AGRICULTURE: by Patrick J. ByrneNews Weekly
Cane farmers reject sugar package
, September 21, 2002
The recently announced Federal Government's proposal for the sugar industry is likely to achieve something rare in agri-politics - united opposition to the key proposals by farmer organisations.
At stake for the government,with this heavily depressed industry, are four sugar electorates held by the Coalition. The fifth is held by independent Bob Katter.
The package proposes abolishing single desk selling of raw sugar into the domestic market, and a $150 million assistance offer.
Until 1996, farmers received a premium price for sugar sold into the domestic market, as a justifiable tariff stopped dumped sugar imports from undermining the domestic price. The world price for raw sugar is half the world average cost of production, due to high sugar subsidies and other protective measures used by the EU, Brazil, the US and Thailand.
The US Department of Agriculture predicts a 4 million tonne over-supply on world market this year, helping to continue the long-term price decline of sugar.
In 1996, the industry was partially deregulated under National Competition Policy. The tariff on imported sugar was abolished and cane growers forced to accept the world export price for sugar sold into the domestic market. The industry retained single desk selling for both the export and domestic market. The desk didn't have the power to raise the price of sugar in the markets, but it stopped Australian refineries, food manufacturers and retail chains from bidding down the price from the mills below the world price.
Deregulation has resulted in Australia being the only sugar exporting country where the domestic price is below the world price.
Now, sugar cane farmers are adamant that abolition of domestic single desk selling will destroy the industry. The government claims that this further deregulation, via changes to The Queensland Sugar Act
by the Queensland government, is needed to assist the development of new products from sugar cane.
Farmers point out that if change is necessary, it does not necessitate the abolition of single desk selling.
The key problem is that abolition of single desk selling will allow anyone to buy bulk domestic sugar, bid down the price below the world price, on-sell through a third party to a foreign buyer below the world price, and thereby destroy international single desk selling.
Further, driving the price of sugar below the corrupt world price will undermine the value of any income assistance package to the industry from government.
The $150 million package for 6,000 cane farmers is to be spread over four years. $60 million is for industry restructuring to be decided upon by regional committees. Income support will be for 12 months only.
The value of this package should be measured against the fall in the value of sugar. In 2002 the estimated value of raw sugar production is $1.35 billion, $600 million less than the $1.94 billion received for approximately the same 5.1 m tonnes of sugar produced in 1994-95 as produced in 2002.
Farmers have faced several years of low or zero incomes due to low world prices, drought, floods and pestilence.
In other words, the sugar packaged does not address the very serious short-to-medium term problems of sugar cane growers.
In contrast, the dairy industry package is worth about $1.8 billion over seven years, funded from an 11 cents/litre levy on fresh milk.
The government appears to think that the problems of the industry stem from the industry's failure to use the previous government rescue package to adequately restructure, particularly the failure to achieve farm aggregation and the exiting of small farmers.
The government appears to believe that small farmers are a key part of the problem. In fact, small farmers carry the lowest debt to income ratios in the industry, with half their income coming from off farm jobs. It is the medium-to-large farmers who carry much higher farm debts.
The government is offering a $45,000 one off industry grant to those who want to leave the industry. Sugar farms have on average dropped 40% in value. But farmers argue it is far better to have a proper industry package that returns profitability to the industry, thereby restoring farm values, and so let those who wish to leave the industry, sell their farms for a decent price, and go with dignity.
Some farmers are now calling for a more comprehensive industry package:
- A 23-25 cent/kg levy on all sugar sold into the domestic market to guarantee about $200 million per annum for farmers;
- Applying the levy to the sugar content of imported products so as not to disadvantage domestic manufacturers who use sugar;
- Maintaining single desk selling for the domestic and export market; and
- A government commitment to a mandated ethanol target content in Australian fuel, so as to ensure the longer term viability of the industry.