Sugar giant goes it alone- ABC Rural report

The foreign-owned company that crushes more than half of Queensland’s cane has confirmed speculation it’s already selling some of its own sugar.

Local millers have traditionally sold all their raw sugar through the marketing body, Queensland Sugar Limited.

The revelation by Wilmar International, Asia’s leading agri-business group, comes at a time cane growers are becoming increasingly concerned about a push by foreign-owned millers to bypass QSL.

Wilmar Sugar managing director, Jean-Luc Bohbot, says despite now marketing one third of Wilmar’s cane through its Singapore trading desk, it doesn’t have plans to sever ties with QSL.

But he says Wilmar won’t rule out the option in the future.

“This is an open and constant consideration, don’t think you can say in any business you don’t want to reconsider your situation,” he said.

“We are in a constant discussion with QSL to see how we can have more sugar to market.

“Today Wilmar has one third of the cane marketed directly to the destination outside of QSL. so there is always discussion to see how we can improve this marketing.”

QSL currently provides about 85 percent of Queensland’s raw sugar exports and 60 percent of its reserves come from Wilmar-owned mills in north Queensland.

Farmers are concerned that if foreign-owned millers operating in Australia begin to market the sugar themselves, it will jeopardise the future of QSL which growers have long trusted to get the best price for their sugar.

Two weeks ago, cane farmers on the Atherton Tablelands in north Queensland fell out with their Thai-owned miller Maryborough Sugar Factory over a cane supply agreement that didn’t involve QSL.

Growers were not happy with a decision by MFS to sell its sugar through the mill’s Thai-owned parent company, Mitr Phol. Instead growers chose to supply their cane to rival miller Mackay Sugar which still uses QSL.

But Mr Bohbot says despite grower concerns with foreign ownership, increasing Wilmar’s marketing capacity will mean better business and result in higher returns for cane farmers.

“We ask all our partners in Australia to sit and to discuss how we can address this issue to be in a strong position to capture the market change opportunity,” he said.

“It doesn’t make a lot of sense to disconnect cane production, processing and marketing because this is something that must work together.”

Mr Bohbot says that if the milling and marketing process was better integrated, the industry would be less likely to make bad financial decisions, such as those seen three years ago.

In 2010, QSL was unable to fulfil its export contracts after disastrous weather kept harvesters from getting onto paddocks and cane into the mills.

QSL forward-sold more sugar than it had in its reserves and was forced to buy back futures contracts at premium prices while also importing sugar from other producers.

The incident cost the industry over $100 million and some growers are still in legal disputes with QSL over the individual costs passed on to them as a result.

Despite the strain this put on the relationship between QSL and growers at the time, most Queensland cane farmers still prefer QSL to sell their sugar, rather than foreign-owned companies like Wilmar.

But Mr Bohbot says the global sugar market is transparent and growers should not be concerned with Wilmar selling their sugar.

“The industry is very concerned about transparency which is probably fulfilled by QSL today,” he said.

“But the sugar market is a transparent market. It is not QSL that is fulfilling a transparency role, it is the market that is transparent.

“Our interest is the same as the growers, we want to maximise the return.

“We want to have the maximum amount of cane to process and the best way to do this is to get the growers reaching the best price so they will invest and develop the production.

“Sugar is not a highly profitable business but a very high capital business and investments are massive.

“So to justify the continuing investment, we need to do everything possible to maximise the capacity [to get more cane].”

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