this journalist visited Réunion to exprience the island’s sugar industry at first hand.“Réunion is a beneficiary of the EU’s Common Agricultural Policy (CAP) system,” says Guy. “This system of subsidies and programmes comprises the single biggest budget outlay for the EU – some 38% of the overall budget.”

Under the agreement on the EU’s €960 billion (R13 trillion) budget for 2014 to 2020, spending for agriculture and rural development in the union’s member states will be around €380 billion (R5 trillion), he explains. “This is about three times South Africa’s total annual national budget, with some €280 billion (R3,8 trillion) set aside for direct payments to EU farmers and
€80 billion (R1 trillion) for rural development. The balance goes mainly for export support.”

The island’s sugar farmers benefit from a guaranteed sugar reference price that is higher than the global market price. In addition, Réunion’s sugarcane growers receive a plethora of government subsidies, in keeping with CAP policy. These include:
A production subsidy;

  • A fuel subsidy;
  • Compensation for farming on the island’s hilly slopes;
  • A sugarcane planting grant worth 50% of total planting costs;
  • A soil management payment of 50% of the costs of removing volcanic rocks or contouring;
  • An irrigation subsidy worth 40% of the initial capital costs of irrigation infrastructure;
  • A machinery grant worth 30% of the costs of machinery purchases.

“This high level of subsidisation ensures that sugarcane provides a secure income for farmers and enables diversification, taking into account the very small average farm size,” explains Guy.

Sugar exports
Réunion’s 3 500 sugarcane growers own an average of 8ha of land, and 85% of them deliver less than 1 000t sugarcane annually to the island’s Le Gol and Bois-Rouge sugar mills, which are owned by Téréos Ocean Indien (TOI). The farmers collectively utilise about 50%, or 24 286ha, of agricultural land on the island, and supply 1,9 million tons of dryland and irrigated sugarcane to TOI’s mills.

The two mills collectively produce 215 000t sugar annually. Of this, about 15 000t of standard brown sugar is consumed on Réunion, 100 000t of specialised brown sugar is sold in the EU, and 100 000t raw sugar is refined in France. “Due to the small farm size, diversification is strongly encouraged. There’s actually a policy requiring that 10% of each farm’s agricultural land be dedicated to this practice,” explains Guy. This policy ensures that Réunion has an 80% self-sufficiency of fresh agricultural products of animal, fruit and vegetable origin. It also encourages crop rotation.

Shortage of land
A major threat to sugarcane and other farming on the island is ongoing competition for available land from the growing urban population. According to Guy, this has lost Réunion’s sugar industry more than 2 000ha under cane over the past 10 years.
“It’s for this reason that the industry is currently focusing on increasing the area under irrigation and on other vertical expansion initiatives, to maximise production from its available arable land,” he explains. “There is now strong focus on bringing uncultivated or under-productive land into full sugarcane production.”

The island’s department of land affairs – Sociétés d’aménagement foncier et d’établissement rural (SAFER) – not only controls Réunion’s land prices but has the authority, through forced sales, to reallocate land being used unproductively. The volcanic island’s highly variable topography results in better crop farming conditions in the east and south than in the substantially drier north and west.

However, the development of a water transfer scheme delivering water from the east to the west of Réunion has allowed for the ongoing development of new irrigation zones that will eventually add a total of 7 000ha of irrigated crops, mostly sugarcane.
Financed by the EU and its regional council, the scheme has already increased sugarcane yield by an average of 40t/ha. About 25% of the island’s area under cane is currently irrigated, and the industry is working on growing this figure to 37% by 2020.

Support structures
“Given that Réunion’s agricultural sector is highly subsidised and therefore dependent on the state to survive, it’s unsurprising that grower structures are formed along political lines, in the form of unions that aim to influence government policy while defending grower interests,” Guy explains. “The more liberal union is the biggest, representing 64% of unionised farmers, while the more conservative union represents the balance.”

Only 20% of Réunion’s registered farmers are active members of either of these unions, despite every farmer having to pay an annual levy of €50 (R680) regardless of their union membership status.“In effect, this means that 80% of farmers on the island rely on the remaining 20% to shape their future,” says an incredulous Guy. “This is in stark contrast to the SA sugar industry, where every grower is represented through the structures of SA Canegrowers.”

Despite this anomaly, all of Réunion’s sugarcane farmers, among others, have a variety of agricultural extension and rural development support services available to them. These include the Chambre d’agriculture, (Chamber of Agriculture), the Centre Technique Interprofessionnel de la Canne et du Sucre (Cane and Sugar Interprofessional Technical Centre), the SAFER land use management service, and the TOI sugar milling company.

There is also the Centre de coopération internationale en recherche agronomique pour le développement (French Agricultural Research Centre for International Development) and the eRcane institution, which is dedicated to research and development along the sugarcane value chain. eRcane’s research includes seeking opportunities to add value to the sugarcane stalk, such as through renewable energy production.

Cutting back on pesticides
Currently, a key challenge faced by farmers in the EU is pressure to reduce their use of herbicides and pesticides by 50% by 2018. Réunion’s farmers are sceptical about the achievability of this target, according to Guy, given that the island has a tropical climate, in contrast to Europe’s moderate climate. However, there are a number of research initiatives underway to limit the use of agricultural chemicals as much as possible on the island.

These include crop rotation, mulching, inter-cropping, mechanical weeding and the use of push/pull techniques to suppress crop pests. Reducing the island’s dependency on chemical fertilisers is another EU objective, and farmers are encouraged to use the island’s readily available organic fertilisers, such as sugar factory scums, liquid pig manure, chicken litter, sewage sludge, and composts of other organic wastes.

A further potential challenge to Réunion’s sugarcane farmers is the big change planned for 2017 to what Guy describes as “the complex EU sugar regime”. One aspect of the reforms to the EU’s CAP includes the scrapping of existing sugar quotas in and to the EU. Another potential change will be reductions in minimum guaranteed sugar prices, or reference prices, to the farmers. This, TOI admits, has brought about a level of uncertainty, given the island’s sugar industry’s reliance on subsidisation to remain sustainable.

French president François Hollande recently visited Réunion, where he acknowledged the vital role played by the sugar industry in the island’s economy. “He promised that if the reference price for sugar were to come down as a consequence of the reforms, there would be an increase in direct subsidies to ensure that the net impact on Reunion’s sugarcane farmers and sugar industry would be nil,” says Guy.

Phone Guy Ducasse on 083 440 3204, or email him at [email protected]. Visit www.sacanegrowers.co.za.
Email LEGTA Saint-Paul at
[email protected]. Visit www.reunion.educagri.fr.
Email Réunion’s Chamber of Agriculture at
[email protected].
Lloyd Phillips’s flights to and from Réunion were sponsored by SA Canegrowers. He was hosted on the island courtesy of the EU and LEGTA Saint-Paul.