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The Sugar Worker, May 2003. News from the Sugar Sector.

Posted to the IUF website 02-Jun-2003

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The Sugar Worker
Information and Analysis for Unions in the Sugar Sector
Volume V, Number 5
May 2003

Contents




Pakistan: Sugar Workers Federation Formed

One hundred and ten delegates from sugar worker organisations from all the country, attending a national convention held in Karachi on 17 & 18 May, formed the Pakistan Sugar Mill Workers' Federation (PSMWF). The federation would play an important role in supporting workers to secure jobs and rights and to negotiate wages and working conditions, in the context of a hostile industrial relations environment.

In the convention's conclusions, delegates called for the reinstatement of retrenched sugar mill workers, the right of agricultural workers to freedom of association, and for the government to provide support to small sugar farmers in the Sindh province, who face a severe crisis because of shortage of water.

The federation emerges when widespread changes in industrial and labour relations in the sugar mills have been the norm in recent years. For instance, in July 2002, the Sindh Sugar Mills Trade Unions Federation (SSMTUF), one of the founding members of the PSMWF, expressed its concerns about the large numbers of unemployed workers and the retrenchment processes in the mills. The SSMTUF also said that employers were resorting to contracting out jobs that effectively curtail workers' rights and tend to undermine the unions. In addition, the apparent lack of clear direction in the industry and the abolition of some regulations, such as the zoning system in the supply of cane, contribute to create uncertainty in the industry.

Of particular concern to the delegates was the Industrial Relation Ordinance (IRO) 2002, which the Pakistani labour movement at large opposes because it severely affects the trade union rights of workers and their ability to negotiate with the employers. The International Labour Organisation (ILO) has requested the government to amend the IRO 2002, according to local papers. The situation is especially difficult for agricultural workers, including sugar workers, who do not enjoy the right of freedom of association and are unable to strike.

Representatives of the Pakistan Sugar Mills Association (PSMA) and the Workers, Employers Bilateral Council of Pakistan (WEBCOP) also attended the sugar workers' convention, and said the employers should welcome the opportunity to negotiate with a industry-wide federation in order to meet the challenges of globalisation and to support the industry. Not all mill owners seem to appreciate such opportunity, however. The day after the PSMWF was established, management of the Army Welfare Sugar Mill told the union, the Army Welfare Sugar Mills Workers' Union, a founding member of the federation, that, because of losses in the mill, the union had to stop activities and dissolve itself or management would do that forcibly. (More information in IUF Asian Food Worker at http://www.asianfoodworker.net/)

Guyana: Arbitration Tribunal on 2002 & 2003 Wage Increases

On 25 May, an Arbitration Tribunal granted a 6 percent and a 5 per cent wage increases for 2002 and 2003 respectively to workers organised by GAWU and NAACIE, both IUF affiliated unions in the sugar industry. The Tribunal's decision covers some 19,200 employees of the Guyana Sugar Corporation (GuySuCo), the sole cane processor in the country, of whom 92 per cent affiliates to GAWU and the remaining 8 percent to NAACIE. GAWU represents field and factory workers and also foremen and forewomen; NAACIE affiliates clerical and allied employees.

The Arbitration Tribunal was set up in mid January to look into wages and salaries, salary scales, salary increases, and merit increments for 2002 and 2003. (In NAACIE's case, the Tribunal also looked at 2001 awards.) In addition, the Tribunal reviewed a demand by GuySuCo to amend clauses on promotion and acting allowance in the Memorandum of Understanding with NAACIE. After evaluating the submissions by all parties, the Tribunal decided:



The Tribunal also made some recommendations, among them, that the company and the unions should conduct a comprehensive study on wages and salaries and a Job Evaluation, to address the current wage structures and the introduction of an annual appraisal scheme. The Tribunal recommended the study be completed in six months. A related recommendation was that the parties should negotiate an annual production incentive before to the year of production, for it to be a truly incentive scheme, rather than after production is completed, as is the case now. The Tribunal also recommended multi-year collective agreements, considering that yearly negotiations represent a great investment of resources to everyone, and when negotiations go to conciliation or arbitration, decisions take longer to be reached.

A source in GAWU said the union welcomes the Tribunal's recommendations although some deserve further analysis (e.g. multi-year agreements) because there are variables that influence the financial performance of GuySuCo, over which the company has little control. For instance, the fluctuations of the Euro against the U.S. dollar play a major role in determining the "profitability" of the company, given that it sells a substantial portion of its production in the European market, with prices denominated in Euros.

In the same line, the union believes that the ability to make projections and to share key information (from the company) that makes such projections possible are matters still to be achieved in the Guyanese environment. For instance, a five percent wage increase for 2003, said the union, does not take into account the strong financial and production performance expected this year. Although the Tribunal recommends the parties to negotiate an additional percentage, according to the "profitability" of the industry, it remains to be seen whether the company is willing to provide the basic information for the negotiations to take place and if it would actually bring them to completion.

Brazil: Cane Production Seen at 344 Million Tonnes

Datagro, a consulting firm, announced a revised forecast of the Brazilian production of sugar cane of 344.3 million tonnes in the 2003/04 harvest, up from its previous estimate of 330 million tonnes published last February. The revision came based on improved weather conditions in the Centre-South region, around Sao Paulo state, and a better evaluation of the Northeast production at the end of the year. According to Datagro, the Centre-South would produce 291.8 million tonnes of cane while the Northeast would reach 52.5 million tonnes.

Datagro expects the additional cane in the Centre-South, about 9.8 million tonnes, would go to sugar, bringing sugar production to 18.5 million tonnes, which is lower than the 18.7 million tonnes in the previous crop. The Northeast would produce about 4 million tonnes of sugar, up from the 3.4 million of last year. Brazil's total sugar production is estimated at 22.5 million tonnes, slightly above the 22.4 million of 2002/03 crop. It is expected that the Centre-South would contribute with 85 percent of the estimated 13.25 million tonnes for exports.

The 2003/04 crop, said Datagro, would be an "ethanol harvest," estimating that about 53 percent of the cane would go into ethanol. Datagro forecasts a production of 14.04 billion litres of ethanol, with almost 90 percent originating in the Centre-South region.

Sem Terra Movement Claims Cane Lands

In comparison with the success enjoyed by the production of cane, which helps consolidating Brazil's leadership in the global ethanol and sugar production, the Sem Terra Movement (Landless Movement) had 19 May as protest day against the country's highly concentrated land ownership structure, the latifundio, also present in the sugar industry.

On 19 May, some 2,000 landless rural workers protested at the engenho Prado, in the municipally of Tracunha�m in Pernambuco. A communiqu� by the Sem Terra said the people were related to the Sem Terra Movement, the Pernambuco rural workers federation (FETAPE), and the pastoral land committee (CPT), a church-related organization.

According to local papers, the engenho Prado lands are one of the oldest land disputes in Pernambuco, claimed by around 300 families who live there since 1997. Lands had been also leased to a third party with whom the company is involved in a legal dispute. Sem Terra said the families were cultivating the land and waiting for the government's agrarian reform agency to expropriate the lands, which do not fulfil a social role. Private armed personnel had been harassing and threatening the families for some time, Sem Terra added. Protesters at the engenho Prado set fire to some buildings and destroyed machines and equipment. The engenho Prado belongs to the Usina Santa Teresa, owned by the Joao Santos Group.

Cuba: Disastrous 2003 Harvest Ends

A report by Reuters on 29 May said that the Cuban Sugar Ministry decided to end the 2002/2003 crop in most of the country because of the start of the rainy season, which tends to hamper harvest operations (cane cutting, transportation), lowers agricultural yields, and increases production costs. By that day, fifteen of the 79 mills had ended operations, and most of the other mills were already finalising operations. Only one or two mills would be working into early June, said the report, but they would add little to the national production. Reuters estimated Cuban production at between 2 and 2.1 million tonnes of sugar, below the revised target of 2.6 to 2.7 million, and a poor result when compared to the 3.6 million tonnes achieved in 2002 that, in itself, was one of the lowest production levels of the past 50 years.

Reuters said that Cuban authorities have not disclosed the volume of sugar committed for exports, which local observers put at 2 million tonnes. As Cuba's annual domestic consumption is about 700,000 tonnes, it should not be a surprise if the island imports sugar to cover local needs or decides not to fulfil export commitments, mainly with Russia and China.

European Union: Monitoring Commodity Stocks in Candidate Countries

With May 2004 as date for the next round of enlargement, the European Union started to monitor stocks of agricultural commodities, including sugar, in the ten candidates countries to determine the amounts that can be absorbed into the EU, reported the German analysis group F.O.Licht on 15 May.

According to Licht, EU experts are working with the governments of the candidate countries to determine the "reasonable" level of stocks based on historical levels. There is a risk of speculative stockpiling during the period leading to the integration, because of the expectation that domestic prices would rise in line with EU prices. The extra inventory would then add to the stocks in the EU-15 and would mean extra payments from EU budgets.

Among the candidate countries are sugar-producing countries like Poland, Hungary, the Czech Republic and Slovakia, with an estimated combined production of 3.3 million tonnes of sugar in 2002/03. If sugar stocks are above historical levels, the EU might classify them as "C" sugar, which is sugar for exports to world markets without subsidies.

In a related matter, Serbia said it would improve controls on sugar imports and exports to prevent what appear to be fraudulent exports to the European Union. In April, the EU imposed a three-month ban on Serbian sugar, a period during which the government should improve controls. The volume of Serbian exports of sugar to the EU keeps no relation to domestic production, and there are complains that imported sugar is repackaged and re-exported to the EU. A Serbian official said that the country had contracted 160,000 tonnes of beet sugar for export to the EU in the first six months of 2003, compared to 180,000 tonnes in 2002. In 2001, the EU gave special rights, including duty-free sugar exports to the Balkans, to help them in their post-war recovery.

Company News

Southern Africa: Record Production, Increased Earnings in Illovo

In the financial year ending on 31 March 2003, the South Africa-based Illovo Sugar posted a strong performance with 2.308 million tonnes of sugar produced, 355,000 tonnes more than the previous year, and 5.781 million tonnes of cane, almost one million tonnes more than in 2001/02. In the downstream products (manufactured from sugar), the group achieved new records in furfural and ethyl alcohol production, and a significant increase in acetoin production.

The group's operating profits increased by 42 percent on year, with a 33 percent increase in headline earnings per share. Sugar manufacturing accounted for 59 percent of the profits, cane growing for 27 percent and downstream products for 14 percent.

In terms of geographic areas, operations in South Africa contributed with 39 percent of the profits, Malawi with 24%, Zambia 22%, Swaziland 13%, and United States 2%. It is worth noticing the exceptional performance of the medium-size operations in Malawi (two units) and Zambia (one), which accounted for a combined 46 percent of the group's total operating profits.

During the year, Illovo Sugar increased its stake in Sucoma (Sugar Company of Malawi) to 76 percent and in Zambia Sugar to 90 percent. The group expects these two investments to increase future earnings. After completing the rehabilitation and redevelopment programs in Kilombero Sugar (Tanzania) and Maragra (Mozambique), they were consolidated into the group operations as of 31 March 2003. It is expected that they would start producing positive results for the group soon.

Illovo Sugar said that sales of sugar and downstream products to domestic markets contributed with 50 percent of total revenues, with the remaining half from sales to 94 countries. Interestingly enough, 61 percent of sugar production by volume and 77 percent by value was sold into domestic markets or preferential markets like the European Union and the United States. In fact, Illovo Sugar is well positioned to take advantage of preferential markets in the European Union through the sugar agreement between the EU and the African, Caribbean and Pacific (ACP) countries and to benefit from the "Everything But Arms" trade initiative. Some of the African operations also benefit from to the United States sugar quota.

Looking to the future, the group expects that a stronger South African rand vis-�-vis the US dollar and weather-related problems coupled with 0inadequate rainfall in South Africa in the past summer might have a negative impact on cane production, which in turn may result in a lower production of sugar and downstream products. The South African Cane Growers Association has forecast a national production of 2.4 million tonnes of sugar for the 2003/04 crop, down 360,000 tonnes on last year.

Hungary: Nordzucker Consolidates Grasp on Industry

Nordzucker, the second largest German sugar processor, bought minority stakes in three Hungarian beet plants in which it acquired majority stakes earlier this year. Forr�s Rt. of the State Privatization and Holding Company Rt sold the shares at 70 percent its nominal value of 3.59 billion Hungarian forints (USD 17 million) and posted, according to international sources, a profit of USD 942,000. The transaction involved a 39 percent stake of M�tra Cukorgy�r Rt, 38 percent of Szerencsi Cukorgy�r Rt, and 25 percent of Szolnoki Cukorgy�r Rt, giving Nordzucker control of close to 90 percent in each of the factories. The three factories account for about 40 percent of the national output, estimated at 378,000 tonnes of sugar in the 2002/2003 crop. (The Hungarian sugar industry is dominated by three West European companies: Nordzucker, Agrana, the Austrian subsidiary of S�dzucker, and Eastern Sugar, a joint venture of the French Saint Louis Sucre - another subsidiary of S�dzucker - and the British Tate & Lyle.)