ADVISORY CONSULTATION ON ACP SUGAR POLICY AND TRADE

13-14 September 1999 (M'babane, Swaziland)

PRODUCTION AND COMPETITIVENESS OF ACP COUNTRIES

30. The Consultation noted that one of the problems that would face ACP sugar producers as the benefits of their preferential arrangements in the EC erode, would be the declining long-run trend in the real world price of sugar. The real price of sugar had been declining at an average rate of 1.5 percent over the period since 1950. This phenomenon was common to agricultural products, virtually all of which had a sharper rate of decline.

31. When the trend in world prices was compared with that in world cane sugar production costs, it was discovered that the two had moved in parallel since the mid-1980s. This suggested that, in the long run, cane sugar production operations with lower costs than the average world-wide would be profitable. Those with higher than average costs would be unprofitable in the long run.

32. The average costs of production of ACP producers were similar to those in the world as a whole. However, whereas both African and Pacific ACP producers had typically recorded costs below the long-run trend in world prices, the costs of production of Caribbean ACP producers had been well above the trend.

33. Unfortunately, none of the three ACP regions had managed to reduce its real production costs since the late 1980s. Also, within the ACP group of producers, the range of production costs was much greater than in the world at large.

34. Comparing cane and beet white sugar production costs in the world, it was discovered that cane sugar was consistently the more competitive of the two.

35. On the technical side, African ACP producers enjoyed high cane yields per hectare per annum by world standards. Caribbean and Pacific ACP states’ yields were close to the global norms.

36. The sucrose content of Caribbean ACP sugar output was well below that in the other ACP regions. Combining sucrose with cane yields left the Caribbean and Pacific ACP producers behind most other leading suppliers, including African ACP producers.

37. All three regions of ACP producers had small average mill sizes by world standards. Those in the Caribbean were the smallest of all.

38. Factory recoveries in the ACP regions were fairly close to the world average. One respect in which the ACP nations compared poorly with other producers was in the amount of sugar that they produced annually from each tonne of daily crushing capacity.

39. Among the main conclusions were:

• Cane quality and mill recovery rates needed to be improved, particularly in the Pacific and Caribbean regions.

• The average mill size should be increased and the utilization of the installed capacity should be raised.