La rentabilité de la recherche sucrière: Jean Antoine Tonta

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1 La rentabilité de la recherche sucrière: Jean Antoine Tonta 12 juillet 2011

2 CONTENTS Overview of the economic evaluation of research Industry statistics ( ) Methodology (cost-benefit analysis) Results Comments/recommendations Concluding remarks 2

3 HISTORICAL FACTS Agricultural research Sumerian times (5000 B.C) Organized agricultural research Economic evaluation of agricultural research 1850 s 1950 s 3

4 NEED FOR ECONOMIC EVALUATION Activity consuming increasing amount of public funds. Competed with alternative uses of public funds. But how to evaluate? 4

5 PIONEER WORK (1950 s) ex-post analysis Schultz (Nobel prize in 1972) Griliches Between 1953 and 1998, some 228 studies were published (< 10% for the African continent) 5

6 ECONOMIC EVALUATION (to-date) Ex-post Cost-benefit analysis Econometric methods Feedback to scientists Accountability to stakeholders Justification for more funds Ex-ante Cost-benefit analysis Planning and priority setting 6

7 INDUSTRY STATISTICS SINCE 1953 Area harvested Cane and sugar yields Sugar production Sugar prices Cost of production R & D costs 7

8 Area harvested ha x Miller- and corporate planters Small- and large-scale planters Total

9 Cane yield (Island average) 100 t ha

10 Cane yield by planter category 100 t ha Miller- and corporate-planters Small- and large-scale planters

11 Sugar yield (Island average) 11 t ha

12 11 Sugar yield by planter category t ha Miller- and corporate-planters 2 Small- and large-scale planters

13 Sugar production (Island) t Miller- and corporate-planters Small- and large-scale planters Island 13

14 Record-breaking Variety mix Year M 13/56 S 17 M 93/48 Others Sugar production % 23% 16% M 377/56 9% Cane productivity % 16% 9% M 377/56 14% Sugar productivity % 8% 5% M3035/66 & R % 14

15 Average sugar price ( ) MUR t rupee Nomimal rupee

50000 MUR t -1 Sugar price by planter category 45000 40000 35000 Miller- and corporate-planters Small- and

16 50000 MUR t -1 Sugar price by planter category Miller- and corporate-planters Small- and large-scale planters Export duty ( )

17 MUR ha -1 Cost of production (miller- and corporate-planters) rupee Nomimal rupee Source: Mauritius Chamber of Agriculture 17

18 R & D costs ( ) 2009 rupee Nomimal rupee MUR m Source: MSIRI 18

19 PROJECT Implemented in second semester of 2009 Aimed at determining the IRR for research undertaken since

20 Methodological approach Cost and benefit analysis technique - with and without research focus Internal rate of return (IRR) as a measure of profitability IRR calculated for Island Miller- and corporate-planters Small- and large-scale planters 20

21 Steps in methodological approach Split time horizon into shorter ones. Determine without research yields Adjust yields for year effects. Calculate benefit flow (10 years). Calculate IRR. 21

22 Splitting of time frame A B C D E F G H I Progperiod R&D investments ( 5 yrs) Benefit flow period (10 yrs) 22

23 With and Without research yields Fate of cane and sugar yields in absence of research Increase? Decrease? At what rate? Study assumed Rates of decline of 1.0, 1.5 and 2.0 % per annum 23

24 Why choose decline? Sugar yield t ha -1 Revolutionary phase Evolutionary phase New varieties M 3035/66 R 570 Progress in agronomy

25 With and without research yields (adjusted for year effects) 9 Sugar yield t ha Actual 1.0% dec

26 Calculation of annual benefits [ Difference in sugar yield between with and without research ] X [ Sugar price ] X [Area harvested] less Costs R & D Incremental (area harvested) - Harvest and transport - Milling - Others, if any 26

27 IRR calculation Matching R & D investments (years 1-5) against benefits (years 6-15) A programme-period is profitable if calculated IRR is > 10%. The 10% is an interest rate representing opportunity cost. 27

28 RESULTS 1. Island 2. Miller- and corporate-planters 3. Small-and large-scale planters 28

29 Main variables (Island wide) Period Avg area harvested R & D costs Avg sugar price Code R & D ha X 10 3 MUR x 10 9 t -1 MUR (x 10 3 ) Span constant 2009 MUR A B C D E F G H I

30 R & D Mix of ex-ante and ex-post analyses Assumptions for ex-ante part ( ) Total area to decrease to ha Cane yield same as for 2010 Extraction of 10.26% Sugar price to increase to MUR t -1 R & D cost same as for

31 Incremental sugar (Island wide) Period Incremental sugar output t x 10 3 ) Code R & D Rate of decline span 1.0% 1.5% 2.0% A B C D E F G H I

32 Ratio (Inc gross benefits/r& D costs (Island constant 2009 rupee Code R & D costs Rate of decline MUR billion 1.0% 1.5% 2.0% A B C D E F G H I

33 Yields (Island wide) Period Yield (t ha -1 ) Index Code R & D Cane Sugar Cane Sugar Span A B C D E F G H I

34 IRR % (Island wide) Period Internal rate of return (IRR%) Code R & D Rate of decline Span 1.0% 1.5% 2.0% A B C D E F G H I

35 Main variables (Miller..) Period Avg area harvested R & D costs Av g s u ga r p r i c e Code R & D ha X 10 3 MUR x 10 9 M U R ( x ) t - 1 Span c o n s t a n t M U R A B C D E F G H I Miller- and corporate -planters contribute d 73% of R & D costs 35

36 Incremental sugar (Miller- ) Period Incremental sugar output t x 10 3 ) Code R & D Rate of decline Span 1.0% 1.5% 2.0% A B C D E F G H I

37 Yields (Miller- ) Period Yield (t ha -1 ) Index Code R & D Cane Sugar Cane Sugar Span A B C D E F G H I

38 IRR % (Miller- ) Period Internal rate of return (IRR%) Code R & D Rate of decline Span 1.0% 1.5% 2.0% A B C D E F G H I

39 Main variables (Small- and ) Period Avg area harvested R & D costs Av g s u ga r p r i c e Code R & D ha X 10 3 MUR x 10 9 M U R ( x ) t - 1 Span constant 2009 MUR A B C D E F G H I Small- and large- scale p l a n te rs contributed 27% of R & D costs 39

40 Incremental sugar (Small- ) Period Incremental sugar output t x 10 3 ) Code R & D Rate of decline Span 1.0% 1.5% 2.0% A B C D E F G H I

41 Yields (Small- ) Period Yield (t ha -1 ) Index Code R & D Cane Sugar Cane Sugar Span A B C D E F G H I

42 IRR % (Small- ) Period Internal rate of return (IRR%) Code R & D Rate of decline Span 1.0% 1.5% 2.0% A B C D E F G H I

43 R & D [NEW SCENARIO] New assumptions for ex-ante part ( ) Initial New Cane yield Same as for 2010 Increase by 1% yr -1 Extraction rate 10.26% 10.37% Others unchanged 43

44 R & D INTERNAL RATE OF RETURN (IRR%) Rate of decline 1.0% 1.5% 2.0% Island (I) Island (New) Miller-... (I) Miller-... (New) Small- and... (I) Small- and (New)

45 IRR % (Summary- ) Period Internal rate of return (IRR%) Code R & D Rate of decline of 1.5% Span Island Miller- Small- A B C D E F G H I

46 Summary: relative yield performance Miller- Small CANE A B C D E F G H I A B C D E F G H I Miller- Small SUGAR A B C D E F G H I A B C D E F G H I 46

47 Summary R & D programmes had been profitable, despite - a reduction in area harvested (500 ha per year since 1966) - a lowering of the sugar price (real terms) since a long-term decline in sugar productivity Small- and large-scale planters gained more the R&D programmes. 47

48 Poor sugar productivity (miller- ) Fully known causes Climate Mill centralization Mechanization Questions? Is mix of EML varieties appropriate? Are there too many Early varieties? [13/22] Are present varieties less rich than past ones? 48

49 Recommendations 1. To investigate from a holistic perspective, the issue of declining sugar yield. - centralization, mix of varieties, other variety related aspects, etc 2. For feedback and accountability purposes, to assess ex-post IRR of R & D prog. on a more frequent basis years after completion 49

50 Recommendations (contnd) 3. To undertake ex-ante analysis of future R & D programmes. - justification for funds, enhanced priority setting 4. To carry out economics of new technologies. - fine tuning of R & D assessments and others 5. To carry out effectiveness analysis (EA). - Past R & D [Improve productivity/reduce cost of prodn?] - EA to allow comparing targets to achievements 50

51 Conclusions 1. With the completion of this study, at least two pertinent objectives of research management had been achieved, i.e. feedback to scientists and accountability to stakeholders 2. The recommendations made will not only lead to enhanced research management but will also help towards a more sustainable sugar industry. 51

SUGAR INSURANCE FUND ACT

Revised Laws of Mauritius SUGAR INSURANCE FUND ACT Act 4 of 1974 1 June 1974 ARRANGEMENT OF SECTIONS SECTION PART I PRELIMINARY 1. Short title 2. Interpretation PART II THE FUND, THE BOARD AND THE COMMITTEE