longitudinal impact assessment study of sugar producers in malawi

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4. The global, national and local sugar contexts 4.1 The global sugar situation More than 100 countries produce sugar, 80% of which is made from sugar cane grown primarily in the tropical and sub-tropical zones of the southern hemisphere, and the balance from sugar beet which is grown mainly in the temperate zones of the northern hemisphere. Generally, the costs of producing sugar from sugar cane are lower than those in respect of processing sugar beets. Currently, 70% of the world's sugar is consumed in the countries of origin, whilst the balance is traded on world markets. Because of the residual nature of the world market, the free market price has historically been one of the most volatile of all commodity prices. The five largest exporters in 2008/09, Brazil, Thailand, Australia, SADC and Guatemala, are expected to supply approximately 85% of all world free market exports. South Africa is currently ranked as the 8th largest exporter to the world market. None of the other countries in which Illovo operates export sugar to the world market. The world sugar price, although continuing to be very volatile, adjusted upwards during the past two years, from an average of US11.84 cents/lb in April 2008 to above US13.00 cents/lb in March 2009 and US 15.20cents/lb in April 2010. The world sugar balance forecast for the period October 2009 to September 2010 shows a widening gap between world consumption and global output. World production is now put at 157 million tonnes, raw value, up by 3% from the last season. Generally sugar crops in the world’s leading producing countries – with the exception of the EU, Russia, and, probably, India – are now likely to be lower than expectations at the beginning of the season. World consumption is expected to grow at a rate significantly lower than the long-term 10 year average (1.48% and 2.66%, respectively). The lower growth is attributed to soaring world market prices as well as some lingering impacts of the 2008/09 global recession on sugar consumption growth rates. The ISO does not anticipate that the projected renewed global economic growth will significantly stimulate sugar consumption in the course of 2009/10, particularly taking into account high world market prices. Even so, global use of sugar is expected to reach 166.6 million tonnes. Growth in global production is too small to cover anticipated increases in sugar consumption, and the world statistical deficit is expected to reach 9.4 million tonnes by September 2010. Figure 4.1 World Sugar Balance 2009/10 2008/09 Change (mln tonne, raw value) in mln t in % Production 157.160 152.482 4.678 3.07 Consumption 166.585 164.153 2.432 1.48 Surplus / Deficit -9.425 -11.671 Import demand 54.281 50.068 4.213 8.41 Export availability 52.156 50.070 2.086 4.17 End Stocks 53.068 60.368 -7.300 -12.09 Stocks/Consumption ratio in% 31.86 36.78 Source: ISO quarterly market outlook, February 2010 10
4.2 The sugar situation in Malawi Although sugar is more costly to produce in Europe than in developing countries, government subsidies coupled with high production quotas have lead to overproduction which has subsequently depressed the global sugar prices 1 . High import taxes and strict quotas have been additional barriers for even the most efficient developing country producers trying to seek markets for their own exports. Malawi’s sugar sector is vital for the country’s economy and holds enormous potential. It is the country’s third most important export commodity after tobacco and tea, valued at US$ 61 million (2007). Malawi is one of the most efficient sugar producers in the world, producing sugar up to three times cheaper than European producers. The sugar cane is grown under irrigation, and agro-climatic conditions are favourable for both cane yields and sugar formation. As an ACP 2 country, Malawi has been able to export 20,000 metric tonnes of sugar to the EU through a preferential KCGL arrangement. The Fairtrade certification in 2004 of the first and only Fairtrade sugar producer group in Malawi, Kasinthula Cane Growers (KCGL), plus the tariff free access into Europe, means that Malawian Fairtrade sugar is now available in mainstream supermarkets. From 2009, under the terms of the “Everything But Arms” (EBA) initiative which is part of the recent EU sugar regime reforms, Malawi’s status as a Least Developed Country (LDC) will grant it unrestricted duty-free access to the EU for all its sugar, giving the country – and potential Fairtrade sales – some long-term support and market access. However as Brazil – the world’s largest and most efficient sugar producer – steps in to provide the shortfall in sugar left by the EU, land-locked developing countries like Malawi will still struggle to compete due to their higher export costs. Illovo Sugar (Malawi) Ltd is Malawi’s only sugar plantation producer and processor. It has two estates with milling facilities at Nchalo Estate on the Shire River (which mills the cane from Kasinthula), and Dwangwa Estate near Lake Malawi. Together with local smallholder production that they purchase, they produce around 270,000 tonnes of sugar per year (5% of production at Nchalo is from bought-in Kasinthula smallholder production). Kasinthula Cane Growers Limited produced 69,831 tonnes of sugar cane in 2009 from 754 hectares of land. KCGL has 282 farming families and 460 permanent workers. All of that production is purchased by Illovo and processed at its Nchalo factory. There are around 50 buyers of the sugar produced, with 28% going to Europe, 67% used for the domestic market and speciality sugars being sold to Europe and the USA. The Figure below (from TWIN) shows the supply chain for Kasinthula sugar. 1 Since 1995 the EU has spent around $1.25bn a year subsidising sugar exports. Subsidised exports are estimated to depress world sugar prices by 12%. 2 The African, Caribbean and Pacific Group of States (ACP) is an organisation created by the Georgetown Agreement in 1975. It is composed of African, Caribbean and Pacific States signatories to the Georgetown Agreement or the Partnership Agreement between the ACP and the European Union, officially called the "ACP-EC Partnership Agreement" or the "Cotonou Agreement".The ACP Group´s main objectives are: a) sustainable development of its Member-States and their gradual integration into the global economy, which entails making poverty reduction a matter of priority and establishing a new, fairer, and more equitable world order ; b) coordination of the activities of the ACP Group in the framework of the implementation of ACP-EC Partnership Agreements; c) consolidation of unity and solidarity among ACP States, as well as understanding among their peoples ; d) establishment and consolidation of peace and stability in a free and democratic society. 11
Page 1 and 2: LONGITUDINAL IMPACT ASSESSMENT STUD
Page 3 and 4: Executive Summary The study This st
Page 5 and 6: • Food security for producer hous
Page 7 and 8: Contents 1. Introduction Page 8 2.
Page 9: 3. Methodology This study is a long
Page 13 and 14: Malawi exported sugar during the ye
Page 15 and 16: 6. Support to KCGL from TWIN/TWIN T
Page 17 and 18: 7. Findings of the study 7.1 The pr
Page 19 and 20: There are now plans for a Phase III
Page 21 and 22: The limiting factors to the success
Page 23 and 24: Cane transport Concern Universal En
Page 25 and 26: Table 7.1 Labour employment by KCGL
Page 27 and 28: Major economic and social benefits
Page 29 and 30: demands have come from villages out
Page 31 and 32: KCGL employees do not feel that the
Page 33 and 34: 1998 MK400 fortnightly (MK800 per m
Page 35 and 36: He plans to build a house of his ow
Page 37 and 38: A grocery shop at Dyeratu Trading c
Page 39 and 40: The relationship with the KCGL Boar
Page 41 and 42: The disciplinary committee oversees
Page 43 and 44: Frequent ploughing out and replanti
Page 45 and 46: 8.5 Changes in local, regional and
Page 47 and 48: 9. Improving impact 9.1 Producer st
Page 49 and 50: and their solutions in order to imp
Page 51 and 52: Number of families receiving money
Page 53: to 282 farmers in March 2010. These

longitudinal impact assessment study of sugar producers in malawi

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