Item 2.3 Result to be achieved by the commissioners
(vii) “Specific recommendation as to changes to the cane pricing
arrangements, if any are made”
July 16, 2010
Introduction
The SMCJ is overwhelmingly supporting the existing cane testing and payment
system.
Our position is so as the purpose of this system is expected to result in an
improvement in productivity in the sugar industry and growers and manufacturers
alike have expressed confidence in it.
Cane payment systems define one of the most important relationships of any cane
industry, since they determine how revenues are distributed between growers and
millers. Cane payment systems also play a central role in establishing the
incentives that growers and millers face. Not only do they influence heavily the
incentives to improve technical efficiency, they also have far-reaching
implications for investment decisions.
2
However the manufacturers feel the system must remain with the level ‘playing field’ it
started in 1991 in the movement of funds from factories to growers and growers to factory.
This was a fair introduction to increasing efficiency to achieve incentive.
The distribution puts to rest the future policies and logistic base on the majority.
In any business the world over, it is the majority that counts for representation.
3
The Distribution
1991 - 2009 (inclusive)
Tonnes Cane total =
40.121 M
100%
Tonnes Cane - Farmers = 19.458 M
48.49%
Tonnes Cane - Estate =
51.51%
20.663 M
Sugar Produced 3.629 Million tonnes
Value of Sugar
B $78.202
=
100%
Factory share sugar
B $28.888
=
36.94%
Estate cane (estimated value)
B $25.371
=
32.48%
Subtotal = (manufacturer)
B $ 54.265
=
69.42%
Farmers Cane (estimated value)
B $ 23.937
=
30.58%
4
Types of Cane Payments Systems
•
The number and different type of cane payment systems in existence are an
indication that there is no single formula for an efficient and effective cane
payment system
•
(Table1). However, payment systems used to divide revenue between growers and
millers can be separated into two broad groups.
•
Fixed cane price systems
•
Revenue sharing systems
•
These systems can be divided into two main types:
•
Fixed revenue sharing
•
Variable revenue sharing
5
Table 1. Summary of revenue sharing arrangements
Cane Industries
Cane payment system
Revenue share base on revenue from:
Australia
Revenue sharing
Raw sugar (Millers retain molasses)
Brazil
Revenue sharing
Cristal1 sugar and ethanol
Colombia
Revenue sharing
Raw/ Mill white sugar (Millers retain molasses)
Fiji
Revenue sharing
Sugar and other by-products
Jamaica
Revenue sharing
Sugar and other by-products
Maharashtra
Co-operative
Sugar and molasses
Uttar Pradesh
Fixed price (flat rate)
n.a.
Tamil Nadu
Fixed price2
n.a.
Mexico
Revenue sharing
Sugar (millers retain molasses)
Philipines
Revenue sharing
Raw sugar and molasses
South Africa
Revenue sharing
Raw/ refined3 sugar and molasses
Thailand
Revenue sharing
Raw/ white/ refined4 sugar and molasses
India
USA
Raw sugar and molasses
Louisiana / Florida
Revenue sharing
Hawaii
Integrate growers/ Millers
n.a.
China
Fixed price (flat rate)
n.a.
Vietnam
Fixed price (flat rate)
n.a.
Notes: 1. Cristal sugar is a very high polarity raw sugar produced by the Brazilian sugar industry.
2. Growers receive quality premium based on sugar yield per tonne cane.
3. Growers share in only part of the premium earned from exports of refined sugar.
4. Growers share in only part of the premium earned from exports of white and refined sugar.
6
INCENTIVES TO IMPROVE THE CANE QUALITY AND SUCROSE
RECOVERY
Table 2 shows the extent to which each country’s cane payment system rewards
growers and millers (as a group) for improvements in cane quality and factory
efficiency. The table presents estimates of the percentage change in growers’
revenue that result from 10% increase in cane sucrose content. The equivalent
figure for millers showing the effect of a 10% increase in factory sucrose recovery
is also presented.
7
Systems based on the average quality of growers’ cane
Cane payment systems that are based on the average quality of cane delivered to a
mill by all growers provide little incentive for individual growers to improve cane
quality. For example, a cane grower who produces cane with a high sucrose
content will only receive payment based on the average quality of all the cane
delivered to the mill.
Consequently, the grower is unable to influence the price received for his cane,
and has no financial incentive to produce cane of higher quality.
8
JAMAICA’S CANE PAYMENT SYSTEM
• Cane analysis based on the core sampling method
• Required to test at least 50% of all deliveries
• Price/ tonne cane is based on the all suppliers average cane quality
• Cane quality is determined by measuring The Jamaican Recoverable
Cane Sugar (JRCS) content in canes delivered within 72 hours after
burning or cutting
9
SAMPLING
• Approximately a 7kg sample is taken by a rotating diagonal Core Tube
• For canes transported in a tandem of carts samples are taken as follows:
- One to three carts - all should sampled
- Four to six carts - a minimum of three should be sampled
- Seven to eight carts - a minimum of four should be sampled
- One sample is taken from trucks typically weighing 10 - 15 tonnes.
10
JRCS DETERMINATION
• Samples are shredded to obtain a cell breakage of not less than 80%
• Sub-samples of 1kg is weighed on an electronic balance for processing
• The juice is extracted by a hydraulic press at 3000 psi for two minutes
• The press residue (bagasse) is analyzed for Fibre% Cane
• The extracted juice is analyzed for brix, pol, purity and sediments
11
CANE PAYMENT FORMULA
●
Cost-Based System
● Aim: To Attain an Equitable Distribution of Sugar Revenue
●
Principles:
(1) Revenues should be divided in proportion to the costs involved in
producing and processing a tonne of cane
(2) The revenue should be determined on the basis of the recoverable
sugar in cane.
(3) The main factors which influence the payment of sugar from cane are:
-
Standard Cane Quality
-
Standard Factory Efficiency
12
FACTORY OPERATIONS
Since the implementation of the new system, the indicator of efficiency has been the
Factory Recovery Index. This is based on the actual sugar produced expressed as a
percentage of that predicted.
Predicted sugar is calculated from a structured formula, partly scientific with
standards set for losses in:-
Milling
- Bagasse pol loss = 5% (reduced pol extraction 95 at 12.5%F)
Processing - Filter cake pol loss, 0.60% of cane
- Undetermined pol losses (physical and chemical) 1.3% of cane and
- Final molasses pol loss, W & C formula modified (1.45 - 45/Q).
13
DETERMINATION OF POL % CANE & JRCS
 Data Obtained From at the Core Laboratory. Eg.
- Pol % Press Juice = P = 13.92
- Fibre % Cane
= F = 14.86
- Press Juice Purity = Q= 82.81
 Pol % Cane = P (1.02 - 0.44 f/100) (1.0 - f/100) = 11.31
 JRCS = 1.03P (1.02 - 1.73 f/100) (1.45 - 45/Q) = 9.92
14
The Cane Payment Formula and the Core Sampling Method of testing introduced in
1991, have brought about many positives in managing and stabilizing the Sugar
Industry.
Firstly, up to 100% of grower’s cane can be tested.
Secondly, the Payment Method has brought about a more equitable distribution of the
proceeds from sugar between the growers and the manufacturers.
Thirdly, Cane Payment is based on the sugar in cane tested at the Core independent
of factory operation. The amount of sugar in cane is expressed as the Jamaica
Recoverable Cane Sugar (JRCS) or sugar percent cane.
15
JRCS Measures directly the amount of sugar in a given quantity of cane. The
higher the JRCS, the better the quality A JRCS of 10 indicates a quality better than
a JRCS of 8.
JRCS
to
13.00
High
tonnes of cane per tonne of sugar
7.7
12.00
8.3
10.00
10.0
8.00
Low
12.5
The tc/ts gives the ratio or the amount of cane required to make 1 tonne sugar. The
lower the tc/ts ratio, the higher the quality. JRCS therefore, is now the important
measure of quality on which the cane payment is based.
16
CANE PAYMENT FORMULA
V
=
P x FRI/100 (Average JRCS– FF) + BYP
V1
= P x FRI/100 (Average JRCS x RF) – FF) + BYP
● V
= Average Price/Tonne Cane at the respective factory
● V1
= Individual Payment at each respective factory
●
P
= Price/Tonne Sugar
●
FRI
●
JRCS = All growers’ average recoverable sugar in cane
●
FF
= The standard factory efficiency on which payment is based
= Factory fraction - The fixed number of Units of recoverable
sugar of the standard cane quality to be retained by the factory
●
BYP
=
Value per tonne cane for by-products
17
STANDARD CANE QUALITY
◘ Derived from the Moving Weighted Crop Average JRCS of All Factories
◘ A new value is calculated each year based on the last five years results
◘ Annual Factory Fraction Represents 38% Of the Standard Cane Quality (JRCS)
18
Commission Report 4.32
The Factory Fraction
Total revenue for 1987 for 7 estates as per 4.3
$ 478,597,00
Total tons sugar for 1987 for 7 estates as per 4.3
176,409
Total Revenue per ton sugar = $ 478,597,00
=
$ 2,713
176,409
Cane growers/ farmers share of 62%
=
$ 1,682
1987 average TC/TS
=
10.44
1987 price per ton cane
= $ 1,682
10.44
=
$ 161,11
1987 average JRCS
= 100
(assuming percent sugar
10.44
=
9.58
is the inverse of TC/TS)
Therefore Price per ton cane of $ 161.11 = 0.0091 x $ 2,713 (9.58 - fixed fraction)
(
161.11
)
(0.0091 x $2,713) = (9.58 - fixed fraction)
6.526 (68.12%) = (9.58 - fixed fraction)
= 3.054 = 31.88%
Since 9.58 is at .91FRI then the JRCS reported = 9.58/.91 = 10.5274
Price = 2713 x .0091 x (10.5274 - 3.054) = $ 184.57
Therefore it should be 2713 x .0091 (10.5274 - 4.0004) = 161.14
19
COMPARISON OF VARIATION IN PRICE/ TONNE CANE AND
SHARE OF PROCEEDS DUE TO VARYING EFFICIENCY
CASE
1
2
3
4
5
6
JRCS
10.1667
8.2500
12.0000
10.1667
10.1667
12.00
FRI (ACHIEVED)
91.00
91.00
91.000
95.00
87.00
99.52
PRICE/ T ($)
573.61
399.19
740.44
573.61
573.61
740.44
GROWERS SHARE (%)
62.00
53.17
67.81
59.39
64.85
62.00
FACTORY SHARE (%)
38.00
46.83
32.19
40.61
35.15
38.00
This demonstrates the challenges to both growers and manufacturers to maintaining not only
their standard sharing but to exceed for incentives.
20
CANE PRICE AS A FUNCTION OF QUALITY (JRCS)
ESTIMATED SUGAR PRICE
STANDARD CANE QUALITY 10.0422
- $36,000.00/T
FACTORY FRACTION 3.8160
PRICE/TONNE = $2037.70 STANDARD
TARGET
JRCS
10.2
10.3
10.4
10.50
10.6
10.7
10.8
F.F
3.8160
3.8160
3.8160
3.8160
3.8160
3.8160
3.8160
PRICE/ T $
2091.37
2124.14
2156.91
2189.68
2222.45
2255.22
2287.99
DIFF FROM
TARGET $
(98.31)
(65.54)
(32.77)
NIL
32.77
65.54
98.31
This demonstrates the value of one tenth (1/10) of one JRCS that is gained or lost by a
grower.
21
CANE PAYMENT FORMULA
$36000.0 X .0091 (JRCS - FF) Standard JRCS = 10.0447
= $36000.0 x 0.0091 (10.0447 – 3.8170)
Growers Fraction = 6.2277
= 327.60 x (JRCS – 3.8170)
WORTHY PARK
11.14 - 3.817 = 7.323 X 327.6 = 2,399.01
LONG POND
10.51 - 3.817 = 6.693 X 327.6 = 2,192.62
MONYMUSK
10.11 - 3.817 = 6.293 X 327.6 = 2,061.58
BERNARD LODGE
10.04 - 3.817 = 6.223 X 327.6 = 2,038.65
FROME
9.65 - 3.817 = 5.833 X 327.6 = 1,910.89
APPLETON
9.55 -3.817 = 5.733 X 327.6 = 1,878.13
ST. THOMAS
8.90 - 3.817 = 5.083 X 327.6 = 1,665.19
ISLAND AVERAGE
9.89 - 3.817 = 6.073 X 327.6 = 1,989.51
In this example the fixed factory fraction is demonstrated and shows the incentive to be gained from
improved cane quality.
Note the difference between Worthy Park and St. Thomas then St. Thomas to the island average.
22
LEVELING THE PLAYING FIELD
COMPARISION TO THE OLD SYSTEM WITH THE NEW
FOR THE 1990/91 CROP
FACTORY % SHARE
FACTORY
DIFF. IN PRICE/TC
TO SUPPLIER
FACTORY
EFFICIENCY*
OLD
NEW
FROME
+ 10.90
82.02
36.29
3327
MONYMUSK
+ 19.78
81.52
34.91
29.78
PETRONOL
+ 4.83
86.17
36.15
34.93
LONG POND
+ 9.54
86.14
33.46
30.89
TROPICANA
- 22.92
89.19
37.83
44.56
NEW YARMOUTH
- 10.29
91.52
36.55
39.03
APPLETON
- 15.59
92.63
36.21
39.94
WORTHY PARK
+ 19.09
96.64
39.84
36.21
HAMPDEN
+ 35.73
76.84
35.00
25.26
AVERAGE
+ 7.15
85.14
36.25
34.41
The Standard Factory Efficiency in 1991 was 90.5. As a result of the new system growers earned a
net $19.47M FROM ALL FACTORIES, while three manufacturers earned $10.70M and six paid
out an additional $30.17M
23
ALL ISLAND GROWERS -ANALYSING THE CANE PAYMENT
SYSTEM BASE ON RECORDS
YEAR
PRICE/T
SUGAR
STD
PRICE/TC
ACTUAL
PRICE PAID
ANNUAL JRCS
AVERAGE
% ANNUAL CHANGE
PRICE/TC
PRICE/TS
% CHANGE
1991
4500.00
258.15
10.1577
N.A.
$257.75
N.A.
N.A.
1992
9500.00
546.91
10.2192
.61
$549.75
113.29
111.11
1993
11403.00
633.27
9.6500
(5.57)
$600.12
9.16
20.00
1994
14825.00
830.94
9.8704
2.28
$816.52
36.06
30.00
1995
18100.00
1024.63
10.0429
1.75
$1029.72
26.11
22.09
1996
20546.00
1144.68
9.8166
(2.25)
$1127.02
9.45
13.51
1997
17190.00
993.19
10.4914
6.87
$1052.84
(6.58)
(16.33)
1998
16670.00
895.11
9.2871
(9.53)
$835.68
(20.63)
(3.12)
1999
19098.00
1042.93
9.5167
2.47
$1000.99
19.78
14.57
2000
19107.00
1140.51
11.2159
17.85
$1300.04
29.88
0.05
2001
18697.00
1063.03
10.0994
(9.95)
$1069.08
(17.77)
(5.12)
2002
19300.00
1100.71
10.0454
(0.53)
$1094.07
2.34
3.23
2003
27500.00
1523.39
9.5682
(4.75)
$1442.26
31.83
42.4
2004
31387.00
1841.79
10.6242
11.04
$1939.45
34.47
14.13
2005
32204.00
1925.33
10.4606
(1.50)
$1946.83
0.38
2.6
2006
36842.44
2079.59
9.9173
(5.19)
$2031.69
4.36
14.4
2007
38744.02
2147.37
9.6901
(2.29)
$2056.45
12.18
5.16
2008
44500.24
2497.73
9.9703
2.89
$2480.44
20.62
14.86
2009
46416.62
2796.85
11.1141
11.47
$3070.40
23.79
4.32
Avg
21549.34
1220.35
9.9066
$1193.52
24
This table demonstrates the movement in the price of sugar compared to the quality of cane
and the price of cane which is often non-proportional to the sugar price movement. The
growers often fail to achieve the standard quality that they set, resulting in significant losses.
25
APPLICATION OF THE RELATIVE FACTOR FOR INDIVIDUAL PAYMENT
V 1
= P x FRI/100 ((Average JRCS x RF) – FF) + BYP
The implementation of the “Relative Cane Payment System” for the 1972/73 crop arose out of the
concerns for the uneven deliveries of cane by growers throughout the crop. Such a system had the
desirable effect of removing the advantages of the growers who deliberately delivered canes during the
peak period of juice quality at a cost to those who delivered at the beginning and end of crop.
Such practices also had a negative impact on the factory performance of low operating time due to a
shortage of cane at the beginning and end of crop and high stocks in the peak periods.
The basis of the system was that the quality of any cane delivery is related to the factory average cane
quality for the week in which it was delivered.
It operates so that a supplier who supplies cane at the beginning of crop of a quality equal to that of the
factory average for the particular week will get the average price paid for cane at that factory for the
crop. If at the peak juice period a supplier supplies cane which is equal in quality to the factory
average for the particular week, that supplier will also be paid at the said crop average price. Better or
worse than average quality cane for the particular weeks would attract higher or lower than
average price, in the proportion by which they are better or worse than the factory average for
the particular week.
26
For example, if a farmer at the start of the crop delivers cane taking 11 tonnes of cane per tonne
of sugar, and the factory average for that week was also 11 tonnes of cane per tonne of sugar (his
Relative Factor would be 11/11 = 1.0000), he would be paid the crop average price for cane for
that factory, if his cane tested 10 tonnes per tonne of sugar, he would be paid 11/10 (a Relative
Factor of 1.1000) of the crop average price for his cane delivered for that week.
If a farmer delivers cane of 9 tonnes per tonne of sugar at the peak quality period and the factory
average for the week in which the cane was delivered is also 9 tonnes per tonne of sugar, he
would be paid for that cane at the average cane price for the factory.
If, however, his cane quality is 10 tonnes of cane per tonne of sugar, he would be paid at a rate of
9/10 (or 0.90000 Relative Factor) of the average price for cane for that factory.
27
The average Relative Factor for the crop is calculated from the Tonnes Relative Cane
delivered. The Tonnes Relative Cane is calculated weekly - this is the product of tonnes cane
delivered x the Relative Factor (see table below).
Week
Tonnes cane supplied
Supplier’s TC/TS
(=A)
Factory average TC/TS
(=B)
Relative Quality
(B/A)
Tonnes cane x
Relative
Quality
1
200
11.0
10.5
0.9545
190.90
2
200
10.0
9.5
0.9500
190.00
3
50
9.0
9.0
1.0000
50.00
4
50
9.0
8.0
0.8889
44.45
5
100
10.
11.0
1.10000
110.00
Total
Average
600
583.35
AVERAGE RELATIVE FACTOR = 583.35 ÷ 600 = 0.97225
Note the cane quality curve for 1999 and 2000 crop below. Farmer
compared with farmer
(an inefficient grower) compared to farmer
(a average quality grower) is
(an efficient farmer)
28
IMPACT OF THE RELATIVE FACTOR
Farmer
Farmer
: R.F. 1.00 X 9.52
: R.F. 1.00 X 11.26
= 9.52 (1999)
= 11.26 (2000)
Farmer
Farmer
: R.F. 0.92 X 9.52
: R.F. 0.92 X 11.26
= 8.76 (1999)
= 10.36 (2000)
Farmer
Farmer
: R.F. 1.1 X 9.52
: R.F. 1.1 X 11.25
= 10.47 (1999)
= 12.39 (2000)
29
Example of 2009 season
Worthy Park average JRCS = 12.06
JRCS
R.F
Average Quality at time of delivery
Highest
Lowest
15.72
6.51
1.2727
0.5279
12.35
12.33
Price at actual JRCS
$ 5019.88
1124.01
Price at Relative Factor JRCS
$ 4862.84
1063.30
Frome average JRCS = 11.34
JRCS
R.F
Average Quality at time of delivery
Highest
Lowest
13.93
5.14
1.2726
0.4699
10.95
10.94
Price at actual JRCS
$2997.63
$543.67
Price at Relative Factor JRCS
$4468.63
$623.36
30
Monymusk average JRCS = 10.63
JRCS
Highest
Lowest
14.36
5.24
R.F
1.2157
0.5823
Average Quality at time of delivery
11.81
9.00
Price at actual JRCS
$ 4416.96
583.14
Price at Relative Factor JRCS
$ 3812.83
982.40
Long Pond average JRCS = 10.88
Highest
JRCS
R.F
Average Quality at time of delivery
13.46
1.0051
Lowest
5.25
0.5322
13.39
9.86
Price at actual JRCS
$ 4017.03
524.21
Price at Relative Factor JRCS
$ 2961.46
890.25
31
St. Thomas average JRCS = 10.87
JRCS
Highest
Lowest
13.91
5.87
R.F
1.1946
0.6723
Average Quality at time of delivery
11.64
8.73
Price at actual JRCS
$ 4243.00
Price at Relative Factor JRCS
$ 3853.03
851.06
1457.72
Appleton average JRCS = 10.69
JRCS
R.F
Highest
Lowest
13.40
7.10
1.2251
Average Quality at time of delivery
0.6300
10.94
11.27
Price at actual JRCS
$ 4047.78
1376.73
Price at Relative Factor JRCS
$ 3919.02
1222.18
32
COMPARISM OF ESTATE vs FARMERS QUALITY
Appleton Factory
JRCS
RELATIVE FACTOR
Estate total
10.47
0.9958
Frome Estate
10.84
1.0035
St. Elizabeth Farmers
11.21
1.0276
New Yarmouth Estate
10.59
0.9919
B/ Lodge & Clarendon
10.01
0.9887
Average
10.69
1.0000
Frome Factory
JRCS
RELATIVE FACTOR
Farmers
11.14
0.9866
Estate
11.59
1.0167
33
Long Pond Factory
JRCS
RELATIVE FACTOR
Farmers Total
10.49
0.9815
Estate Total
11.17
1.0139
Average
10.88
1.0000
Monymusk Factory
JRCS
RELATIVE FACTOR
Farmers
11.05
1.0096
Estate
11.11
1.0399
9.69
0.9421
10.63
1.0000
Bernard Lodge
Average
34
St. Thomas Factory
JRCS
RELATIVE FACTOR
Farmers
10.83
1.0009
Estate
10.91
0.9991
Duckenfield Indvl
10.59
0.9849
Serge Island Indvl
12.36
1.1033
Average
10.87
1.0000
Worthy Park Estate
JRCS
RELATIVE FACTOR
Farmers
11.70
0.9690
Estate
12.65
1.0573
Hillside Farmers
11.40
0.9475
Bog Walk Farmers
11.80
0.9637
W.P./ Tulloch
12.79
1.0035
Spring Garden
10.10
0.8532
Average
12.06
1.0000
35
CROP YEAR: 1999/2000
Estate
JRCS
Highest
Relative
Factor
Group
No.
JRCS
Lowest
Relative
Factor
Group
No.
Span
Tropicana
14.96
1.2199
31212
7.53
0.7626
20136
7.43
Worthy Park
13.97
1.1104
00024
11.07
0.8441
00059
2.90*
Hampden
12.52
1.0878
00081
7.77
0.7633
00119
4.75*
B/ Lodge
14.52
1.3252
05406
6.84
0.6419
06610
7.68
Long Pond
13.12
1.1079
80149
7.62
0.6905
80418
5.50*
Monymusk
17.56
1.4585
04373
7.86
0.686
02115
9.70
Frome
14.14
1.1478
00282
7.24
0.7263
00673
6.90
Appleton
14.69
1.2124
01786
4.55
0.4489
01147
10.14
* These are examples of a good and acceptable span (highest to lowest).
36
GENERAL
The report of the Sugar Industry Enquiry Commission (1987/88) contained the following
recommendation (see paragraph 8.53):
“We also recommend that the Sugar Industry immediately commence a canegrowers education programme detailing the JRCS measurement system and
the reasons for its introduction, and particularly emphasizing its aims and the
effect on the returns to growers who continue to supply poor quality cane”
The contents of the AIJCFA submission to the CPC suggests that the case for an educational
programme is at least as strong today as it was fourteen years ago. The submission makes it
clear that there remains a lack of understanding of the principles upon which the Cane
Payment System is based. This, in turn, has led to a general state of confusion on the part of
the cane farmers and their representatives.
37
As a result this unique and most brilliant system of testing and payment has failed to bring
the degree of achievement in efficiency and prosperity to a failing industry.
The strength of the Euro coupled with the devaluation of the Jamaican Dollar has not
helped as there were this satisfaction of the significant price increases although efficiency
was falling.
Scientific studies show why cane quality will decline and although this has been exposed
very little attention is given.
Example:SUGAR CONTENT OF COMPONENTS
COMPONENTS
MATURE STALK
PERCENT SUCROSE
12 - 15
TOPS
2-3
SUCKERS
3-5
38
FACTORS AFFECTING QUALITY
•Variety
•Cane maturity
•Fertilizer programme
•Moisture supply nearing harvest
•Delay between harvesting and testing
FACTORS INFLUENCING CANE QUALITY
FRESHNESS
•Below 24 hours after kill - ideal
•48 hours - good
•Up to 72 hours - acceptable
•Over 72 hours - unacceptable
Aim to supply as much cane as possible within the first 24 hours after kill.39
DROP IN CANE PRICE DUE TO STALENESS
After cut or burn
Cumulative % loss
Day 1
0
Day 2
12.3
Day 3
22.7
Day 4
39.9
Day 5
65.2
Day 6
94.1
40
FIBRE % CANE
•True cane fibre = 12 - 16% of cane weight
•Extraneous matter also classified as “fibre”
•Extraneous matter is added to true fibre
•Higher fibre = lower cane price
IMPACT OF FIBRE COMPONENTS
Components (10% of sample)
Percent Price drop
Dry trash
11.7
Green leaves
7.4
Dry dirt
13.6
Tops
8.3
41
FACTORS AFFECTING PURITY
•Immature cane
•Suckers
•Tops
•Dead cane
•Stale cane
42
FACTORY RECOVERY INDEX
(FRI)
This is:
◘ The Relationship Between a Factory’s “Sugar In”
Measured in JRCS Purchased and its “Sugar Out”
Expressed as Tonnes 96º Sugar Made
Tonnes 96º Sugar Actually Produced
by Factory (including sugar equivalent
sold to distillery)
◘ FRI = _____________________________________
Tonnes Jamaican Recoverable Cane Sugar
The negative/ positive impact is demonstrated for a factory processing 300, 000 tonnes cane.
The value of one (1) FRI is $11.340 million or $ 1.134 million for 0.1FRI.
Refer to factory (A) below
43
FACTORY REVENUE AS A FUNCTION OF FACTORY RERCOVERY INDEX (FRI)
Factory “A”
‘89
‘90
‘91
‘92
‘93
300,000
300,000
300,000
300,000
300,000
Price/ T. Sugar
36000
36000
36000
36000
36000
Crop avg. JRCS
10.50
10.50
10.50
10.50
10.50
T. sugar prod
28,035
28,350
28,665
28,980
29,295
TC/TS
10.70
10.58
10.47
10.35
10.24
1,009,260,000
1,020,600,000
1,031,940,000
1,043,280,000
1,054,620,000
2189.68
2189.68
2189.68
2189.68
2189.68
656,904,000
656,904,000
656,904,000
656,904,000
656,904,000
Suppl. Share ($)
65.09
64.36
63.66
62.97
62.29
Total revenue to
factory
352,356,000
363,696,000
375,036,000
386,376,000
397,716,000
Fact. Share (%)
34.91
35.64
36.34
37.03
37.71
(22,680,000)
(11,340,000)
0.00
11,340,000
22,680,000
FRI
T. Cane grnd
Total revenue from
sugar ($)
Price/ T. cane
Total revenue to suppl.
($)
Fact. (loss) / Gain for
FRI above/ below
91 ($)
NB: STD. CANE 10.0422
FF
3.8160
44
For the period 1991 to 2009 each factory existing is analyzed in accordance with
the standard cane quality, standard FRI.91 and the Growers/ Manufacturers share
of 62 - 38%.
Appleton
Tonnes cane received
4.683 Million
Tonnes sugar produced
430, 664.00
Average JRCS
9.9124
Revenue for cane
$5.233 Billion
Average FRI
92.76
Factor share
39.68
The value of the increase factory share of 1.68 = $183.159 million.
This is due to the growers failure to achieve the standard JRCS (10.0534) costing them
$129.484 million and the major upgrading of the factory in 1998/99.
This is a good example of the intended outcome of the system with an incentive for
investment and efficiency.
45
Bernard Lodge
Tonnes cane received
4.597 Million
Tonnes sugar produced
404, 968.00
Average JRCS
9.8903
Revenue for cane
$5.409 Billion
Average FRI
89.00
Factor share
36.87
This level of inefficiencies resulted in the Growers losing of $138.012 million from poor quality in
relationship to the standard (10.0534) and the factory $204.997 million, for realizing only 89.00 FRI
and 36.87% of the share, this is dictated by the Payment Formula as designed.
Frome
Tonnes cane received
12.682 Million
Tonnes sugar produced
1.099668 million
Average JRCS
9.7731
Revenue for cane
$15.342 Billion
Average FRI
89.21
Factor share
37.44
Similar to Bernard Lodge both sectors failed the standard (10.0534) which costed the Growers
46
$667.232 million and the factory $119.466 million.
Long Pond
Tonnes cane received
2.430 Million
Tonnes sugar produced
212, 098.00
Average JRCS
10.2428
Revenue of cane
$3.032 Billion
Average FRI
85.45
Factor share
31.94
This once more dictated by the Formula shows the Growers earning to be $95.050 million greater
than the standard cane quality (10.0534) and the factory losing $270.974 million for failing the
achieve 38% of the share.
Monymusk
Tonnes cane received
6.688 Million
Tonnes sugar produced
606, 414.00
Average JRCS
10.1342
Revenue for cane
$7.759 Billion
Average FRI
89.25
Factor share
36.25
Similar to Long Pond the Monymusk Growers benefit for quality at $119.100 million while the
47
factory lost $252.055 million for poor recovery.
St. Thomas
Tonnes cane received
2.726 Million
Tonnes sugar produced
221, 136.00
Average JRCS
9.5446
Revenue for cane
$3.405 Billion
Average FRI
85.01
Factor share
34.53
Both sector lost with the Growers $266.616 million and the factory $183.862 million. Even so
the Growers were less efficient than the factory.
Worthy Park
Tonnes cane received
3.791 Million
Tonnes sugar produced
430, 868.00
Average JRCS
11.5495
Revenue for cane
$6.240 Billion
Average FRI
98.44
Factor share
37.75
This is most revealing of a system, a perfect example of the challenges to supremacy for each side. The
growers earned $295.00 more per tonne of cane above standard (10.0534) with a Gross of $1.119723
billion. Although this factory was so outstanding in its efforts failed by 0.25% of the standard share
which cost it $35.198 million.
48
Summary
This system as explained is second to none throughout the cane industries of the world. Its scientific
development and with all due consideration given has proven it to be so.
The industry has failed to make progress and failed to be viable and profitable. This is attributable to both
sectors’ inefficiencies some more than others.
Inasmuch as the cane production has fallen to (40.121 million tonnes) less than fifty percent (50%) of its
potential and with the industry producing 3.629 million tonnes sugar earning $78.202 billion over the past
19 years it could have been much better.
This was shared:
Growers
= 63.06% at 9.9066 JRCS
Manufacture = 36.94% at 89.87FRI
The losses estimated for unacceptable performance are:
Growers
= $1.201344 billion by failing to achieving the standard they set at 10.0534 JRCS
Manufacture = $1.066552 billion for excess losses in all areas of processing
Total
= $2.267896 billion
This represents 2.90% of the $78.202 billion earned over the period under review
1991 - 2009 inclusive.
49
Growers Additional
Losses/ Potential Gain
JRCS
JRCS
10.50 =
$ 1309.86 per tonne
Average reported 9.9066 $ 1193.53 per tonne
Difference
($ 116.34) per tonne
Value million 40.121 tonne cane B $4.667
Productivity
The average productivity 1991 – 2009
Was – Cane Harvested 40.121 million tonnes
- Area Harvested 667446 hectares
- Average JRCS
9.9066
Tones sugar per hectare
5.99
Tonnes sugar per hectare (target)
7.5
Growers actual earnings
B $ 49.314
Growers potential earnings at target
B $ 61.745
Difference at the average JRCS of 9.9066 is B $ 12.431 or 25.20%
50
The manufacturers have incurred massive losses in:
A. Sugar loss in cane yard 44824 tonnes valued at M $ 965.912 above 4% at which this
loss is calculated. Due to cane yard management but primarily to washing dirty cane .
Loss of sugar in washing whole stick cane is at 4lb per tonne and 8lb per tonne for
chopped cane. There is no allowance for such losses in the JRCS formula.
B. Milling – it is estimated that the loss of sugar was 45.446 tonnes valued at M $ 979.315
for losses in excess of the standard set.
C. Excess loss of sugar in molasses at 59052.0 tonnes valued at B $ 1.273 from which the
growers got 62% or M $ 788.964 a double payment.
D. Baggasse/ oil consumption
Year
L/T.S.
Tonnes Sugar
Volume used
2009
64.97
125,818.0
8.174 million litre
2004
43.24
183,867.0
7.950 million litre
1999
64.95
204,633.0
13.290 million litre
1997
48.41
236,512.0
11.450 million litre
1994
79.26
220,856.0
17.505 million litre
51
E. COST FOR FACTORY DOWN TIME – OUT OF CANE
Long Pond St. Thomas
Worthy Park
Frome
Appleton
Monymusk
1.89
1.06
Number of
Days 2009
7.5
6.72
28.45
4.43
The system has not failed us we failed ourselves. The only change to the system may be
the fixed sharing of proceed which now stands at Growers 62%, Manufacturers 38%. Such
a change is mandatory upon the review of the actual costs of production from audited
accounts that is long overdue.
52