On September 8th 2014 the Belize Sugar Cane Farmers Association and BSI/ASR resumed negotiations on the new commercial agreement for the purchase and sale of sugar cane. On that date BSI/ASR walked into the meeting and presented to the BSCFA a completely new commercial agreement.

 

When we spoke to representatives of both entities on that day they were basically tight lipped about the contents of the new agreement in order not jeopardize the negotiations. Today though, in hope of disseminating the right information to cane farmers BSI/ASR decided to elaborate on the contents of the new agreement which according to Financial Director, Belizario Carballo Junior, includes parts of what was in the new previous agreement and some new elements.


Screen_Shot_2014-09-24_at_7.52.44_PMBelizario Carballo- Financial Director BSI/ASR


“For that to occur there has to be some coordination there has to be a dialogue and there has to be that coming together and for that purpose we are reaching out to the farming community to start the process of informing them of what it is in terms of the negotiation out of the new agreement.  The first bit is the issue of the, in terms of what was there of what we need to clarify more is this whole issue of purchase and sale of cane because that seems to have been, misconception that some people had which we don’t know why it came about and we want to make sure we address it in this new agreement.  We want to ensure that we are very clear as to what he business that we are in is all about.  BSI is in the business of producing sugar we are a sugar company and for that purpose we buy cane from farmers, the farmers own the cane until they deliver to the factory and they sell the cane to BSI then the cane becomes BSI so ones the cane is weight at the scales and enters the factory then we are responsible to pay for that cane and  the method of payment and the timing of those payment are set out in those agreements and so that is something that we want to ensure that it was there before but we want to ensure that it was clarified because we feel that is an issue that needs to be clarified.”


The new proposed agreement also sets out how the price of cane will be determined. Along with that comes the controversial payment per ton of bagasse. But don’t hold your breath because BSI/ASR did not have a change of heart in the quantum payment which remains at a propped 51 cents per ton of the byproduct.


Belizario Carballo- Financial Director BSI/ASR


“One big element of the previous agreement that is being retained in this agreement is the price calculation because the price is based on the calculation of what we call the nestric value which is essentially gross revenue less those expenses that has been incurred in taking the sugar from the factory to the market because what we share with farmers if the value of the sugar ones it is produced at the mill, so once the sugar has been produced at the mill we try to quantify that value and that value we called it neftrif value, now the way that value is calculated in the agreement is by taking the gross revenue in other words what you actually invoice the buyers for and you deduct those cost that you incur in getting the sugar from the factory to the market which essentially is freight and handling and once you arrive at that value 65% goes to the farmers for payment of cane and then35% goes to BSI, from BSI 35% BSI then has to meet all of its cost of producing that sugar and so it is not a case where we are sharing profits because it is not deducting any of BSI costs when we arrive at that value and that is really the value of the sugar ones it is produced at the mill and from our 35% we have to meet all of our costs incurred in producing that sugar then the farmers their 65% is for the payment of cane so that formula is essentially being retained in the new agreement.  In the new agreement however we have added to that price the payment for bagasse and the payment for bagasse will be based on the formula that we have previously presented which essentially seeks to value the amount of fiber that is part of the bagasse that is used to generate electricity that is sold to BEL so that is a formula that calculates the values that amount of fiber and using 2013 crop as an example that worked out to be fifty one cents, but it’s not really fifty one cents as such it is actually a formula that is being proposed which will vary from crop to crop depending on how much cane there is how much fiber comes in the cane and the cane price those are the main determinants of that formula that will impact on the payment content for bagasse but that will become part of the formula to arrive at the price for cane that is being retained”


We must also note that for the first time since the negotiations commenced BSIU/ASR presented in black and white an audited financial report of BELGOGEN to the BSCFA.


Belizario Carballo- Financial Director BSI/ASR


“Last week we sent to the Association audited financials of BELCOGEN which sets out or which confirms what we have told them before that BELCOGEN is yet to turn a profit in which for its four years of operation is yet to make a profit and so it really means that BSI who is the investor in this project, who invested 130 million dollars Belize to bring about BELCOGEN is not yet realizing one cent out of this business and so it is in that context that BSI is proposing this payment formula, it is one that we could justify, it appears fifty one cents to be small but that fifty one cents translates to half a million dollars Belize.”


Carmelita Perez – Reporter


“Was this report presented to BSCFA before?”


Belizario Carballo- Financial Director BSI/ASR


“This report was just presented to the BSCFA last week but the same information was presented to them before what we have now done is simply presented an audited report essentially confirming by our extension auditors that the information that we have previously provided to them is correct and is in accordance with our audited financial statements.”


Carmelita Perez – Reporter


“Do you believe that this will make a difference when it comes to the bagasse negotiations?”


Belizario Carballo- Financial Director BSI/ASR


“Well, at least we would like to put this point to rest because the biggest point for us is that BELCOGEN is yet to turn a profit and we have been expressing that to the BSCFA, we have shared financial information to support that but still there is that credibility issue and so to address that matter we have requested from our external auditors a specific audit of the financial information that we presented to the BSCFA and that report has been submitted to them.”


As we have reported before, currently there is no agreement between both entities and while negotiations have been taking place for the past two years there seems to be a never ending battle between the miller and the producer as they can’t reach to terms when it comes to the quantum of bagasse.

 

It’s left to be seen if cane farmers will accept the new proposal tabled by BSI/ASR since it holds no change when it comes to the payment of bagasse. We will have more on the new proposed commercial agreement later on in the newscast.

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