Grower protection against monopolies fails, fix outlined in Senate submission tendered today

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JOINT PRESS RELEASE: 3 November 2014

Peak grower groups CANEGROWERS and ACFA today tendered a powerful joint submission into the Senate enquiry into Australia’s sugar marketing systems, outlining robust and workable strategies to rectify the clear market imbalance in favour of the mill which has now been created. 

CANEGROWERS and ACFA have united strongly on this issue, saying a fix is needed as a matter of priority because of the far-reaching and serious consequences to which growers would now be exposed.

At the top of this list is a loss of rights to choose how their sugar is marketed and the loss of transparency into the operation of the company which markets their sugar – both issues have the potential to rob the State’s growers of hundreds of thousands in profits, and those profits redirected from growers pockets straight into the mills coffers.

The imbalance was created when large millers Wilmar, MSF Sugar and Tully Sugar gave notice to QSL of their intention to withdraw from industry-owned and supported marketing arrangements at the conclusion of the 2016 season. The actions by the mills had the unintended consequence of removing the long-standing protections which have been in place since 1915, which had prevented large corporate millers from taking advantage of the clear imbalance in economic strength.

“The mill decision overturns 100 years of industry practice that recognises growers and mills as interdependent partners that share equally in the risks and rewards from the market place,” says CANEGROWERS Chairman, Paul Schembri.

“The imbalance, characteristic of sugar industries around the world, has resulted in a suite of regulations governing the commercial relationship between millers and growers in each of those countries.”

Pro-competition protection

CANEGROWERS and ACFA have hit back strongly what they describe as uninformed claims, saying theirs is not a call to restore a mandatory single desk, but a call for regulation to address market failure. They describe the changes needed as pro-competition – a way of putting in place for cane growers what other industries currently have access to through Australian legislation.

“A few vital differences in the set up of the sugarcane industry have left cane farmers additionally exposed to anti-competitive behaviour,” says ACFA Chairman, Don Murday. He explains that as sugarcane is perishable, proximity to the mill is critical. Growers in most sugarcane areas cannot choose to sign up with a nearby mill to try and secure better conditions.

“Without protection against anti-competitive behaviour, the mills have been able to effectively wrest control of the right to determine how sugarcane is priced and sold from growers. That means growers will no longer have control over the very mechanism which determines how they get paid,” says Mr Murday.

Recognition of economic interest

CANEGROWERS and ACFA are quick to point out that this is not a question of sugar ownership but the regulation of regional mill monopolies who are exerting their market power.  Mr Schembri says the long-standing arrangement by which the risks and rewards of producing sugar are shared between growers and millers (two thirds growers, one third millers) are being disregarded by the mills.  “In the absence of this protection for growers being enshrined in legislation, the mills do not have to honour this long-standing arrangement.  This is at the heart of what CANEGROWERS and ACFA say cannot be allowed to happen – the government can and must intervene to reinstate those basic protections for growers,” he says.

“The vast majority of growers have come out strongly and publically demanded that the mills be held to account and bought back in under basic pro-competition safeguards. These growers want to continue to be able to choose how to market the long-recognised two-thirds grower share in accordance with long-standing industry arrangements, which were put in place to share the risk and rewards of sugarcane producing fairly between the parties.”

CANEGROWERS and ACFA agree that this issue is the largest to face the sugarcane industry since the government first introduced legislation in 1915 to prevent this skewing of negotiation strength in favour the milling sector.  They say the underlying objective of the State and now the Federal investigations now underway is to ensure Queensland sugarcane growers continue to have confidence in the marketing of the state’s sugar.

The growing sector says this issue must be addressed as a matter of priority, just as it has been in countries around the world.

Media comment:
Paul Schembri  |  CANEGROWERS Chairman  |  0417 604 196
Don Murday  |  ACFA Chairman  |   0418 774 499

More information:
Suzi Moore  |  CANEGROWERS Communications  |  0427 641 239
Stephen Ryan  |  ACFA CEO  |  0401 002 322

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