FIJI

INTRODUCTION

Sugarcane is thought to be indigenous to the islands of the South Pacific, and it is certain that several of the world's principal commercial varieties of sugarcane were obtained from this origin. Crystallised sugar was probably first manufactured in Fiji in 1862. During the development of the industry some 35 sugar factories were established, but only four remain today. With one exception, all the early developments of sugar took place in the wetter areas of Fiji, spreading outward from Suva to Levuka. Early planters mistook the general lushness of the wet zone for fertility. Their objective was first and foremost to grow heavy crops, and they paid insufficient attention to the importance of sunlight for the plant to manufacture sugar. Poor drainage was also a problem in some areas. It was for these reasons that many of the earlier sugar enterprises were short-lived.

The foundation of the current sugar industry in Fiji began shortly after the turn of the century, when the Colonial Sugar Refining Company (CSR) became the major player. Its dominant position continued into the early seventies, when in 1971 the agreement relating to the acquisition by Government of the majority shareholding was enacted by Parliament. To make further provision for milling and related activities in the sugar industry, Government created the Fiji Sugar Corporation (FSC) which came into existence on 1 April 1973. FSC, a public company with Government shareholding of 68 percent, is the sole miller and operates the four existing mills. In 1976 Government established the Fiji Sugar Marketing Company Limited (FSM) to market Fiji sugar.

PRODUCTION

Sugarcane is currently grown in the two main islands of Fiji, Viti Levu and Vanna Levu, in proximity to the 4 mills, 3 in Viti Levu and 1 in Vanna Levu (Fig 1). About 22 000 growers currently produce around 4 million tonnes of cane on just under 100 000 ha (74 000 ha harvested annually over the past 4 years). Initially, all cane was grown on estates, but from the twenties lands formerly leased to planters were returned to CSR and developed into the successful (10 acre) tenant farm system still functioning today.

The localization of the sugar industry in Fiji was followed by a steady decline in sugarcane production from about 2.9 million tonnes in 1970 to 2.2 million tonnes in 1975. In 1973 a planned effort to revive cane and sugar production was undertaken. The major thrust of this effort was in the Seaqaqa cane development scheme on Vanua Levu, which together with the world market price peak and the establishment of the Lom� Convention in 1975, contributed to the sustained growth in cane and sugar production from 2.2 million tonnes cane in 1976 to 4.0 million tonnes in 1980, a level which has generally been maintained since then. Production declines have been mainly the result of extreme weather conditions such as the cyclone and drought in 1983 and adverse weather conditions in 1985 and 1987. The Crop Rehabilitation Development Project (CRP) which was implemented following Tropical Cyclone Oscar in 1983 contributed to the recovery in cane production.

Cane production is almost entirely rain-fed, and yields are subject to wide annual fluctuations depending on weather conditions. Average national yields of cane per hectare have increased only slightly over the longer run, from 50 tonnes in 1973-75 to 52 tonnes in 1990-95. In 1996 yields reached 59.2 tonnes per ha. However, sugar content was lower than in 1994, and although cane production was a record the sugar extracted was less than the peak output obtained in 1994 from a smaller amount of sugarcane.

Sugar production averaged 439 000 tonnes during 1990-95, an increase of more than 50 percent compared to 1973-75, immediately after localization of the industry, but prior to the expansion programmes. The growth in production mainly reflected increases in the areas planted to sugarcane. Production reached an all time record in 1994, with 517 000 tonnes sugar from a harvested 4.1 million tonnes of cane, due to favourable weather, but has since stabilized at about 450 000 tonnes.

PROCESSING

There are four mills, which crush cane for the FSC. The Rarawai Mill in Ba commenced crushing in July 1886. Although the mill has been realigned and refurbished, cane has been crushed on that site for 110 years without interruption. After the Rarawai Mill, a mill at Labasa was built in 1894. The Lautoka Mill which commenced crushing in 1903 still is the largest mill in Fiji, and it has now been in operation for 93 years. Finally, the Penang Mill at Rakiraki first started to crush cane in 1881.

The steady rise in Fiji's cane production over the years placed ever-greater demands on the mills. The FSC expanded milling and processing capacities, replaced some obsolete plant and equipment and introduced mechanical sugar handling and storage facilities. Between 1973 and 1996 the combined crushing capacity of Fiji's mills expanded from 14 400 tonnes to over 25 000 tonnes of cane per day. However, because of their age the efficiency of these mills could be improved.

Major capital investments have been made over the years to modernize equipment and improve efficiency. New equipment included the installation of a diffuser at the Lautoka mill to increase crushing capacity; vertical crystallisers at Rarawai and Labasa (installation at Lautoka and Penang is also planned) are designed to improve extraction of sugar from molasses; the installation of boilers and turbo generators at Lautoka in 1995, enabling the FSC to supply power to the Fiji Electricity Authority during harvesting, and in Labasa in 1996, providing that town’s electricity needs during crushing; and bulk storage. handling and loading facilities at the Lautoka and Labasa mills.

CONSUMPTION

Sugar for domestic consumption is produced at the Penang Mill and partly at the Labasa Mill for Vanua Levu consumers. The sugar is a high quality washed raw, polarising at around 98.80 degrees and packed in 35 kg polylined bags. Wholesalers buy the sugar ex-factory and ex-Lautoka Mill store and distribute to retail outlets.

Domestic consumption has steadily increased from 18 000 tonnes (raw equivalent) in 1970 to around 36 000 tonnes in 1996 (Table 1) reflecting mainly population growth. Consumption data have been adjusted downwards to allow for quantities (average 12 000 tonnes) shipped to neighbouring Pacific Island nations. Over the past five years domestic consumption accounted for only 7 percent of production. This percentage is unlikely to change much over the next decade, and given the fact that the domestic market price is regulated and per caput consumption is already high at 45 kg, the contribution of the domestic market to the overall earnings of the industry is unlikely to vary.

TRADE

The export of sugar accounts for an important share of foreign exchange earnings. In 1995, the value of exports of sugar and molasses accounted for 38 percent of the value of total exports. About 90 percent of production are exported, mainly at premium prices under the Sugar Protocol of the Lom� Convention, and bilateral long-term agreements. Exports have increased by more than 30 percent over the last 5 years, from about 382 000 in 1991 to about 500 000 in 1996.

Fiji was one of the 46 ACP States that signed the Lom� Convention on 28 February 1975. For each of the 13 countries, including Fiji, listed in the Sugar Protocol an annual quota was allocated for imports to the EC. These quantities were given in metric tonnes white value (mtwv), and Fiji's quota was set at 163 600 mtwv, equivalent to approximately 175 000 metric tonnes of raw sugar. The Convention expires in 2000 and negotiation between the contracting parties is expected to commence 18 months before the expiry date of 29 February 2000.

PRICES

Since 1960 the sharing of proceeds from the sale of sugar has been subject to regulation, initially under a rather complicated formula. In 1970, a formula of sharing of proceeds of sale (65 percent to growers and 35 percent to the miller) was introduced and further modified in 1990 under the Master Awards. Under this award, quantities produced up to a base figure of 325 000 tonnes would entitle growers to receive 70 percent and FSC the remaining 30 percent. For quantities above this base up to 350 000 tonnes, proceeds would be shared 72.5 percent for growers and 27.5 for FSC, while for quantities produced above 350 000 tonnes proceeds would be shared on a 75 percent, 25 percent basis. From the gross proceeds certain "industry costs" are deducted e.g. costs of operating sugar industry institutions (Sugar Commission of Fiji, Mill Area Committees), marketing expenses, contributions towards operating expenses of the Research Centre etc.

The devaluation of the Fiji Dollar by 17.75 percent in June 1987 and by a further 15.25 percent in October 1987, had the immediate effect of increasing sugar industry revenue in Fiji dollar terms which resulted in a large increase in the unit price paid to farmers for cane. The cane price rose sharply from F$36.56 per tonne in 1986 to F$52.37 per tonne in 1987 and has remained at between $45 and $55 per tonne during the period 1987 to 1996.

Although the sale of sugar for domestic consumption is not under direct price control, any price increase is subject to Cabinet approval. The price for domestic sugar to wholesalers has remained the same since April 1993, at around US 11.07 cts/lb (US 24.35 cts/kg), and the retail price is around US 16.00 cts/lb (US 35.2 cts/kg).

FUTURE PROSPECTS

Fiji as a small island economy faces obstacles in the development process that are not present in larger countries. With a small population, economies of scale are difficult to achieve in domestic markets, and investments in infrastructure are relatively more costly and often uneconomic. Superimposed on the problems of smallness, Fiji is geographically relatively isolated, prone to natural disasters, and suffers constraints on the availability of land and its productivity.

The past decade has seen fluctuating, but increasing real world market prices of sugar. Medium-term price forecasts range from a small decrease to a substantial increase. However the major concern for Fiji is the quantity sold to the EC under the Sugar Protocol of the Lom� Convention.

The future viability of the sugar industry will depend on being able to produce sugar at a profit at a mix of world market prices and possibly lower returns from shipment to the EC. Low yielding, heavily indebted farms located on marginal lands a long way from mills may find it difficult to survive in the future if such conditions materialize. Other cane farms are expected to remain viable if costs can be reduced. Most of these farmers are likely to continue to consider cane cultivation as the preferred land use option. However in a more competitive environment they, together with FSC, are more likely to be receptive to diversification possibilities.

With the right incentives there is ample scope for the sugar industry to improve efficiency, particularly in the cane growing sector. A recent study undertaken for the industry identified ways yields could be increased by 25 percent with better farming practices. In addition, major efficiency improvements are possible within the existing cane transportation system, by introducing a quality payment system for cane, adopting appropriate mechanisation, and by enhancing labour utilisation. Thus the appropriate policy emphasis should be on improving the efficiency of the existing industry. This is indeed necessary as no single crop or group of crops have been identified that could replace sugar in the foreseeable future.

The Fiji sugar industry, while small, is not insignificant in the context of the world sugar economy. It has a basically sound structure, is relatively efficient (albeit with considerable room for improvement) has sufficient critical mass to reap economies of scale, and has a reputation for good quality product. If the industry can respond to the adjustment challenges it now faces, it has a sustainable future.

Table 1 : Fiji sugarcane area, yield and production

Table 2 : Fiji sugar production, trade and consumption