AGRICULTURE: by Patrick J. ByrneNews Weekly
Sugar package, Clayton's package
, May 22, 2004
Prime Minister John Howard has handed out a $444 million package to the sugar industry, focused on one year's relief and aimed at tiding the government over the Federal election.
While the media focused on the PM's package, Queensland Premier, Peter Beattie, was quietly pushing further deregulation of the sugar industry through State Parliament.
On the one hand, the Federal package vindicates the year of protests organised by the Sugar Industry Reform Committee, which was told repeatedly by politicians, and even some industry leaders, that "there is no more money for the sugar industry," "there is no point beating that drum any longer," and "any form of cash injections is unachievable."
On other hand, a year from now the combined effects of the package, more state deregulation and Brazil keeping world sugar prices lower with a large expansion in cane production will be to leave the industry in crisis.Federal package
The Federal package has strings attached.
For starters it requires that the industry sign off on comprehensive reform and restructure. This means, accepting the Federal-Queensland agreement to deregulate the industry and continuing the notorious 1996 "Ministerial Directive."
This involves a bizarre twist of National Competition Policy that forces producers to sell domestically at the corrupt world price, which is half the world average cost of production. In other words, it has been "regulated" and fixed at the world price.
The package contains $146 million which gives farmers up to $3/tonne and millers $1.50/tonne for cane for one year, to be administered by an Industry Oversight Group made up of community, grower, miller and government representatives appointed by Federal Agriculture Minister, Warren Truss. This goes nowhere near to providing a fair market price for cane.
There are restructuring grants worth $40 million. These can pay farmers up to $15,000 over two years for improving farm management practices, engaging in alternative business structures and assisting in diversification. This will not go far when farmers cannot afford even to repair or replace existing equipment.
Another $75 million over three years is for diversification into bio-fuels, co-generation of electricity to sell into the regional power grid using cane waste burned at the mill, bio-plastics etc. This won't go far, given that an ethanol mill would cost about $100 million, or a co-generation plant a similar amount.
There will be $23 million for intergenerational transfer of farms, but medium to larger farms will be excluded. The property must be gifted to the next generation, who must have had specified industry experience. Retiring farmers must have owned their farms for 15 years or spent 20 years actively in the industry.
A further $96 million is for re-establishment grants of up to $100,000 per farmer in the first year, diminishing over three years, for farmers to leave the industry. There are one-off exit grants for sole harvester contractors. This will suit some smaller farmers and those with no debt, who have off-farm incomes. However, it is no substitute for the dramatic depreciation in the value of farms as a result of years of bad government policies in the face of low world prices.
According to Bundaberg cane farmer, Erroll Zunker, "This is a welfare package, a pork barrel for the next Federal election with a lot of the payments put under local political control. And the restructure aspects of this package won't make the industry more efficient.
"Yes farmers need immediate relief from years of bad government policies, bad seasons, bad international prices and being forced to sell at the corrupt world price at home. But farmers would prefer to see their industry made profitable by the right policies - mandated ethanol, lifting the Ministerial Directive and allowing farmers to get a fair price in the domestic market, incentives for other bio-products - than to be propped up for one more year and then have to fight for more welfare yet again.
"Profitable farms then don't need welfare, or intergenerational grants, or exit packages. A valuable farm is a saleable commodity. It brings a price that gives farmers a superannuation package. It makes them independent of governments. The solutions are out there but governments don't seem to have the will to adopt the right policies to solve our industry's problems."
Despite Queensland Premier Beattie's recent strong attack on National Competition Policy in Parliament, his government has decided to:
- maintain the Ministerial Directive on selling sugar into the domestic market;
- abolish without compensation the Cane Production Area system that gave farmers valuable, tradable contracts to supply cane to mills; and
- watered down compulsory collective bargaining between farmers and millers, meaning that mills will be able to bargain down the price of cane between groups of local farmers, who mostly have no option but to sell their cane to the local mill.