Queensland’s sugarcane growers won a major victory for competition and fairness when the state Parliament confirmed their legitimate right to continue to have a say in how their sugar is marketed.
A crucial piece of legislation passed the Queensland Parliament in December last year that confirmed, in law, the growers’ existing rights. The bill was drafted by Katter’s Australian Party MPs and supported by the Liberal National Party Opposition and an independent MP.
Sugarcane farmers are not just paid for the raw cane they supply to the 20 mills along the state’s east coast. Their final income is calculated by a formula that takes into account the sugar content of the cane they grow (the quality of their crop) and the price the final product (the raw export sugar) attracts on the international market.
Grower involvement in that crucial sugar pricing component came under serious threat when the nation’s three biggest milling companies gave notice in 2014 that they each intended to take over the marketing of all the sugar produced at their facilities from the 2017 season – both the sugar they have an economic interest in (one-third of production) and that component which contributes to the growers’ incomes (two-thirds of production).
Up until that point the sugar had been marketed through an industry-owned not-for-profit entity, Queensland Sugar Limited (QSL), with growers playing an active role in choosing from a range of pool options.
Growers were immediately alarmed and outraged at the milling companies’ move and rallied in numbers demanding the right to choose between the millers’ proposal and QSL, fearing for their future profitability. Family farmers faced being placed in a situation where one company had complete control and could sell sugar to its own overseas partners or subsidiaries at a price below what could be achieved by an independent trader in the open world market.
“This would have opened the way for mills effectively to set themselves up as the regional monopoly marketer in their own mill districts,” said CANEGROWERS chairman and Mackay district farmer Paul Schembri.
As cut cane is a perishable product, most growers have a choice of only one mill, and mill owner, with whom to sign a cane supply agreement covering the processing of their crop. “If allowed to proceed unchallenged, this change to marketing arrangements would have allowed the mills to unilaterally put their only competition out of business, leaving the way clear for mills to set up their own marketing business in its place, with no competition,” Mr Schembri said.
Despite attempts at negotiation brokered by governments at both state and federal levels over 18 months, the milling companies would not move on their proposal. The only recourse became a legislative one and finally a bill was put before the Queensland Parliament in December 2015 containing pro-competition amendments to the Sugar Industry Act (1999).
The bill had several objectives: first, to enable growers to choose who marketed grower economic interest (GEI) sugar; second, to link the cane price to the price of sugar; third, to provide for a pre-contractual dispute resolution process, including arbitration to deal with negotiation deadlocks; and fourth, to ensure that growers would not suffer any discrimination regardless of whom they chose as the marketer of their economic interest sugar.
The parliamentary visitors’ gallery was packed with grower representatives for the late-night sitting and dozens more were tuned in to the live feed via the parliamentary website when Katter’s Australian Party (KAP) MP Shane Knuth formally started proceedings on the Sugar Industry (Real Choice in Marketing) Amendment Bill.
“The bill will improve competition in the Queensland sugar industry,” Mr Knuth explained. “It will also ensure that the mill owners are not the only marketing entity available to growers. It will ensure that growers are not forced to use mill owners as their marketing entity simply because the mills crush the growers’ cane.”
After two weeks of almost daily Queensland Government media releases opposing the bill as an attempt at re-regulation, then Opposition Leader Lawrence Springborg set the record straight, explaining that the legislation would create an environment to make deregulation work.
“It does not take the sugar industry back to the 1950s … It does not remove voluntary marketing arrangements. It does not dictate Queensland sugar must be marketed through the QSL or single desk,” he said. “It creates an environment that ensures there is some balance in an area where there may be a power imbalance.”
The bill passed 45 votes (LNP, KAP and Independent) to 43 (ALP).
The passage of this bill was a big step towards ensuring genuine competition in sugar marketing and it gave growers the confidence they needed to plan their next cropping cycle.
The process is not yet finished. Cane supply agreements, between growers and millers, that comply with the new legislation are needed in several milling districts and negotiations are continuing. CANEGROWERS expects that the process will be completed within the month for all milling areas where a new agreement is required.
CANEGROWERS is a membership organisation that represents 80 per cent of Australia’s mostly family-owned sugarcane farming businesses.