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The Australian sugar industry is one of the most vital industries to Australian agriculture as it is the second largest raw sugar exporter in the world behind Brazil. Almost all of the Australian sugar (95%) is produced in Queensland with about 5% being produced in northern New South Wales. According to the Australian Sugar Milling Council, “There are approximately 4400 cane farming entities growing sugar cane on a total of 380,000 hectares annually, supplying 24 mills, owned by 7 separate milling companies. The vast majority of cane farms are owned by sole proprietors or family partnerships. The mill ownership structures are a combination of publicly owned entities, privately held companies limited by guarantee, and co-operatives.” However, the in the 2017/18 season, the harvest area was expanded to 410,000 hectares, significantly above the 10 year average of 380,000 hectares. The 40% increase in the price of sugar over the last 3 years led sugar cane producers to increase production.
The sugar industry is especially important for Australian trade as approximately 80-85% of the sugar produced in Queensland is exported, which brings in over $2 billion annually to Australia. The production from the New South Wales area is mainly refined and used locally in the domestic market. Sugar exports for 2016/2017 exceeded initial estimates to reach 3.9 million MT due to favorable yields and changes in the international market. The Korea-Australia free trade agreement removed a 3% tariff on raw sugar imported into Korea, which evened the playing field for Australia, allowing them to export more to Korea. Additionally, the Japan-Australia Economic Partnership eliminated a tariff on raw imported sugar, which proved beneficial for Australian exports. Australian exports to the Chinese market are also expected to increase over the next few years due to increased market demand.
The Australian sugar industry has undergone some significant changes in the last 15 years that are still not completely settled. Before 2006, a company called Queensland Sugar Limited (QSL), was in charge of export sales of raw sugar directly to refiners in other countries, essentially controlling the marketing of the entire Australian export industry. In 2006, the Australian government deregulated the Queensland sugar industry, which forced QSL to negotiated voluntary contracts with the mills to market their raw sugar for exports. Every mill has signed contracts with QSL as they have had long, trusting relationships with them except for a company called Wilmar that threatens to disrupt the industry.
Wilmar bought 8 sugar mills in 2010 and 2011 that collectively produce more than half of Australia’s supply of sugar. Instead of using QSL to market their sugar, Wilmar has decided to sell all of its sugar through its own trading arm, which is completely legal under the deregulation in 2006. However, this decision has caused a lot of backlash that has affected Australian sugar cane growers, politicians, as well as QSL and Wilmar.
The growers, who sell their sugar cane to the mills, are upset because of the price differences between Wilmar and QSL mills as Wilmar is paying $104 per ton less than QSR. Additionally, as the arguments drag on, up to $1 billion worth of sugar cane could be waiting to be crushed and sent to market as cane supply agreements between growers and mills are stalled. This issue is making its way into the political sector as the Liberal-National Party, who is traditionally supported by the sugar cane growers, needs to find a good outcome of the issue soon. Growers are becoming increasingly impatient as they want to have a say in who markets their sugar as it has significant economic impacts. This issue also poses a threat to foreign investment due to the uncertainty over the industry as well as potential government regulation. New regulations from the government could discourage foreign investment as it could set a precedent for the government to resolve disputes in a supposedly “deregulated” market with more regulations.
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