The sugar industry has long been a crucial foundation of the country’s economic progress, but it is now confronted with a slew of challenges that have resulted in a sharp drop in production and a lack of enthusiasm among the younger generation to take up the mantle. Devesh Dukhira, CEO of the Mauritius Sugar Syndicate, shares his thoughts in this interview on the primary obstacles facing the sector and how to navigate the changing landscape.
Despite several attempts at reform and market diversification, the Mauritian sugarcane sector has experienced an accelerated decline in production over the last few decades. Is the sugar industry still viable in Mauritius?
After abolition of EU guaranteed prices with the end of the Sugar Protocol in 2009, a series of reforms had indeed been undertaken to adapt to the new market environment, namely consolidation of milling operations, shifting from production of essentially raw sugar for refining to exclusively direct consumption sugars, and even increasing sales of the higher value special sugars through further market diversification.
Unfortunately, the world market price for sugar, on the basis of which sales are mostly undertaken, is often distorted whereby, despite the aforementioned measures, the net revenue of the industry from sugar sales has been below producers’ viability price levels over several crops, thereby prompting further land abandonment.
The game changer for the industry has been the decision taken by the Government in 2021 to allow adequate remuneration for bagasse used for electricity generation. Together with molasses, these co-products of sugar henceforth represent around 25% of cane planters’ total revenue, thereby mitigating future sugar price falls. Profitability has also been restored with improved market conditions over the last 2 years, supported by an increasing proportion of high-value special sugars in the sales mix.
The ex-Syndicate price paid to producers from sales of their sugars has thus risen from Rs 11,384 for 2019 crop to Rs 14,062 for 2020 crop and to Rs 16,765 for 2021 crop. It is estimated at Rs 21,000 for the prevailing crop. While producers’ viability prices have meanwhile increased, we believe that, with the structural change since the start of the Ukrainian war, in the beet sugar industry within the EU, which remains an important destination for our sugars, prices are unlikely to go back to levels seen before 2020, which therefore, together with the revenue from the cane co-products, should assure producers of a decent revenue.
What are the industry’s main opportunities and challenges?
Mauritius has established a solid reputation in the marketplace for the quality of its sugars and its reliability of supplies. Despite fierce competition, even in the niche market segments where our special sugars are sold, buyers are willing to pay a premium for the Mauritius origin. We have based ourselves on these strengths to redefine the Mauritius Sugar Label, and have even ventured to create a Mauritius Sugar Club, thereby strengthening our customers’ loyalty. Moreover, we are now selling sugar in over 50 countries worldwide, allowing us the flexibility to prioritize the most remunerative market segments every year.
The main constraints remain on the production side, namely the scarcity of resources, especially labour, increase in the cost of agri-inputs, or even owners’ inclination to convert their land for other purposes for quicker wins. While certain measures are being envisaged by the Government to address this issue, I am not sure we are acting prompt enough. We have already witnessed considerable land abandonment and I fear that those having given up will find it very challenging to resume cane cultivation. Another challenge worth mentioning is the impact of climate change, which has drastically affected both cane and sugar yields over the last 2 harvests.
Sugarcane farmers, particularly smallholders, have seen their crop area shrink steadily. How can we change this and attract the younger generation?
Firstly, such categories of planters, with lower economies of scale compared with larger growers, are more disadvantaged when operational costs increase. While they are encouraged to prepare their land for mechanization or regroup for economies of scale, the process can be slow and tiring. Appropriate regulatory frameworks are required to facilitate such regrouping and ensure their costs are contained. Meanwhile, certain sugar mills are already providing support in the fields, which should be further reinforced.
Planters are, unfortunately, ageing, as is the case worldwide. But their offspring can be enticed to pursue cane cultivation when they appreciate the value and importance of cane. It is in fact, an ‘energy’ plant, not only to produce sugar and potable alcohol for human consumption, but also electricity from its bagasse and ethanol from its molasses to run motor vehicles. In addition, as we are all more conscious of the need to preserve the environment, the cane is one of the most efficient convertors of carbon dioxide into biomass for renewable energy production, with the industry priding itself of a negative carbon footprint after accounting for co-generation.
In addition, from a sustainability perspective, the cane industry should be appealing to the younger generation in search of entrepreneurial skills. The Mauritian sugar sector has always been perceived as sustainable, with regard to the environment, socio-economic development and governance, but for some 15 years now, it has also become certified as such by independent global bodies such as Fairtrade and Bonsucro. We do note that younger people are being attracted to such dynamics as they look at the longer perspectives.
How important is government support for the industry?
It is comforting to note the importance attached by the Government to the sugarcane sector, not only regarding its socio-economic importance, but also its contribution towards the preservation of the environment and in particular agricultural land, namely to address food security challenges. They have willingly provided financial support, particularly to smaller planters, when sugar revenue fell to unviable levels and also took the bold decision in 2021 to review remuneration for bagasse for the production of electricity, thereby providing better visibility to the growers. Since the 2019 crop, Government has also topped up the cane’s different revenue streams, thereby guaranteeing a payment of Rs 25,000 per ton sugar to planters producing up to 60 tons sugar, thereby showing its confidence in this industry and commitment in assuring its viability. This is on top of the various support provided to producers through the Mauritius Cane Industry Authority and its various departments, subsidies on fertilizers, financial assistance towards cane replantation and acquisition of mechanical harvesters, etc.
But according to a recent World Bank report, competitiveness analysis results show that no single public policy or program can pull the sector out of the red. Could you please comment?
With a small domestic market, Mauritius is one of the most exposed sugar producers to the volatility of world market prices, which is exacerbated by recurrent price distortion, which is itself triggered by cross-subsidization of sugar exports and frequent Government’s intervention in sugar policies. Consequently, producers are cognizant that they cannot rely only on sugar sales, hence the necessity of valorising other revenue streams, namely the sugar co-products, which will mitigate the impact of sugar price fluctuations. At the Mauritius Sugar Syndicate level, no stone is left unturned in bringing the highest value for the sugar produced, namely with regard to the promotion of the high-value-added special sugars, the market segments targeted and optimization of costs along the supply chain. In this context, the Government’s decision to finance the construction of a new state-of-the-art warehouse in Jin Fei for the storage of bagged sugar is most welcome.
In order to ensure a competitive industry, producers also have to continuously review their operations to keep improving their efficiencies. Already the milling sector has undergone significant reforms over the last 13-14 years, but further targeted incentives and efforts are required to restore the yields in the fields, which have been on a declining trend recently. In this context, a number of growers have invested, especially after they have been reassured of a sustainable level of revenue from the sugar co-products, in replantation of their canes, which have been ageing owing to insufficient revenue levels previously. A collective effort by all stakeholders is essential in assuring the viability of the sugar cane industry.