The economics of the gov’t’s cane ‘crushing’ plans for the Berbice estates will likely incur an annual loss of $13B
It was reported in SN May 17 edition under caption “President confirms Paul Cheong is new GuySuCo CEO”, President Ali’s reiteration that “5,000 hectares here in Skeldon we are going to put back into production, whilst we are doing that, we will be opening up opportunities for more than 50,000 acres of new land so that we can have new land available for our farmers, we are investing in that”. It is clear from this statement that 5,000 hectares would be cultivated into sugar canes, but what was not clear was whether those 50,000 acres (note the President did not use hectares) would be cultivated for sugar canes. 50,000 acres is equivalent to 21,280 hectares.
Editor, I would assume that in the context of the President dealing with the sugar industry when he met with residents at Crabwood Creek, and in the corollary of the 5,000 hectares, that 21,280 hectares of land development will be cultivated for sugar cane. I will return to these 21,280 hectares, which is equivalent to approximately all the land under cane cultivation in the four existing estates.
In the May 20 SN edition, the Minister of Agriculture, Zulfikar Mustapha under caption “Canes being replanted at Skeldon – Mustapha” provided more insight into the 5,000 hectares. According to the Minister, “they have already started to mechanize 5,000 hectares of land at Skeldon Estate with replanting of canes already started”, and “by the end of this year we can plant a substantial amount of canes in that 5,000 hectares, and also the intention is to complete an additional 5,000 hectares from Skeldon that we will crush at Albion and Rose Hall factories that have the capacity to crush more canes” Therefore, by this disclosure by the Minister, 10,000 hectares of land will be cultivated under canes at Skeldon; all of which will be processed at Albion and Rose Hall factories.
The Minister further disclosed that whilst the lands are being cultivated, improvement will be made to the Albion and Rose Hall factories. Editor, in a previous letter from me published by SN on March 12, 2024, I analyzed President Ali’s announcement on March 9 of the 5,000 hectares. In summary, I posited that it would cost approximately G$12.5 billion to have canes planted on lands rehabilitated under mechanized layout, and now for 10,000 hectares, it would cost G$25 billion, and to amortize it over 5 years (plants + 4th ratoon), it would be $5 billion per year. Average cane yield over 5 years should be about 70 tonnes cane per hectare (TCH)
The total operating expenses for all agricultural activities would be $500,000 per hectare, and for 10,000 it would be $5 billion. Now that it is confirmed that these canes would be “crushed” at Albion and Rose Hall factories, the total amount of canes from 10,000 hectares would be 700,000 tonnes (10,000 hectares x 70 TCH). It would take 35,000 trips on 20- tonnes trucks from Skeldon to Albion/Rose Hall factories, at a cost of $3.5 billion (700,000 tonnes x $5,000 per tonne). Could you imagine 278 trips each day for 6 days per week for 21-week trucks with 20 tonnes of canes each commuting the Corentyne Highway from Skeldon to Albion/Rose Hall?
The total “crushing” capacity of Albion and Rose Hall is presently 275 tonnes of cane per hour. To process the 700,000 tonnes from Skeldon it would take 2,545 hours. If the factories “crush” an average of 120 hours per week, it would take 21 weeks. The average crushing cycle for the factories per year is 32 weeks. No harvesting is normally done during the May/June and December/January rains. It means that only 11 weeks would be available for these 2 estates to crush canes grown on their own cultivation.
Albion and Rose Hall have approximately 9,000 and 3,000 hectares of its cultivation under canes, respectively, that with the much-touted mechanisation process going on as articulated by the Minister these lands should yield at an average 65 TCH approximately 585,000 and 195,000 tonnes of canes, respectively: a total of 780,000 tonnes. These canes would require 24 weeks to process at existing capacity. Thus, with the Skeldon and Albion/Rose Hall canes, it would require 45 weeks to process per year, and would involve mechanically harvesting canes under suboptimal conditions within major parts of the two wet seasons. This would then leave just 7 weeks for all the normal out of crop factory maintenance works.
Editor, unless the existing capacities of these two factories are increased cumulatively to 385 tonnes cane per hour and operate within the 32 weeks window period, or even to not more than 34 weeks, which is by another 110 tonnes per hour, it will render approximately 385,000 tonnes of cane not being “crushed” each fiscal year: an equivalent of approximately 33,000 tonnes sugar. In the interest of space, I would not venture in detail. as I did on March 12, on the financials of this endeavor, but would posit that the loss per year with the intention to cultivate 10,000 hectares of canes to have them “crushed” at Albion and Rose Hall factories would be approximately $13 billion.
On President Ali’s 50,000 acres (21,280 hectares) if cultivated under canes, they would yield 3,500,000 tonnes of cane per year. This is presently the existing yield capacity of the four operating estates’ cultivation: a saturation level for the cumulative throughputs of the four factories. Where then would these 3.5 million tonnes of cane be processed, unless the government has plans to build a 900 tonnes cane per hour factory; one that would be three times the size of the failed Skeldon Estate?
Editor, it is obvious that neither the President nor the Minister of Agriculture were properly advised on these two ventures, which are plainly ill conceived. The most viable option is to focus all resources on improvements of the existing estates by increasing cane yields to an average of 65 TCH and improving factory efficiencies, and surely 125,000 tonnes of sugar could be produced each year. A case in point is the Minister’s recent disclosure that GuySuCo could only produce, with four estates, 42% of a meagre target of 16,000 tonnes sugar in the just concluded 1st crop.