Ethanol eases pain of EU sugar reform for African, Caribbean and Pacific countries

The European Union has been subsidizing sugar farmers in Africa, the Caribbean and the Pacific (so-called ACP countries) for decades. Under the ACP/EU Sugar Protocol, signed in 1975, nineteen countries receive guaranteed access to the EU market for fixed quantities of ACP sugar at preferential prices.

The Sugar Protocol has been hailed the world over as a model for development cooperation, as it has brought significant benefits to the economies of small and vulnerable ACP countries. But it has also been criticised because it was based on enormous subsidies that distorted markets. Guaranteed sugar prices have consistently been above twice the market price.

Calls for reform of the EU's Common Agriculture Policy, and specifically of the sugar sector, resulted in a drastic restructuration: a 36 percent cut in the guaranteed minimum sugar price spread over the next 4 years, generous compensation for farmers and, crucially, a Restructuring Fund as a carrot to encourage uncompetitive sugar producers to leave the industry. Intervention buying of surplus production will be phased out after four years as well. Developing countries will continue to enjoy preferential access to the EU market at attractive prices, but those ACP countries which need it will be eligible for an assistance plan worth millions of Euros.

Many of the developing countries that enjoyed the preferential, subsidised price do fear that Sugar Reform will push them out of business. Thousands of their farmers are preparing to abandon production alltogether. A large number of jobs is expected to be lost in the sector.

Ethanol to the rescue?
But the global ethanol boom has given the complex problem a whole new perspective. Suddenly, developing countries that were expected not to survive in the open market are now optimistic once again. An example comes from Jamaica, where the depressing phrase "sugar is dead" is gradually disappearing from the vocabulary of globalisation. What is more, the Jamaican government now even sees a "promising future" in the production of sugarcane-based ethanol and its potential to revitalize agriculture in this Caribbean nation.

Donovan Stanberry, permanent secretary in the Ministry of Agriculture and Lands, in a recent statement: "The world is seeing that ethanol is a big thing and ... the prospect of what we can earn from ethanol is simply going to be mind-blowing." He is now actively encouraging farmers who planned to step out of the industry to make a U-turn:
bioenergy :: biofuels :: energy :: sustainability :: sugarcane :: sugar :: ethanol :: sugar :: Africa :: Pacific :: Caribbean :: Jamaica :: CAP :: European Union ::

Stanberry says sugarcane ethanol, which fuels cars and residues of which (bagasse) can be used to generate renewable electricity, would also help the Caribbean country cope with high global oil prices.

In 2005, the Jamaican government announced a plan to restructure the island's ailing sugar industry to focus production more on ethanol, raw sugar, and molasses. But the majority of the Caribbean nation's cane fields remain focused on sugar and Jamaica was been squeezed by the recent reductions in sugar subsidies by the European Union for producers in the Caribbean, Africa and the Pacific.

Addressing farmers at a recent meeting in Morant Bay, St. Thomas, the Permanent Secretary said "the world is seeing that ethanol is a big thing and as we ready ourselves for privatisation, the prospect of what we can earn from ethanol is simply going to be mind blowing," he said. The Secretary added that overseas conglomerates were constantly making requests for parcels of land in excess of 15,000 hectares to plant sugar cane.

Mr. Stanberry told the farmers that even if Jamaica did not go into ethanol production, the fact that Brazil, one of the largest sugar cane growers, was moving out of sugar production and into ethanol, meant that Jamaica would have an opportunity to fill the gap for sugar on the world market created by Brazil's withdrawal.

"The prices for sugar are going to rise to such an extent, that they will reduce the negative impact of the European Union's impending 36 per cent reduction," he said.

With St. Kitts announcing that it was coming out of sugar production and its quota to the European Union being allocated to CARICOM, Mr. Stanberry said it was unfortunate that Jamaica might not be able to capitalise on that opportunity, because the sector's production capacity was not enough.

"What we need in Jamaica's sugar industry is the planting of more cane for whatever reason, sugar or ethanol, and to plant it in a very efficient way, so that we can increase our yields. Despite claims that sugar is dead, this is not so; in fact I can safely say that sugar has a bright prospect," he said.

More information:
Jamaica Information System: Permanent Secretary Urges Farmers to Plant More Sugar Cane - April 5, 2007.

BusinessWeek: Jamaica promotes sugarcane-based ethanol - April 7, 2007.

BBC: EU sugar reform splits exporters - June 25, 2005

APC Sugar: African, Caribbean and Pacific Sugar Group website.

European Commission, Agriculture / CAP reform: Reform of the Sugar Sector website.

Sucre Éthique / Ethical Sugar: organisation working towards sustainable and socially responsible sugar, website.