NADALEEN SINGH

There are fears that man­u­fac­tur­ers may be­gin to ex­plore oth­er op­tions of buy­ing sug­ar rather than ob­tain­ing it from the Sug­ar Man­u­fac­tur­ing Com­pa­ny Ltd (SM­CL) due to the in­ter­na­tion­al in­crease in the price of the com­mod­i­ty. Chan­dra Bo­bart, SM­CL chief ex­ec­u­tive of­fi­cer, said the in­crease in sug­ar prices will have an ef­fect on the com­pa­ny since man­u­fac­tur­ers may opt to buy sug­ar from the Cen­tral Amer­i­can mar­ket. "We have to face the very high prices of raw sug­ar on the world mar­ket, which have risen at a dis­pro­por­tion­ate lev­el in re­la­tion to the price of re­fined sug­ar.

"I pre­sume that a lot of the man­u­fac­tur­ers will be im­port­ing re­fined sug­ar that came orig­i­nal­ly from coun­tries in Cen­tral Amer­i­ca, like Nicaragua, Cos­ta Ri­ca." His com­ments have come af­ter lo­cal man­u­fac­tur­ers, through the T&T Man­u­fac­tur­ers As­so­ci­a­tion (TTMA), met with Le­gal Af­fairs Min­is­ter Pe­ter Tay­lor on Au­gust 11 to dis­cuss the im­pli­ca­tions of the glob­al in­crease in sug­ar prices on those TTMA mem­bers re­quire sug­ar to make their prod­ucts. Bo­bart the dai­ly price of sug­ar is quot­ed on an SM­CL-sub­scribed Web site that gives world mar­ket prices of re­fined and raw sug­ar on a minute-to-minute ba­sis. The Web site gives re­ports and ex­pla­na­tions for price changes, and fac­tors in­flu­enc­ing prices, up or down.

Bo­bart spoke of the re­fin­ers pre­mi­um on the world mar­ket, which is the dif­fer­ence be­tween re­fined sug­ar and raw sug­ar. The price of re­fin­ers pre­mi­um has gone down. "The re­fin­ers pre­mi­um quot­ed on the in­ter­na­tion­al mar­ket has shrunk from US$100 a tonne about two months ago to US$65 a tonne, and this has se­ri­ous im­pli­ca­tions for SM­CL. "It means when we go out on the in­ter­na­tion­al mar­ket to buy raw sug­ar, we are dis­ad­van­taged in the sense that the price of re­fined sug­ar did not rise to the same ex­tent as the price of raw sug­ar." Com­par­ing raw sug­ar prices in Feb­ru­ary 2009 with Au­gust 2009, Bo­bart said SM­CL faces a 50 per cent as SM­CL pur­chased sug­ar at US$277 a tonne in Feb­ru­ary, and now pays US$481 a tonne.

He said the price does not in­clude freight, which is an ad­di­tion­al US$75 to $80 a tonne.

Im­pli­ca­tions

Bo­bart said SM­CL pro­vides sug­ar to 66 lo­cal man­u­fac­tur­ers and be­lieves they may soon have to face the same high prices as SM­CL.

"That's a fact of life we have to face. Whether you source it lo­cal­ly or on the in­ter­na­tion­al mar­ket, the whole world has been faced with high­er sug­ar prices as a re­sult of de­mand and sup­ply re­la­tion­ships." He said SM­CL buys raw sug­ar from the in­ter­na­tion­al mar­ket but, in most in­stances, the sug­ar is sourced from Brazil which, in terms of freight and price, is the most at­trac­tive be­cause of its prox­im­i­ty to T&T.

Those who im­port re­fined sug­ar source it from many coun­tries, like Cen­tral Amer­i­ca, which man­u­fac­ture re­fined sug­ar and sell it on the world mar­ket. "Re­fined sug­ar con­sumed in this coun­try mounts to 50 to 60 tonnes. The coun­try al­so im­ports around 25 tonnes of sug­ar based on 2008 fig­ures, and this is both do­mes­tic con­sump­tion and in­dus­tri­al con­sump­tion." Point­ing to the lo­cal de­mand for sug­ar, Bo­bart said he does not be­lieve de­mand will de­crease due to the in­crease in prices on the in­ter­na­tion­al mar­ket, but that many man­u­fac­tur­ers' prof­it mar­gins may suf­fer.

The Ef­fect on man­u­fac­tur­ers

Di­ana Can­dy Com­pa­ny Ltd:

From hard sug­ar can­dy like choco mint, to chewy can­dy like jub jub, plain mints and spe­cial­ty nut can­dy; those are but a few of the prod­ucts Di­ana Can­dy Com­pa­ny Ltd makes and sells to Bar­ba­dos, Grena­da, Be­lize and Mi­a­mi, among oth­er coun­tries. The com­pa­ny, how­ev­er, is now feel­ing the brunt of the in­crease in the glob­al price of sug­ar. Ronald L Gros­berg, man­ag­ing di­rec­tor, said 20 per cent of the com­pa­ny's in­put is sug­ar and with the in­crease in the cost of sug­ar, Di­ana Can­dy is adopt­ing a wait-and-see ap­proach be­fore in­creas­ing the cost of its prod­ucts.

"Ob­vi­ous­ly, we are hold­ing on to see what will hap­pen in the next few weeks. For the mo­ment, prices are not go­ing to change. We have to keep an eye on the prices. We hope that prices will re­duce at least to a mod­er­ate lev­el," Gros­berg said. He said the com­pa­ny has sup­pli­ers from South Amer­i­ca, Cen­tral Amer­i­ca, Mex­i­co, Co­lum­bia, Brazil and SM­CL so that the best price can be sourced. Though the price at which lo­cal com­pa­nies pur­chase sug­ar is set to in­crease, Gros­berg said it does not mean there would be lay-offs, but there might be cut­backs on such things as over­time and week­end work. "We are deal­ing with it on a week-by-week ba­sis. At the mo­ment, we are not run­ning the fac­to­ry around-the-clock in some cas­es.

The over­time work has been cut out and work­ing on Sat­ur­days as well. All our peo­ple are still em­ployed, though, and we have no in­ten­tion of cut­ting back staff," Gros­berg said. Gros­berg said the com­pa­ny is hop­ing to launch a few more prod­ucts on­to the mar­ket.

"We are work­ing on new lines. We have not changed our vi­sion in any way. We are cer­tain­ly go­ing to sur­vive. "The high pres­sure of work had lim­it­ed the ef­fort that could have gone in­to new prod­uct de­vel­op­ment be­fore and now. We have lee­way. We are putting our en­er­gy in­to that." Gros­berg said he doesn't fore­see prices of Di­ana Can­dy's prod­ucts in­creas­ing, un­less the sit­u­a­tion wors­ens.

So­lo Bev­er­ages Ltd

Hay­den Charles, di­rec­tor, So­lo Bev­er­ages Ltd, said when it comes to the price of sug­ar, life is not so sweet. He said he has a ship­ment of sug­ar on its way that will last him two months. It's a wait-and-see ap­proach for the pe­ri­od there­after. "When I have to pur­chase again, I would have to take what's com­ing my way. Com­pe­ti­tion is fierce and, chances are, we would have to take the loss­es our­selves. There's noth­ing we can do. There's no sub­sidy on sug­ar here, not that we are ask­ing for it. I think the com­mod­i­ty of sug­ar, like all com­modi­ties, is very er­rat­ic be­cause you have to hope that you get to a point where there's a slight dip, so that you can pur­chase as cheap­ly as you can."

He said the process of get­ting a price for sug­ar is sim­ple. It in­volves call­ing all the bro­kers that the com­pa­ny deals with; whether they are in­ter­na­tion­al bro­kers or SM­CL. The quotes based on the fu­tures mar­ket are then ob­tained and a de­ci­sion is made.

Charles said it's a sad pic­ture which man­u­fac­tur­ers face when it comes to price. "In Jan­u­ary, I got quotes at US$397 a tonne in com­par­i­son to now a quote of al­most US$700 a tonne. That's an al­most 90 per cent in­crease. It's in­com­pre­hen­si­ble, but I have to deal with it on a day-by-day ba­sis or or­der- by-or­der."

So­lo Bev­er­ages or­ders sug­ar from Co­lum­bia, Guatemala, Brazil and SM­CL. "Some­times we make a deal with a bro­ker, but we don't choose where it comes from. We have our specs of what we re­quire and they source and they bring it to us." In or­der to de­ter­mine whether the com­pa­ny buys sug­ar at a par­tic­u­lar lev­el, Charles said he reg­u­lar­ly com­mu­ni­cates with the sug­ar bro­kers. "We touch base with our bro­kers reg­u­lar­ly and we mon­i­tor the in­ter­na­tion­al news to get an idea of the trends. It's like call­ing your bankers for a rate and it does not in­volve any tech­ni­cal work."

Re­gal Prod­ucts Ltd

Re­gal Prod­ucts Ltd, the largest man­u­fac­tur­er of ic­ing sug­ar in T&T, plans to in­crease its price in Sep­tem­ber. Nigel Gopeesingh, gen­er­al man­ag­er of the St Au­gus­tine-based com­pa­ny, said the in­creased glob­al price of sug­ar is go­ing to af­fect the price of some of its prod­ucts, one of them be­ing ic­ing sug­ar. "For a 340 gramme ic­ing, it is go­ing to be in­creased by 10 per cent, and the oth­er size, the two kilo­gramme pack, is go­ing up by 14 per cent. The change will be ef­fec­tive Sep­tem­ber 1."

In or­der to ben­e­fit from the best price, Gopeesingh said he tries to do busi­ness with two sup­pli­ers, SM­CL and a Cen­tral Amer­i­can bro­ker. Gopeesingh said the com­pa­ny nor­mal­ly tries to get its sup­ply of sug­ar from SM­CL and from Cen­tral Amer­i­can bro­kers be­cause "sug­ar pro­duc­ers will not talk to us di­rect­ly be­cause the quan­tum is not enough." About a week ago, Re­gal Prod­ucts pur­chased sug­ar at $5,134 a met­ric tonne from SM­CL and plans to use this stock by next week. The price that Gopeesingh paid the Cen­tral Amer­i­can bro­ker one met­ric tonne of sug­ar a year ago was $2,753.66.

Small busi­ness own­er

Forty-year-old JT, who owns a small busi­ness man­u­fac­tur­ing lo­cal sweets–for ex­am­ple nut cakes–buys a 100-pound bag of sug­ar twice a month. "In Jan­u­ary, I bought a 100-pound bag of sug­ar at $200, and one week ago, I paid $240," she said. Her sup­pli­er is a whole­saler at the Sea Lots mar­ket. She said the in­creased price she now pays for sug­ar will not af­fect the cost of her prod­ucts. "It de­pends on the prof­it mar­gin. I do every­thing my­self and I am not a big en­ter­prise. I am small. I don't have over­head ex­pens­es and I don't have staff to pay, so my costs are low," JT said. –Nadaleen Singh