On Friday, we told you about the dispute brewing in the sugar industry in the north between the millers, BSI/ASR, and the biggest of the 4 farming associations, the Belize Sugar Cane Farmers Association.
The BSCFA has informed the millers that they want to terminate their commercial agreement with BSI/ASR, which will expire by January 19, 2022. The millers say that this could have devastating impacts on the next crop season. That's because, from the perspective of the millers, no agreement means that BSCFA members will not be able to deliver their cane to the factory for the grinding, season. They contribute a little bit more than HALF of the total amount of sugar that the mill grinds annually. The losses would be huge.
Now, the last time this happened in 2013/2014, it caused the mighty BSCFA, which has been in existence for over 60 years, to splinter. There are now 4 different associations, and the BSCFA's dominance was whittled down significantly because of it.
Several days ago, ASR/BSI was the first to come forward with their concerns over the pending termination of this agreement, and today, the leadership of the BSCFA hosted a virtual press conference to explain why they want to renegotiate. They say that when they signed it back in 2015, they were under duress and that some of the terms they agreed to have not aged well. They say that certain features of the agreement are slanted against them, and they want the millers to agree to changes.
Here's what the Executive Director of the association had to say during the opening remarks of this morning's press conference:
Oscar Alonzo - Executive Director, BSCFA
"Now why is it we decided to terminate this agreement and seek to renegotiate a new agreement? Clearly, references have been made to the prolonged period that we spent reaching an agreement for this current contract that we have with BSI. It took us over 2 years to achieve that, but we proceed to sign it even though we were not happy with the way several issues in that agreement were settled. It is being said that it is the best agreement and that all matters were fully settled, but in our view, there were several matters still outstanding to be settled, which was to be revisited in 2017, when we signed an addendum, and which gives us the opportunity now to address in this renegotiation process that we have requested that we engage in. The other factor why it is that we want to negotiate is the experience we have had with the working of this agreement. We have not been happy with the way relations have been carried out to ensure that certain clauses are respected in the manner that they are prescribed in the agreement. The other matter that has made us decide to renegotiate this contract is that there have been changes in the enabling environment. At the time in 2015, we had a different government administration that didn't appear to ensure that there was that environment that would create negotiations. Now, we have a different government administration and we hope that this government administration will be to ensure that there are those conditions in which we can reach an agreement that is fair and just. Also, we have the fact that BSI has been making new investments to address certain deficiencies in the industry, which we welcome, but which, as we will point out, have not been fully disclosed to us to convince us that yes indeed, these investments are benefiting us in the way they should. And also, we have been experiencing, since 2017, when the preferential prices were discontinued for our sugar in the European market, the continued low prices, which we need to question the objective of ASR/BSI, when they came into this country to obtain the best markets for our sugar, for farmers to get a better income. We have seen, since 2015, a continued splintering of the associations, being abetted by certain elements and forces in the industry. So, all of these changes, any business would have to look at. It would be irrational if any business did not take into account all these factors, to see how they can approve its operations. It can see how it can obtain the best benefit from its investments. Sugar cane millers have come and gone, and with them, they have taken part of the wealth that has been created by the sugar cane in Belize. But, we have persisted. Small farmers have persisted, and they only guarantee that we want in this whole process is that we can negotiate in an enabling environment that promotes transparency and full disclosure. We're not saying that we're gonna throw out every clause that is in the current agreement. We will retain most of the clauses there that can still work. But as I mentioned to you, these factors impact certain clauses that we need to sit down and negotiate. We need to sit down and ensure that both parties are looking at the same information to appreciate that they're getting the best value."
It is well known that the production sharing agreement between the mill and the farmers features a formula in which farmers get 65% of revenues generated, and 35% goes to the millers. The BSCFA says that what is not as well-known is that there is a bit of fine print in the agreement which mandates that there are costs of doing business, which the farmers must bear. It's referred to as the net strip value, and according to the leadership of this association, every year those costs increase, which cuts into their slice of the revenue pie. Here's how the Chairman of the association's Finance Committee explained it:
Javier Keme - Chairman Finance Committee, BSCFA
"Belize Sugar Industries have been saying that the best sharing or split has been in place for decades, and that is rightly so: 65% for the farmers and 35 percent for the mill. But, there is a line item, like in insurance policies that are in small letter. And those are the important factors that affect the insurance policy. We have a famous appendix 1 that defines how this 65/35 is gonna be done. What does this mean? If you have a cake, 65% should be for the farmers, and 35% should be for the mill if it was a straightforward split. But, it isn't. There are costs, overhead expenses, marketing costs, that have to be deducted to come to a term that is on the appendix 1 definition as the net strip value. Now, what does this mean? The 65/35 has remained for decades there, but that little slice of that cake, described in appendix 1 as the marketing costs, over the years, has been increasing. What does this mean? The portion to be split, 65/35, has been getting smaller over the year. So, this is why it has to be revisited."
Another grievance that the BSCFA has with the agreement is what they refer to as the manufacturing allowance, which they say is also hurting their bottom lines. According to the Chairman of the Association's Orange Walk branch, the farmers need some relief on those costs as well:
Alfredo Ortega - Chairman, OW Branch, BSCFA
"BSI has a charge in regard to the manufacturing allowance, but year after year, it has been increased on which we have seen that the pie on that side has always been increasing. And we have seen also that this is something that is hampering or damaging part of the payment to farmers. That is why we're looking forward to that area, that we need to come to the table and negotiate with them because this is something that was increased in 2016. If you can recall, there was a charge in regard to plantation white sugar, and then the direct consumption sugars came onboard. So, they have 2 different charges: $160 per tonne, and the other one is $150 per tonne. We need to come to the table. We've done some research in regard to the portion of what is being charged to farmers. It should be much less than what they are charging us. So, we're looking forward to this situation. That is why we've put it as one of the 4 issues that we need to negotiate with them."
