Things still tough for sugar cane growers

2007-11-16 00:00

SUGAR cane growers continue to face tough economic conditions, a survey of large-scale grower costs of production has revealed.

According to the Canegrowers' survey, the average annual rate of increase in the recoverable value (RV) price index (+4,3% pa) from 1995 to 2005, was lower than the rate of increase of actual surveyed production costs (+6,8% pa), as well as the average increase in farming requisite prices (+9,5% pa) as reported by the national Department of Agriculture.

The average annual increase in the Consumer Price Index for the period was 6,1%.

Growers are paid for their sugar cane according to the quality of the cane delivered to the mill.

A preliminary investigation of the 2006/07 grower costs (currently being surveyed) suggests that this cost-price squeeze will prevail, despite an increase in the 2006/07 RV price.

The relatively strong 2006/07 RV price has not been sustained and the August 2007 RV price is 3,5% below the final 2006/07 RV price.

The survey results show that the cane price has not kept pace with inflation or production costs during the past 11 years.

And as price takers in the market, there is little that cane growers can do to increase the RV price paid to primary producers.

The declining revenue situation has caused pressure on the growers' viability.

While continuous improvement of efficiency has alleviated some of this pressure, further continual increases in input prices, without an improvement in RV prices, will continue to weigh heavily on the sustainability of the cane growing sector.

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