- Amandala special report -
The new $126 million bagasse cogeneration facility, Belize Cogeneration Energy Limited (BELCOGEN), sits atop Tower Hill in all its majesty — the realization of a dream that dates back to the 1990’s for some sugar industry stakeholders, but for some cane farmers, today’s multimillion-dollar nightmare.
When Amandala visited the area on Thursday morning, cane farmers of Orange Walk and Corozal expressed their growing frustration at the slow rate at which they say that the Belize Sugar Industries (BSI), owner of BELCOGEN, is accepting their cane. Hundreds of trucks were literally on standstill in what seemed like a never-ending queue.
BELCOGEN powers BSI, and provides steam for operations, but the project has suffered numerous glitches in the first weeks of operations.
While the farmers claim to have lost almost $4 million, executives of BSI told Amandala today that they intend to catch up, even as they have been grappling with “teething problems” in bringing BELCOGEN online.
Using the fiber wastes from the sugar cane, BSI produces power, which should feed 13.5 megawatts of power to the national grid. Company officials said today they were producing up to about half that amount.
While Amandala’s reporter was speaking with BSI officials Thursday afternoon, the bagasse power plant went offline, because a turbine had tripped. By Thursday night, we received a report that the problem had been resolved.
BSI reports indicate that it has ground, on average, just over half of the quantity of sugar cane it did in the same period last season. This slow pace has made cane farmers and their drivers miserable.
In the vicinity of the sugar factory at Tower Hill Thursday, several hundred trucks, tractors, and trailers filled with cane, lined the highways and all the approaches to Tower Hill, awaiting their turn to get their cane into the factory. We met frustrated, but calm farmers who had been camping out since Sunday, and as of Wednesday around noon had still not been able to get inside to deliver their cane. Some said they felt powerless because of the fractioning of their association into rival groups.
BSI officials told Amandala that since the season began on December 15, they have requested 74,000 tons of sugar cane, and have processed 62,363 tons. That’s a difference of about 12,000 tons of cane, capable of producing 923 tons of sugar.
“A lot of excitement was there [over BELCOGEN], but the expectations have not been borne out by the problems at the start,” admitted BSI’s chief operations officer Jose Montalvo in an interview with Amandala on Thursday. He claimed, however, that they expected the technical problems they have been experiencing. He is optimistic about having the system fully functional soon, though no timeline was given to us.
Montalvo told us that BSI would have had to shut down its operations if it did not pursue the bagasse cogeneration operations at the start of this sugar cane season in December 2009. The financial position was not sustainable, and it is critical for them to get BELCOGEN up and running now.
David Madrid, CEO of the Belize Cane Farmers Association (BCFA), told Amandala that when they last assessed the losses in cash flow last week, the tally was $3.4 million, and he estimates that it could reach close to $4 million by the end of January.
Madrid wanted to know if BSI would take responsibility for any losses to farmers. However, BSI claims that they will rectify the situation in the months ahead because they plan to catch up on processing.
Last year, sugar netted the highest export earnings next to petroleum, increasing even amid the recession, earning 25% more or, $89 million that year. Where does all the money go? According to BSI’s executives, 65% of sugar revenues go to the farmers; 35% to the factory.
Doing the math, that works out to an average of less than $10,000 per farmer last season, and over $30 million for BSI. (BSI’s net revenue for 2007 was reported at $35 million; $28 million for 2008. It recorded an overall loss in 2008.)
There is no telling what the financial picture will be like if the current stagnation at Tower Hill continues. However, the anecdotal information paints a bleak picture. The farmers we met were already complaining of financial hardships. Some farmers blame the factory and say they should go on strike until the problems are resolved.
Talks of a strike come at a grim time for cane farmers. On Tuesday, February 2, cane farmers will take the day off to memorialize the death of their fellow cane farmer, Atanacio Gutierrez, killed at Tower Hill in the 2009 riot over the core sampler, which still sits on Tower Hill as a reminder of a tumultuous 2009, even though the factory no longer uses the machine.
The mood was ironically calm Thursday, almost a year later. Some drivers complained that they had been waiting in long lines to deliver their cane, for as much as three days. They said that meanwhile, the quality of their sugar cane is decreasing, as fermentation causes the sugar content to drop.
Lennox Neal, BSI’s chief operations manager and a director of BELCOGEN, said that as soon as farmers “kill” the cane for reaping [chop down or partially burn the cane for reaping], the sucrose begins to deteriorate, so the first 24 hours are ideal. The kill-to-mill time, the time between the “killing” of the cane and when it is processed at the mill, now works out to about 94 hours, said Neal.
He told our newspaper that there is a need to coordinate the delivery to eliminate the long waits and preserve the cane quality, because what the factory needs is “mature, fresh, and clean” cane.
BSI factory officials contend that at present, the main reason for the long line of trucks queued outside their gates is because there is an overcapitalization of the sugar cane industry of the north. As a result, BSI argued, farmers are oversupplying by bringing way more cane than the factory announces would be required quota.
BSI issues daily quotas for farmers to fill, and the farmers are told in advance, said BSI officials. The quota was placed at 5,000 tons on Tuesday, but there were about 10,000 tons loaded in the queue, they claimed.
The quotas are usually split evenly for Corozal farmers and for Orange Walk farmers. So in this case, BSI would take up to 2,500 tons from Orange Walk farmers and 2,500 from Corozal farmers to make up the 5,000 tons.
According to BSI data, the quota began at 4,000 tons a day but dropped to 1,500 tons a day in late January. There have been instances this season when the factory could not handle its usual quota because of problems with the cogeneration plant.
Farmers insist, however, that the major shortfall—amounting to millions lost in cash flow—is BSI’s fault. BSI officials said that while they take responsibility for the technical problems with the plant, farmers are also hampering themselves by bringing too much cane to the factory and having it get “stale” and lose sugar content in the queue.
The factory also complained that the mechanized system of harvesting cane mixes a lot of field mud with their cane. This mud must be extracted at the factory in the purification process, which is costly and time consuming and also slows down the process, BSI officials said. This, in turn, extends the queue outside, they claimed.
A group of farmers on the Chan Pine Ridge Road, leading right to the Tower Hill’s junction with the Northern Highway, told Amandala they had tickets in the 200 and 300 series. The factory was receiving about 130 trucks for that day, said a farmer. This means that those who had tickets numbered above 130 had to wait for the following day, or the day after. There has been a persistent backlog because of this.
Farmers report that their income has been cut by a third, because they have had to wait three times as long to drop off their deliveries, and therefore it is hard to make ends meet.
A Corozal farmer, who had multiple trailers to deliver, said that he came out on Sunday, and got number 305, but was still awaiting his turn close to BSI’s gate at around noon on Wednesday. He tabs his loss since the season opened in mid-December at almost $40,000.
Romelo Magaña of Progresso, driving for about 20 years, had ticket #311, for a separate date and in another queue across the highway. He told Amandala that this was the longest time he has ever had to wait to deliver cane. He did not expect his number to be called until Friday.
The farmers say that they normally make at least five trips to the sugar mill a week, but currently they are only able to make one to two. It means that their usual income has dropped substantially, and the hardships trickle to several players in the sugar industry, said Magaña.
“It starts on the cane field. Cane cutters do not make money; drivers don’t make money,” said the farmer. “The problem today is that the factory is working bad.”
The farmers say they want BSI to fix the factory, but concede that at this moment, there is not much they can do but sit it out.
An elderly driver, who has been doing that job for over 20 years, said that he had left his truck at home.
He planned to return to the queue Thursday. He received ticket #252 when he went on-site Tuesday night, around 9:00.
The elder said that he is delivering sugar cane now every three days, when in the past, they had done, at worst, a delivery every two days and in normal times, every day.
They also lamented that high diesel costs are eating away their revenues. An announcement last week that government had given a concession for tax exemptions valued at $1.2 million to cane farmers has provided much needed ease to them.
“I can’t pay the bank,” said Eugenio Flores, a farmer, adding that interest costs are, meanwhile, increasing.
Flores claimed that last year, he was able to deliver at least 150 tons of cane a week. He said that he now delivers 30 tons for the week — a third of the normal delivery.
Flores told us that he had eight workers at the start of the season, but trimmed down to five with the delays at BSI.
He came from Progresso, over “very bad” roads, and had to meet expenses such as extra food and transportation costs to check on his cane truck parked near the sugar factory. He was also made to understand that problems at the factory are the reason for the delay in deliveries.
“It’s not grinding good,” Flores said. He suggests that cane farmers should suspend deliveries until the problems are sorted out.
Flores also said that BSI cares more about the additional money that will come from selling power produced from bagasse, on top of earnings from sugar. (Farmers say they won’t be paid any portion of the additional income.)
As mentioned above, BSI is contracted by the Belize Electricity Limited (BEL) to supply 13.5 MW to the ‘national grid,’ however, the bagasse plant also powers up BSI’s sugar mill and their facilities.
“They are still making profit out of us,” said the farmer, who claims that he is receiving 34 dollars for the ton of cane, and $340 to $350 for the load.
BSI’s finance director Belizario Carballo told Amandala, however, the price paid is now $36 for a ton of cane, only a dollar less than last year.
While Amandala was gathering this story, multiple sources we spoke with pointed to the politicization of the industry. Politicians of the north had used farm lands and licenses (the way it was done in the past) to buy votes, which they said had led to the ballooning of the number of cane farmers. With 6,000 farmers numbered in the north—a sharp contrast to the 400 citrus growers in the south, this block of farmers also wield major political clout if united, our sources said.
However, all the sources we spoke with Thursday point to a major concern — a fractioning of their collective power, with as many as three new organizations looking to spring up among cane farmers to challenge the BCFA.
The BCFA has been the only association recognized in the law, but its exclusivity is now being challenged before the Supreme Court as unconstitutional. The United Cane Farmers Association, which is leading the constitutional challenge, has emerged as the most formable contender.
BSI officials today denied reports that BSI is responsible for instigating the breakaway from the BCFA, which some call “the old divide and conquer strategy.”
BSI, which owns cane fields in both northern districts, says that it is a member of the BCFA, and pays “cess” fees to both; however, it supports the creation of new associations for cane farmers, because it believes that BCFA has not moved with the times in the interest of farmers. The relationship between BSI and BCFA has not been good, BSI’s Montalvo confessed.
According to chief operations manager Neal, BSI is the single largest producer, supplying 7% to 8% of the cane.
Farmers complained that even though they have to wait as many as three days in queue to deliver their cane, BSI’s drivers bypass the queue and deliver the same day. (BSI officials confirmed that their drivers take a day from field to mill, but say the problem outside is lack of organization, which has nothing to do with BSI.)
Farmers project that the unprecedented and extended delays in deliveries that they have been experiencing this season will likely have a domino effect into the next.
They say they will have to continue working the existing crop well into the rainy season. This means they may not have enough time to rehabilitate their fields for the new crop year, in late 2010. So the 2010-2011 season will very likely start late, causing even further financial losses.
Montalvo said even though BSI is admittedly falling behind at the mill, they would work to remedy the situation. Just as the farmers project, Montalvo said that they may need to stretch out the crop season at the tail end, extending into the rainy season. However, he cautioned that they will be “at the mercy of the elements” and operations would be costlier even for the factory.
The industry processed 917,000 tons of cane in the 2008-2009 season, and projects 1.1 million for this one. From that, they can produce 110,000 tons of sugar valued at around $90 million. The Belize market consumes 10% of the sugar that BSI produces.
Neal said that the first shipment of 4,500 has already been sent to Tate and Lyle in Europe, minority shareholder in BSI.
BSI’s employees own 81% of the company, through a trust which pays them dividends in good years. Amandala is informed that dividends to BSI workers are temporarily frozen.