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NOTES ON CANE PRICING Emile A. Finlay 16 July 2010

NOTES ON CANE PRICING Emile A. Finlay 16 July 2010. CORE SAMPLERS. SOME ACHIEVEMENTS OF THE CORE SAMPLING METHOD OF CANE TESTING AND ANALYSIS…. More Accuracy in Cane Testing A Fairer method of Establishing Individual Cane Quality Cane Testing Independent of Milling Operations

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NOTES ON CANE PRICING Emile A. Finlay 16 July 2010

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  1. NOTES ON CANE PRICING Emile A. Finlay 16 July 2010

  2. CORE SAMPLERS

  3. SOME ACHIEVEMENTS OF THE CORE SAMPLING METHOD OF CANE TESTING AND ANALYSIS… • More Accuracy in Cane Testing • A Fairer method of Establishing Individual Cane Quality • Cane Testing Independent of Milling Operations • Improvements in Factory Quality and Process Control • More Accuracy in Material Balances

  4. Taken from “Extension Newsletter” Vol. 10, No. 1 January 27, 2010 SIRI

  5. … the objectives of a cane payment system should be to provide an incentive to: • increase the total quantity of cane produced; • increase the quality of the cane supplied; and to • improve the performance of the factories Taken from the Report of the Sugar Industry Enquiry Commission (1987/88) JAMAICA; June 1988

  6. SUGAR CANE MILLED IN JAMAICA 1967-1987 2009 X Source: Sugar Industry Enquiry Commission (1987/1988) JAMAICA; June 1988

  7. QUESTIONS .... • Why are yields trending downwards??? • Why are the numbers of Cane Farmers decreasing??? • Do we want to correct these trends??? • What needs to be done??? • Are there any examples from overseas that we can follow??? • … ??? • … ???

  8. CANE PAYMENT SYSTEMS… • Play a pivotal role in establishing incentives for Growers • Play a pivotal role in establishing incentives for Millers • Heavily influence the incentives to improve technical efficiency • Have far reaching implications for investment decisions • Can provide incentives to expand production Taken from “Cane Payment Systems” by Martin Todd and Gareth Forber, International Sugar Journal 2005, Vol. 107, No 1277

  9. Indicative Incentives for Growers and Mills (in different industry cane payment systems) Taken from “Cane Payment Systems” by Martin Todd and Gareth Forber, International Sugar Journal 2005, Vol. 107, No 1277

  10. The Sugar Act of 1984 introduced a revenue-sharing scheme for growers and mills. Under the scheme, growers receive 70 percent of the revenue from domestic and export sales of sugar and molasses, and mills earn the remaining 30 percent Graph Plotted from figures obtained from: Proceedings of the Fiji/FAO 1997 Asia Pacific Sugar Conference: Country Report on Thailand

  11. WORLD SUGAR PRODUCTION Source: Südzucker

  12. BAGASSE AS FUEL *For Bagasse, Gross Calorific Value may be determined from: GCV = 8280 – 21.6 x s – 82.8 x w BTU/lb [assuming s % sucrose in bagasse & w % moisture in bagasse] Taken from: HUGOT, Emile, Handbook of Cane Sugar Engineering, 2nd edition, Elsevier Publishing Co, 1972

  13. BAGASSE AS FUEL …an examination of Cost Avoided for Factory A • Factory A, 1979: Fuel Consumption Rate = 355 Litres Oil / T sugar • Factory A, 2008: Fuel Consumption Rate = 46.77 Litres Oil / T sugar • Factory A saved over 300 Litres of oil per tonne of sugar produced by using bagasse as fuel instead of purchasing fuel oil. • Assuming J$50 per litre of fuel oil, Factory A saved over J$15,000 per tonne of sugar produced in 2008.

  14. BAGASSE AS FUEL …an examination of Cost Avoided for the industry • Average (All Factories), 1979: Fuel Consumption Rate = 121.71 Litres Oil / T sugar • Average (All Factories), 2008: Fuel Consumption Rate = 51.61 Litres Oil / T sugar • On average, factories saved about 70 Litres of oil per tonne of sugar produced by using bagasse as fuel instead of purchasing fuel oil. • Assuming J$50 per litre of fuel oil, factories on average saved approximately J$3,500 per tonne of sugar produced in 2008.

  15. BAGASSE AS FUEL …a possible new profit centre from electricity/power generation and sale Images taken from “Cogeneration for Export”, (Biotherm Limited)

  16. JAMAICA’S NATIONAL ENERGY POLICY Vision: “a modern, efficient, diversified and environmentally sustainable energy sector providing affordable and accessible energy supplies with long-term energy security and supported by informed public behaviour on energy issues and an appropriate policy, regulatory and institutional framework” Taken from Jamaica’s National Energy Policy 2009-2030, Ministry of Energy and Mining, October 2009

  17. JAMAICA’S NATIONAL ENERGY POLICY cont’d • Objective of Environmental Sustainability • Significantly increased use of economically viable renewable energy sources • Goal of realizing Jamaica’s Energy Resource Potential through the development of renewable energy sources • Recent Accomplishment: Drafting of a Cogeneration Implementation Strategy with special focus on the sugarcane industry utilizing bagasse as one of the main sources in the energy mix Taken from Jamaica’s National Energy Policy 2009-2030, Ministry of Energy and Mining, October 2009

  18. JAMAICA: PRIMARY ENERGY MIX - 2009 Taken from: WRIGHT, Raymond M. Jamaica’s Energy Future. Presentation at a Discussion Forum at the Auditorium of the Petroleum Corporation of Jamaica, July 1, 2010

  19. CHALLENGES & OPPORTUNITIES • A major Challenge now is to boost cane and sugar production in a real way. (One way to successfully address this has been identified). • The Opportunity for systematically optimizing production levels for Sugar, Ethanol, Cogeneration, Electricity, Rum and Other Products is currently very real and will grow. • An Appropriate Framework for dealing with points 1) and 2) above is essential. This will include a pricing strategy – the successful implementation of which will have clear benefits for both farmers and manufacturers. • Time is Flying… Steps need to be put in place quickly to counteract the immediate challenges and take advantage of emerging opportunities.

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