Skeldon set for disastrous first crop after late start

GuySuCo’s Chairman, Dr. Raj Singh

The sugar industry is continuing its nightmarish run of poor performance with the multi-billion-dollar Skeldon factory heading for another disaster crop.
The US$200M factory started weeks late, in mid-March, as the Guyana Sugar Corporation (GuySuCo) reportedly moved to modify one of the two mechanized punt dumpers.
The dumpers are critical to taking cane from the punts into the factory…Without it there can be no grinding.
According to GuySuCo sources yesterday, the punt dumpers, installed by the Chinese, have been a major problem since the factory was commissioned in August 2009.
GuySuCo, reportedly, was forced to install a winch system on one of the automated dumpers. The installation time was the main cause that Skeldon started grinding late. At the moment, only one of the two punt dumpers is working, badly affecting efficiency.
As of last weekend, GuySuCo’s total production for this crop was 32,685 tonnes….Skeldon’s was a mere

Former President Bharrat Jagdeo

643 tonnes. The industry is targeting 86,201 tonnes.
Again for this crop, like last year, Skeldon’s efficiency is a major problem, requiring up to 18.5 tonnes of cane to produce one tonne of sugar.
The highest producing estate is Albion which as of last weekend recorded 9,772 tonnes using an average of 9.7 tonnes of cane to produce one tonne of sugar.
GuySuCo’s Communications Department yesterday was contacted for a response to the situation. However, as of late last evening there was no response on the continuing dismal performance.
Government itself has been silent on the current crop.
Late Start
A scathing letter in Kaieteur News yesterday by a letter writer  criticized GuySuCo for not producing one pound of sugar until Tuesday, March 17. It could not be verified by a silent GuySuCo.
According to Besham Persaud, who reportedly has close ties to the sugar industry, it is difficult to recall when any estate had ever started so late.
“Management gets a brainwave and decides on Thursday afternoon (March 12, 2015) around 2:00pm that they had to burn canes. The factory had no trial run, there was no pre-crop brief as is always done, and everyone was in the dark and unprepared.

Agri Minister,
Dr. Leslie Ramsammy

The 400-plus punts of cane burnt did not reach the factory and start grinding until after 72 hours. Every schoolboy knows that you cannot eat three-day-old cane because it’s no good… all the juice dries out. So how was Skeldon estate planning to make sugar with it is a mystery.”
Persaud claimed that the factory broke down several times. He questioned who would be paying for all the spoilt canes.
“From the reports, from the unions it looks like the estate, after cutting young canes, for two crops in a row, does not have enough canes to cut this crop. Things are so bad that management is planning to cut canes left over from 2012 and 2013. You can make a lot of things with two and three-year-old canes, but not sugar.”
He said that it is high time that the management at Skeldon estate be held accountable for the failures instead of blaming everything on the factory and the weather.
He also criticized the estate manager, Dave Kumar, for failing to perform and operating without sanctions from his superiors for several incidents.
Government, in deciding to expend US$200M for the Skeldon expansion project, which includes a new factory and more lands, had said that it would prove to be the savior of the industry.
Former President Bharrat Jagdeo had vowed to personally oversee the turnaround of Skeldon after it became clear that the facility was in deep trouble.
In the last crop of 2014, Skeldon fell behind the target by 5,449 tonnes, closing with 21,813 tonnes.
It required an alarming 26.9 tonnes of cane to produce one tonne of sugar, more than double the industry average which stood at 12.9 tonnes of cane to one tonne of sugar.
Albion was the estate with the highest production surpassing the target of 33,516 tonnes by some 681 tonnes.
The Skeldon situation has continued to be an embarrassment for the continuous administrations of the ruling party.
Government has been coming under fire by the Opposition as GuySuCo has been operating at a loss for several years now, using precious taxpayers’ dollars to prop the ailing industry up.
GuySuCo has sued the former supervisor of the Skeldon project, Booker Tate, for US$30M, because of the problems.
In July, GuySuCo officials appeared before the Parliamentary Sectoral Committee, to report that it has $58B in debts.
This includes money to local and foreign suppliers, the Guyana Revenue Authority, the National Insurance Scheme (NIS) and the Sugar Industry Labour Welfare Fund Committee (SILWFC).
In recent months, GuySuCo reportedly took almost $4B in loans from a Jamaican bank to finance expenses for its second crop.
Debts
Over $20B (US$100M) is owed for the new Skeldon Sugar Factory to the World Bank, China EXIM Bank and Caribbean Development Bank.
Earlier this year, the Caribbean Development Bank said that it has approved $1.5B loan to enhance the capacity of GuySuCo to produce and harvest sugar cane on selected estates.
Between last year and now, Parliament approved US$50M but GuySuCo now wants another US$30M to help the industry.
The price for sugar and the cost for production have also made GuySuCo’s situation even more alarming.
While last year, GuySuCo was getting US$715 per tonne, a glut in the market caused prices to tumble to US$350.
The entity reportedly failed to enter into a three-year agreement to lock in the high prices and instead opted for a one-year contract.
In terms of cost of production, it is also clear that an unrealistic US$0.35 per pound for which sugar is being produce could not compete on the market. GuySuCo is actually selling for an average US$0.25 per pound, meaning that it was losing big time. In other words the industry, because of efficiency, remains unsustainable in the current situation.
To realistically compete with the rest of the world, Guyana must bring down its production costs to below US$0.20 per pound. GuySuCo’s officials has asked Opposition Parliamentarians for patience, saying that Guyana will have to wait until 2017, as part of its strategy to turn the fortunes of the industry around, to bring production prices to about US$0.27 per pound. That would still not be enough.
An attempt to use a $3B loan from the Guyana Geology and Mines Commission earlier this year to help GuySuCo, failed after the Opposition objected to its legality.
Sugar had been recording consecutives lows in the last couple of years.
Almost 16,000 persons are employed in the industry.