AGRICULTURE: by Bill MicolaNews Weekly
Deregulation and low prices see sugar investment collapse
, February 8, 2003
As News Weekly goes to press, a major sugar summit is underway in Brisbane, organised by the Australian Cane Farmers Association. Bill Micola, sales manager of Cameco Cane Harvesters describes how with the threat of deregulation, investment in the sugar industry has collapsed.Over the past year, three reports written by free market ideologues have recommended deregulation of the sugar industry - the Federal Government's Hilderbrand inquiry, the Queensland Government's Centre for International Economics report, and now the Boston Consulting report for the Canegrowers' Board.
At stake is an industry that stretches up the Queensland coast, a longer distance than Sydney to Melbourne. It sells bulk to a world market where the world price of sugar is half the world average cost of production. Moves to deregulate the industry in the face of such a corrupt market is collapsing investment in the industry.Evidence ignored
To those who say confidence in the sugar industry is OK, my answer as Australian sales manager of Cameco Cane Harvesters is that "you must be blind!"Five years ago, between Case, Austoft and Cameco we were selling around 160 cane harvesting machines a year. During the year 2001 only 15 were sold. In the year 2002, only nine harvesters were sold and, to date, a total of five have been sold, with only one in Queensland for the year ahead.
The Queensland Rural Adjustment Authority Rural Debt survey shows that about 2,700 the state's 6,400 cane farmers owe banks an average of about $428,000 each, with the industry's collective debt about $1.2 billion. The value of sugar production is $1.2-1.4 billion annually.
However, the situation is probably a lot worse. These figures are based on a survey that did not include all the major institutions lending to cane farmers.
Further, it is estimated that 50% of growers in the Burdekin were unable to pay their last water bill due to financial hardship.
Some pundits are telling farmers that the world price for sugar will come good soon. But sugar is traded in US dollars. Even a $20/tonne rise in the world sugar price would be negated by a 10% rise of the Australian dollar to about US60 cents. Further, with Brazil continuing to expand cane production, there is little likelihood of a substantial, sustained recovery in the world price.
Deregulation cannot fix this problem. Deregulation will lead to the demise of the sugar industry. I can't believe our government and industry leaders are even thinking about it. Should deregulation go ahead all the farmers and the sugar communities better make sure the politicians responsible are voted out of their office.
The recommendations of industry reports bear no relation to reality.
The recent Centre for International Economics (CIE) report for the Queensland Government has recommended a 32 week crushing season.
How will that increase production? Research shows that the longer the season, the less next year's returns will be, also less CCS, so farmers income will be less. If somebody can prove that yield will increase by the 37% as the CIE Report suggests, I will walk from Ayr to Ingham for a charity.
Also, what about our harvesting contractors working 24 hours at harvesting? Haven't they suffered enough with continuous crushing? They don't have much of a family life during the season now. 32 weeks and 24 hour harvesting is a great formula for a divorce.Security
The harvesting contractor also needs some sort of job security. I have always believed there should be by a licensing system, something like a trawler licence and based on current CPAs or Cane Assignments. And if a farmer group wants to harvest their own cane they can buy the licence and havesting machinery from a contractor. That way the contractor is not just dumped and left with idle machinery, in most cases going broke.
If farmers were paid a fair price there would be no problem with the contractor being paid a better price also. Finance companies are now demanding harvesting contractors get a written contract for up to 8 years, before they will lend money for harvesters.
I agree we need some change, but not the deregulation way. The problem is the world price of sugar. If the farmers and the mills were receiving a fair price, we would all be making a living and no one would be asking for government help.
I believe the real solution for the sugar industry is a guaranteed sugar price given by the government between $350 and $400 per tonne until the US and EU drop their subsidies.
This would give the farmers some return on investment. When a farmer makes money he spends money either by employing somebody on the farm, buying machinery and vehicles or making improvements on his farm, all of which greatly benefits the local community, regional areas and the government (less unemployment, less welfare, less crime, less suicide, and on it goes.)
I wrote to Prime Minister Howard and Premier Beattie recently and asked them to have one of their experts prove me wrong. I wrote that if this year the government had to make up the shortfall between $240 and $350, which would have been $110 per tonne of sugar, that would cost the government about $550 million.
For this year's price of $270 per tonne, the government investment would be $400 million. As this would have a multiplier effect in our economy in excess of 10 times, the real benefit to the economy would be around $5.5 billion. Even if the government collected only 20% in taxes, it would return to the government $1.1 billion in tax, plus GST payments.Reply
I received a reply from Federal Agriculture Minister, Warren Truss, on behalf of the Prime Minister. He didn't answer my challenge or my questions. Instead he said that a guaranteed sugar price for farmers (the same thing as guaranteeing a basic wage for workers) would disproportionately impact upon the food manufacturing and sugar refining sectors as well as the consumers.
Artificially high prices would reduce competitiveness of the key domestic sugar users which in turn would inevitably have negative implications for the other sugar industry sector, including the growers
If that's the case, why are the refiners allowed to charge what they like, for example selling refined sugar at $500 tonne for beekeepers at Bundaberg and $800 tonne for beekeepers in NSW? Why are the manufacturers allowed to increase their prices even when the price of sugar had fallen?
Why is the retail price of CSR Sugar to the consumer locally - $1.36/kg (up 8c from last month, before the measley 3 cents Federal levy is applied to sugar) when the forced price to the grower is a pathetic 16c/kg.
What a lot of rubbish! If subsidising causes that much trouble, then how is it that rural producers are leading the US economy's recovery when they have huge subsidies which pay their farmers over three times what our farmers receive? The same story occurs with the European Union, where subsidies are still higher at about four times what growers receive here.
History has proven again and again that the rural sector will lead a nation's recovery. Farmers don't wait to be told to up their productivity or improve their methods or machinery when prices allow. They are in there leading the charge on productivity improvement!
I'm still waiting for a government "expert" to disprove my statement.
The Government sinks billions of dollars of grants into the car industry (as well as a 15% tariff on motor vehicle imports) but gives peanuts to the sugar industry. The car industry directly and indirectly supports 40,000 jobs. I understand that the sugar industry figures are that 46,000 owe their jobs directly to the sugar industry and over 200,000 indirectly.
The fact is it's all about votes. All farmers, harvester contractors, mill workers, councils, business houses and workers need to stand united and fight to keep the sugar industry alive.
If our Government was the least bit sincere, they would be sending Australian produce for overseas aid (like the US does) instead of money and pay our farmers a fair price for their product. If the price is fair, the country will prosper!