Is prosperity escaping the sugar industry?

The bittersweet relationship between smallholder sugar cane growers and millers is gradually turning into another ugly layer, plunging the already chaotic but lucrative sugar sub-sector into further confusion, Prosper Magazine can reveal.

According Prosper According to the magazine’s investigations, this is further complicated by the inability of the “potential” regulator – the government – to bring the two key players in the value chain to order.

Although it is one of the cash crops the government relies on to boost household incomes and lift the nearly 30,000 farming households engaged in sugar cane production out of poverty, Prosper Magazine also established that the government’s decision to put in place the National Sugar Policy (NSP) and the Sugar Act, 2020 has not really helped matters.

Indeed, the operationalization of the two policy documents is pending.
As a result, the sub-sector responsible for the economic sustenance of nearly 30,000 households is at the mercy of the millers, many of whom are not only tied in terms of ownership but also operate in cartels.

Farmers harvest sugar cane in Jinja. Farm-level sugarcane prices reported by farmers indicate that since 2019, prices received by farmers have decreased by 33-44%. PHOTO/TAUSI NAKATO

It emerged last week during the presentation of a study by the Economic Policy Research Center (EPRC) titled: Revisiting the Policy and Institutional Arrangements Affecting Sugar Cane Farmers and Millers in Uganda, that in In terms of price, most operational suckers will bury whatever they have hatched must collectively agree on a price at which they can source the canes from small growers. In most cases, the pricing is at the expense of the farmers—outgrowers.

Price problem
Although competition can be good, its weight, especially in the absence of regulation, can be dangerous for smallholder households.
EPRC research presented last week reveals that between 2016 and 2017, small producers responded to expanding market opportunities that followed the entry of smaller factories. But their joy was short-lived because they could no longer get attractive prices for their products.
The unregulated marketing system has resulted in a persistent decline in cane prices in violation of Part VII of the Sugar Act 2020, which recommends that a fair and transparent cane pricing formula be implemented. operates each season under the supervision of a representative sugar council.

But the Sugar Act 2020 pricing criteria are not only flawed, they are also not enforced. As a result, millers have disproportionate power in determining the price of sugar cane.

Farm-level sugarcane prices reported by farmers indicate that since 2019, prices received by farmers have declined by 33-44%, depending on the region. Based on the five years of data available, cane prices from 2019 to 2021 were more similar across the three sub-regions than in 2017 and 2018.

Cane growers interviewed during the EPRC study said the steady decline in prices began in 2018, thanks to millers exercising “their indisputable market powers to drive down cane prices”.

Subcontractors believe that the uniformity of prices between regions in recent years could be a sign of collusion between millers from different regions in their attempt to control prices in the industry. But without a Sugar Board, neither millers nor growers are obligated to agree to and adhere to a cane pricing formula.

To research
The EPRC report, presented at the 10th National Forum on Agriculture and Food Security, also corroborated Prosper Magazine’s investigations with revealing evidence.
Although the volume of sugarcane produced and the value exported has tripled over the past two decades, poverty is still widespread within the sugarcane-growing communities.

Poverty in the sugar cane community is linked to the lack of empowerment and protection of small producers who have been relegated to the end of the value chain.

“The institutional and policy environment for sugarcane production in Uganda has provided limited empowerment and protection to smallholders. This is attributed to delays in the implementation of the NSP 2010 and the Sugar Act 2020 by the Ministry of Trade, Industry and Cooperatives and the Ministry of Agriculture,” the researcher noted. Principal of the EPRC, Dr Swaibu Mbowa, during the presentation of the report last week in Kampala.

As a result, two sugarcane sub-regions, Busoga and Bunyoro, were affected. The Busoga sub-region alone remains home to 1.2 million low-income people and nearly 0.4 million people living in food poverty, according to 2020 data from the Uganda Bureau of Statistics (UBOS). .

The report also showed that outgrowers contribute about 37% of national sugar cane production, with Buganda region leading in yield, followed by Busoga and Bunyoro sub-region. This is also reflected in income, with smallholders in Bunyoro losing more than the other two cane producing regions.

Farmers harvest sugar cane in Jinja. PICTURE/ FILE

Surprise Surprise…
The country’s sugarcane industry’s threefold increase (more than 380 percent) in sugarcane production over the past 20 years is not the result of efficient land use as as a key factor of production, but from the conversion of forests and public lands (especially ranches) to sugarcane.

The EPRC study also found that the surge over the past two decades, from around 1.5 million tonnes in 2000 to 5.8 million tonnes in 2020, was the result of the allocation by farmers more cane arable land as well as expanding sugar cane acreage via land leasing. market—lease for the cultivation of sugar cane.

Despite the growth in production which is entirely explained by the expansion of harvested land, from around 20,000 ha in 2005 to over 81,000 ha in 2020, Dr Mbowa, the lead author of the report, noted that “Farm-level sugarcane productivity has remained static at 29 MT/acre over these 20 years.

Exit from sugar cane
About 29,000 farming households are engaged in sugarcane production in Uganda, and these farmers employ about 640,000 laborers. More households engaged in sugarcane cultivation between 2012 and 2021. And about 40,000 households, at any given time, participated in sugarcane cultivation between 2005 and 2021, the research reveals. But by the end of last year, that number had fallen to around 29,000.
This indicates that 28 percent of outgrowers had abandoned sugarcane cultivation, with the highest attrition rate (33.8 percent) occurring in the Busoga sub-region. This implies that one in three sugar cane farmers in Busoga have given up cane cultivation.

In the absence of a National Sugar Board (NSB) to regulate activities in the cane sub-sector, the governance of the affairs of the outgrowers is primarily determined by the millers. Without the NSB, agreements between millers and producers are broken.

“In such circumstances, the survival of outsourcing programs is threatened due to heightened market uncertainties among outsourcers,” reveals the report which industry players say is an accurate representation of what is happening. .

“The underlying factor under the current arrangement is to preserve the disproportionate power of the millers over the determination of the price of sugar cane. This requires the application of the cane pricing formula and the creation of functional processor associations stipulated in the Sugar Act 2020. This would strengthen the position of farmers vis-à-vis mills in negotiating prices” , explains the lead researcher of the report.

Licence
By 2020, MTIC had licensed 33 factories, with a combined processing capacity of 71,850 tons per day, compared to 21,700 tons per day supplied by the 4 factories before 2005. However, only 12 factories (with a processing capacity of 32,525 tons per day) of the 24 authorized factories in Buganda, Busoga and Bunyoro sub-region were operational, according to the study.

During the study, it was discovered that existing millers had acquired new licenses in different jurisdictions to prevent other players from establishing milling plants in the same area. This could explain why there are fewer operational mills than authorized mills.
Therefore, there is a need to engage in conversations on the NSB, as recommended by the Sugar Act 2020, to regulate the sector and improve coordination between millers and smallholders, as envisaged by the National Sugar Policy (NSP) of 2010.

What they say
“Millers and farmers should stick together because this sector is lucrative and can accommodate everyone. But there should be a shared vision, something that is missing,” says David Kafuko, sugar industry analyst.

“To say that the cultivation of sugar cane is responsible for poverty in the sugar-producing regions of the country is a myth. In fact, these households have disposal income. The problem is the pricing and payment due from the farmers – it takes months before they get paid. If these two issues are not resolved, we should expect discontent,” said Madina Guloba, senior researcher at EPRC.
“The relationship between the millers and the sub-contractors has been badly managed. This is why sugar cane has been codenamed the crop of poverty, but it has the potential to enrich everyone involved in the value chain,” says Princess Kabakumba Matsiko, Farmer Representative of the Bunyoro sub-region.

Rachel J. Bradford