Tate and Lyle hunting new five-year sugar supply deal

British sugar refiner Tate and Lyle is in talks with the Jamaica Cane Product Sales (JCPS), the marketing firm for local producers, for a five-year supply deal, starting with 200,000 tonnes in the 2011-12 crop year.

Paul Worthington, regional technical director for Tate and Lyle, says his company is moving to secure most of, if not all, the sugar to be churned locally.

The British company is attempting to lock in supplies as the Jamaican industry shifts to full private control.

Still, the producers, who will make up a completely privatised industry when Complant International Sugar Industry Company Limited takes control of the operations at Frome, Bernard Lodge and Monymusk sugar estates in a few weeks, have each expressed a desire to market their own product in order to realise the best possible price.

"We are being proactive and have spoken to all the players in the industry, including the local private owners and the Chinese, JCPS and the ministry," Worthington told the Financial Gleaner on Wednesday, "We have placed an offer starting with the next crop. I think it's a generous offer, but its for Jamaica to decide. We can't force their hand."

Karl James, general manager of JCPS, was not reached for comment.

Tate and Lyle has had a long history with Jamaican sugar dating back to the 1960s when it controlled large chunks of the industry. It exited the local market in the 1970s, returned for a period in the 1980s to manage some factories on behalf of the Government, and in the 1990s as partners with two Jamaican firms in a short-lived ownership of the divested industry.

Last year, Tate and Lyle signed a forward sale-export agreement for sugar worth US$46 million.

The arrangement had a window for Jamaica opting out of the second-year pact, should the factories be sold in the Government's drive to shed its loss-making factories.

This side of the agreement was triggered after the Complant deal was sealed last year, sending Tate and Lyle in search of a new arrangement.

"We were somewhat satisfied with how things went last year," said Worthington, when asked about the abbreviated arrangement.

"The sugar quality wasn't as good as it was before and although supply was late, a contingency plan was in place, so the lateness of the first shipment was no problem," he said.

Worthington was reluctant when quizzed about elements of the new offer on the table.

"Its not one figure," he said. "It covers all sort of things, including technical support if needed, pre-cost financing if required, bringing forward a profit-sharing payment due for February next year to December this year, so it is no one single offer."

Tate and Lyle's commercial director for Caribbean and Americas sugar, Gavin Wakely, has also visited the island and held discussions with industry players.

The London-based firm has been on the ground doing the rounds in the sugar dependent communities and recently partnered with Fair-trade International, a global non-governmental organisation working to secure a better deal for farmers in developing countries through ethical certification of their produce.

Once certified, the cane farmer associations can benefit from the Fair-trade Premium. This is an extra income meant for investment in the farming community's business, social or community development.

Under this arrangement, each cane farmers' association will govern the spending of the funds through consultation with its wider membership and through a budgeting process undertaken by its elected board.

Each association will have autonomous responsibility in how their funds are allotted and spent, as long as the funds are managed in a democratic and transparent manner.

The associations will be subjected to annual auditing by Fair-trade inspectors.

Worthington noted that Tate & Lyle Sugars is looking forward to working with the Jamaican cane farmers in the future, and pointed out that the funds to be disbursed to the farmers annually could reinvigorate their operations. But, as he quickly pointed out, the benefits would only be realised if his firm was selected as the preferred purchaser of Jamaica's sugar.

"We are working with the farmers and it is very productive, but we can only support the farmers if we have a contract," he said, "We are just waiting to hear from Jamaica."

source: jamaica-gleaner