125

SUGAR BEET OR SUGAR CANE Ford Sturrock University of Cambridge

This article attempts to compare the costs of producing sugar from beet and cane and concludes that sugar beet grown in England has probably now become competitive with Jamaican sugar cune.

When sugar beet was established as a commercial crop in this country, this step was heavily criticised on the grounds that while we subsidised beet, “unwanted stocks of cane sugar at from half to a third of the cost of beet were piling up in the West Indies”.’ The subsidy was of course justified as a means of assisting arable farming and a useful source of foodstuff that might be short in wartime. But at no time did sugar beet appear able to compete on level terms with sugar cane. Since the war, we have had a managed sugar market with Commonwealth sugar admitted on a quota basis at a special price (at present about f47 a ton) well above the “free market” price. Farmers growing sugar beet in this country have been given a guaranteed price and the crop is processed by the British Sugar Corporation, a public body that does not disclose its cost or returns. The amount of beet grown depends on the capacity of the factories and farmers would grow more at the price offered if this capacity were greater. For political reasons, however, a share of the market is reserved for Commonwealth countries. I t is thus evident that prices and supplies are artificially controlled and no serious attempt is made to allocate the market between cane and beet on an economic basis. The position is very much the same in other countries where domestic sugar industries shelter behind subsidies and levies and imports are paid for at prices that depend far more on politics than on economics.

In addition to these special arrangements, there are sales at the so called world market price. This, however, is really a residual market for such supplies as fail to find a domestic or a special export market. These world prices have fluctuated in recent years from €12 to well over €100 a ton. The present price ofaround €20 is certainly well below the cost of production under the most favourable conditions.

As a result of government intervention sugar beet and sugar cane are hardly ever allowed to compete on equal terms. There is, however, a tacit assumption that cane must be a cheaper means of producing sugar than beet. In fact, very little information on this point has ever been published. Commonwealth countries supplying the British market collect costings for use in the price negotiations but they do so under conditions of the utmost secrecy.

There can be little doubt that with artificially maintained prices and no real competition, a substantial amount of uneconomic production is kept in being. It is equally apparent that a price high enough to keep high cost producers in being is likely to be unnecessarily generous for other low costs areas. In these circumstances, it is understandable that producers should shun publicity.

The FUWC of British Farming-A. W. Menties Kitchin.

126 FORD STURROCK

Nevertheless, it is in the interests of the consumer and the tax payer that infor- mation should be available on which policy can be determined. It may not be reasonable to expect farmers to depend on an open market because prices are too unstable. It may even be desirable to protect home agriculture or to give assistance to undeveloped countries but a special price for a single crop such as sugar may not be either the most efficient or equitable method of doing so.

Recently, the present writer was a member of the Sugar Industry Enquiry Commission set up by the Jamaican Government. One of the tasks of the com- mission was to examine the efficiency of the industry and to do so a large amount of data was collected on the economics of sugar cane production. As the Farm Economics Branch in Cambridge also collects sugar beet costings this information provided an excellent opportunity to compare the cost of producing sugar from beet and cane.

Some difficulties were encountered in presenting the Jamaican data. There are eighteen estates on the island with sugar factories and most of them employ different accountants.+ It was thus necessary to persuade each of them to process their data on a uniform basis. This was finally accomplished with the aid of the Sugar Manufacturers' Association. The second difficulty was that although a very detailed breakdown of costs was available to the Commission for their private information much of it cannot be used here. Nonetheless, sufficient information was published in the reportt to provide a satisfactory comparison with sugar beet. The data for Jamaica covers the whole of the 70,000 acres of cane grown on the eighteen estates. The estates also buy cane from surrounding farmers. Some are smallholders with lcss than an acre on a hillside but most of the purchased cane comes from a few large holdings that use much the same methods and equipment as the estates.

Data for the Eastern Counties (which includes 64 per cent of the sugar k t grown in the U.K.) was obtained in 1965 from a random sample of 63 farms. From the costs given in Table I , it will be Seen that sugarcanecosts over f I13 per acre compared to f70 for sugar beet.

Table 1 Comparative sugar costs per acre (cultimtiolrr, hrrutjng and delivery to factory)

SUGARCANE S U G A R D U X ( I964/5) ( I 965)

Labour Machinery Direct costs Other overherds

f s. d. f s. d. 74 12 2 2012 0 17 8 2 I5 14 0 I I 0 10 13 2 0 10 IS 7 21 2 0

TOTAL f113 16 9 f70 10 0

Tons of C.ne/Bect per acre 33.16 15.7 Tons of cuK/kct per ton refined sugar 1036 7.96 Tons of rrftncd supar per acre 3.14 1.97

Sugar cane is in fact a giant perennial grass which is cut once a year for two to seven years or more. The high cost of labour (f74 per acre) is largely due to the hand cutting of cane. Direct costs are similar for both crops but more fertiliscr is applied to sugar beet than to cane. Other overheads arc greater for sugar beet. This is partly due to heavier transport costs (the sugar cane on theestates iscloscr

At the request of the industry in Jamaica Mr. Morgan Rees has recommended a uniform

t Report of the Sugar Industry Enquiry Commission, 1966. Jamaica. (Kingston, October 1967). SyStCm-UnfOrtUMtCly it was not fully in operation in 1967.

SUGAR BEET OR SUGAR CANE 127

to the factory than is sugar beet) and partly to an allowance for rent on English farms. The sugar companies in Jamaica own their land and such "landlords" expenses as they incur appear under headings such as labour or machinery.

It will be Seen that the yield of cane per acre is twice that of sugar beet. I t takes ten tons of cane however to produce a ton of sugar compared with only eight tons of sugar beet. On balance therefore, cane produces 3.14 tons of sugar per acre compared to 1.97 tons from sugar beet. Tabk 2 ComprPtive corb per ton of refbed sugar (cultivations, harvesting and delivery to factory)

SUGAR CANE SUOAR BEET

€ s. d. f 5. d. Labour 23 I 5 2 10 10 0 Machinery 5 10 II 7 17 6 Direct costs 3 10 4 6 1 2 6 Other overheads 3 8 8 10 I S 0

TOTAL €36 5 I €35 IS 0

Costs per ton of sugar are given in Table 2. As mechanisation has made more progress on beet in recent years it is not surprising more is spent on machinery and less on labour than for cane. The totals for cultivations and harvesting are, however, nearly the same for both crops--f36 5s. Id. per ton of sugar for cane and f35 15s. Od. for sugar beet.

I t is of interest to see whether the relative position of these two crops has changed in recent years. Table 3 gives a comparison with 1954 and 1961. The cane costs quoted in this table (prepared by the Sugar Manufacturers' Association) are not entirely comparable with those already quoted in Tables 1 and 2.. They provide, however, a consistent series and show clearly the changes that have occurred in the last eleven years. The costs are dissected in two alternative ways:

(a) Wages and Other Costs and (b) Cultivations, Harvesting and Delivery and Overheads.

Tabk 3 Cost of rr&Kd sqpr per ton 15W-fS

I954 1961 I965

Sugar cane : € s. d. (a) Wpoes 14 10 0

Other costs 8 5 0 (b) Cultivations 8 5 0

Harvesting and delivery 6 14 0 Overheads 7 1 6 0

TOTAL €22 I 5 0

€ s. d. 18 5 0 12 14 0 8 1 7 0 9 8 0

I 2 14 0

€30 19 0

€ s. d. 19 7 0 I S 3 0

9 1 9 0 -0

14 2 0

€34 10 0

Sugar Beet: (a) Warn I 7 0 0

Other costs 24 I 4 0

Hamestingand delivery 14 9 0 Overheads 7 1 0

(b) Cultivations 2 r o

I 2 6 0 25 4 0 I 8 I I 0 I I 19 0 7 0 0

10 10 0 25 5 0 16 17 0 10 I I 0 8 7 0

TOTAL €41 14 0

Sugar per acre (tons) sugar cane 3.28 Sugar Beet 1.41

€37 10 0 €35 IS 0

3.01 1.82

3.14 I .97

The Sugar Manufactured Association estimates are slightly lower. mainly because they omit depreciation and allocate overheads differently.

128 FORD STURROCK

Between 1954 and 1965, costs per acre have increased in Jamaica by nearly 50 per cent. As sugar yields per acre have hardly changed in this period the costs per ton of sugar have also increased about 50 per cent from €22 15s. to €34 10s. In England, costs per acre have increased by only 20 per cent and because the yields have increased by 40 per cent, the costs per ton have actually fallen from €41 15s. to €35 15s. The most striking change in England is in the cost of labour. Although wage rates have increased by 85 per cent, man hours per acre have fallen by more than half. In consequence, labour costs per acre in 1965 are slightly lower than in 1954. As yields have increased, the cost of labour per ton of sugar has declined sharply from €17 to €10 10s.

To summarise, the changes in cost per ton are as follows:

Sugar cane (Jamaica) €22 I5 0 €34 10 0 Sugar beet (England) €41 14 0 €35 15 0

I t is thus obvious that in the space of eleven years, the cost of producing sugar from beet has fallen from almost twice that of cane to near equality.

Costs so far refer to growing beet and cane and delivering it to the factory gate. We must now deal with the processing of the raw material. When it arrives in the factory, the cane is crushed by rollers, and the juice released is purified, concentrated and crystallised into raw sugar. This is the form in which it is shipped in bulk to the U.K. and other countries. It is then refined into white sugar ready for sale to the consumer. Sugar beet is processed in factories managed by the British Sugar Corporation. Apart from the fact that the beet is sliced instead of being crushed when it arrives in the factory, the process of manufacture is broadly similar for the two crops. Unfortunately neither the B.S.C. nor the privatecompanies refining sugar in the U.K. publish costs. It is, however, possible from Jamaican data to make an estimate of the costs of processing and refining in England to the point where white sugar is available in bulk ready for packaging and distribution to the trade.

1954 1965

Table 4 Estimated total cost of sugar production

PER TON OF S U G A R SUGAR CANE SUGAR

€ f Cultivations and harvesting (Tabk 2) 36 36 Process to raw sugar 10 9

I Transport and loading 2 t

I I Freight to U.K. 34 Rchc to white sugar I I

€63 €5 7

- - - - -

It will be seen in Table 4 that processing and refining is estimated at €27 per ton for sugar cane and €21 for sugar beet. The last stage-refining to white sugar in the U.K.-is common to both and any error of estimation will not affect the comparison. The first stage of processing cane or beet to raw sugar is fairly similar in both cases. There are, however, reasons for considering that processing in the U.K., if efficiently conducted, should cost less than in Jamaica. The British factories have on average 60 per cent more output than those in Jamaica.. As there are undoubted economies of scale, these should more than compensate for higher wage costs in Britain. There is also the fact that much of the beet in

wen factore .in Jamria produce approximately 500.0W tons of sugar. Eighteen Eigh actoria in Britain pruducc 800,000 tons of sugar.

SUGAR BEET OR SUGAR CANE 129

Britain is processed and refined into white sugar in one continuous process. This should provide economies in transport and handling. In addition, a Jamaican factory has to handle 10 tons of cane to obtain a ton of sugar compared to 8 tons of beet here.

There is a further factor-the value of by-products which should be deducted from manufacturing costs. In Jamaica, some of the molasses is made into rum; the remainder is sold for livestock feed or is exported. The price of molasses is variable but taking one year with another, the net value should not exceed f 2 or f 3 per ton of sugar produced. Sugar beet also produces molasses, much of which is added to the pulp to produce a feedingstuff. The rest is used for industrial purposes. The cost of drying and marketing pulp is not known but the net value after deducting these costs might amount to f 4 per ton of sugar. On balance, the net procecds from by-products is comparatively small with a possible balance in favour of sugar beet.

One final point to be taken into account is the cane grown by the farmers. Evidence was produced to show that their costs were similar to the estates. Judging by the contract price accepted by farmers, it seems possible that their costs may be fractionally lower. This advantage if any to cane can, however, be set against the possible advantage to beet of more valuable by-products.

The final conclusion is that beet costs f 6 less a ton of sugar than cane-the same for cultivations and harvesting and f 6 less for transport and processing. Some of the costs of manufacture are estimates but any error seems unlikely to upset the conclusion that sugar from beet grown in England now costs about the same and probably rather less than sugar from cane grown in Jamaica.

I t should be emphasised that these are cosfs of production. Each of the agents in the process-the farmer, the manufacturer, the shipper and the distributor will expect in addition a return for his efforts. The prices at each stage thus depend on supply and demand and partly on the price; set by the British Govern- ment for Commonwealth sugar and for beet grown by British farmers. The balance of advantage can thus be shifted arbitrarily from one crop to the other by official action. This article is, however, concerned with the costs that lie behind these prices to discover whether either crop has a fundamental advantage over the other as a source of sugar.

It has been shown that sugar beet in England has for the first time become competitive with sugar cane in Jamaica. Is the balance of advantage likely to shift in future years? In England, the amount of labour used in beet production has fallen from 156 to 72 man hours per acre. This is a large and spectacular change in quite a short period.

Man hours per acre: 1953 1965 Cultivations 83 47 Harvesting and loading 73 25

156 72 - -

- - Further economies are possible but inevitably they will become steadily smaller as the totals shrink in size. The fall in harvesting labour (from 73 to 25 hours) is due to the introduction of mechanical harvesters. In theory, the latter figure could be halved with the proper team and equipment. The other advance to be expected is in hand singling. Improved mechanical methods or a satisfactory monogerm seed could reduce the total for cultivation by about one-third. Large fields and larger implements could produce some saving in field cultivations but with higher costs for machinery. Some slight increase in yield per acre may be

J

130 FORD STURROCK

possible with better seeds and cultivations but not on the scale achieved in the past ten years. On the contrary further mechanisation or the use of monogerm seed might depress sugar beet yields slightly. The application of fertiliser is probably near optimum for beet and this is also true of sugar cane on the estates.

There is thus some scope for cutting the costs of sugar beet. If, as seems possible, labour were reduced by half, this could lower costs per ton of sugar by €5 less the cost of extra machinery. This appears to be about the limit unless the plant bmder can produce some markedly superior strain of beet.

With sugar cane, there is ample opportunity for labour saving. For cultivations, large tractors and implements a n already in use. The lifting of cut cane is partly mechanised but the use of complete harvesters has been bi3Med by the Govern- ment under pressure from the trade unions. It is likely, however, that this restriction will be relaxed. Even so, some years will elapse before suitable machines are selected and procured. One factor that hinders a rise in labour productivity is the lack of versatility in workers compared to their British counterparts. Cane cutters for example will not load and loaders will not cut cane. This hampers the field manager in moving surplus labour from one task to another. A change in the attitude of workers could thus brin about a rise in productivity. Un-

is heavy unemployment on the island and a reasonably generous Commonwealth sugar price allows present methods to continue. It may well be that the large estates will not succtcd in lowering their costs to any large extent. It is indeed possible that luge estates of up to 10,ooO acres are above the optimum in size and will eventually be succeeded by 5@0 or 1,OOO acre units large enough to carry mechanical equipment but small enough to avoid some of the overheads carried by the estates.

One final point is the extent to which Jamaican sugar is competitive with other cane producing countries. Forty years ago, West Indies sugar was amongst the cheapest in the world. By contrast, Queensland sugar producers using expensive white labour for cutting cane had high costs and the industry seemed hopelessly uneconomic. Now the position is reversed. Two factors amongst others have brought about this change-the mcchanisation of harvesting in Australia and an improvement in the sugar content of cane. Better varieties mean that 7 tons of cane produce a ton of sugar compared with 10 tons formerly. Although Australian growers refuse to disclose data it is believed that their costs of production per ton of sugar are now some 30 per cent less than in Jamaica. In Cuba, similar improvements are taking place. So far, the improvement of sugar content has eluded Jamaican growers-the hot climate which encourages the crop to continue growing during harvest may be an insuperable barrier.

fortunately progress in reducing labour sta d is likely to be slow so long as there

The conclusions to be drawn are briefly as follows: 1. A comparison between sugar beet in England and sugar cane in Jamaica

shows that contrary to what might be expected the cost per ton of sugar was approximately the same for both crops in 1965. In 1954, the cost per ton of sugar of cultivating and harvesting k t was twice as high as for cane. This gap in costs between the two crops appears to have closed in the past eleven years. In the past eleven years costs have increased substantially in Jamaica due to higher prices and wage rates. As there has been little increase in yields and only a moderate increase in labour productivity, this has led to substantially higher costs per ton of sugar. In England by comparison, yields have increased and the use of mechanical harvesters and other aids have increased the productivity of labour

2.

3.

4.

SUGAR BEET OR SUGAR CANE 131

substantially. In consequence, the cost per ton of sugar has declined in spite of a substantial rise in wage rates and other unit prices. There are opportunities to reduce costs of production in both crops. The potentialities for sugar cane at the moment are somewhat greater because the harvesting has not yet been mechanised. Nevertheless, progress in reducing costs in Jamaica is likely to be slow. It Seems probable therefore that sugar beet in England will continue to be competitive with Jamaican sugar cane for some time to come. The conclusions refer to sugar cane in Jamaica. It seems reasonable to believe that conditions are broadly similar in other parts of the West Indies and Guyana.

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