October 20th 2018


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Articles from this issue:

COVER STORY Internal strife at Fortress ABC by Peter Westmore

EDITORIAL The state is separating children from families

CANBERRA OBSERVED Liberals are bare favourites for Wentworth

DEREGULATION Sugar growers are getting burned on churned-up playing field

EUROPE Attempt to discipline Hungary divides the EU

CHINA Social Credit System gives complete control of every citizen

EDUCATION Curriculum refinements will not fix schools

BANKING ROYAL COMMISSION Banks' failures are a symptom of social malaise

HISTORY Moby Dick and American exceptionalism

SHAKESPEARE Tick-tock: clues to the timeless appear of the Bard

INTERNATIONAL AFFAIRS Trump to UN: we'll do it our way; you do it yours

MUSIC Well-tempered scale: might put an alien in a bad temper

CINEMA Alpha: Beautiful beginnings

BOOK REVIEW Essays towards reconstruction

BOOK REVIEW Can society survive the decay of religion?

LETTERS

CLIMATE CHANGE Hockey 1, hockey 2: Good science contradicts IPCC's two-degree alarmism

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DEREGULATION
Sugar growers are getting burned on churned-up playing field


by Chris McCormack

News Weekly, October 20, 2018

The plight of sugarcane farmers Margaret and Max Menzel is indicative of the experience of many cane farmers since the disastrous policy of deregulation of the sugar industry.

The Menzels owned two sugarcane farms in the Burdekin irrigation area of north Queensland, between Ayr and Townsville. The Howard government’s Sugar Industry Reform Program in 2006, which deregulated the sugar industry, was the beginning of the end for the Menzels, as it has been for many more cane farmers since. The Federal government offered $440 million of taxpayers’ money to entice or force growers and millers out of the industry as it was deregulated.

Deregulation included abolishing the single selling desk. This meant that instead of Queensland Sugar Ltd (QSL) being the single marketing agency for domestic and export sugar, where its market power allowed it to gain a premium price, Australian sugar mills and individual growers/groups would compete with each other to sell their sugar into the same markets.

Additionally, the abolition of tariffs protecting Australian sugarcane from competing with cheap imports, while most nations continue to subsidise their sugar industries heavily, has forced cane growers to the wall and mills to close or sell off to, in many cases, foreign companies.

Mrs Menzel said Australia was the only country apart from Brazil that was paid based on the New York 11 futures sugar price, with all the rest receiving a far higher price subsidised by their governments. Brazilian cane farmers, however, get paid for the whole cane product, that is, ethanol, molasses, etc, rather than just the sugar content.

Hinchinbrook MP Nick Dametto from Katter’s Australia Party summed it up in early October: “American farmers get paid for sugar around $600 a tonne, French farmers $700 tonne, Thailand farmers around $450 a tonne, and Australian farmers, $317 a tonne. (It takes approximately seven tonnes of cane to make one tonne of sugar). We have the most poorly paid sugarcane farmers in the world and that is the outcome of government free-market policies.”

Kennedy MP and leader of Katter’s Australian Party, Bob Katter, responding to news that India would dump millions of tonnes of subsidised sugar on the world market, said: “Before deregulation, the sugar producer was receiving $473 a tonne and the price to the consumer was $1,040 a tonne ($1.04/kg). A mark-up of around 100 per cent.

“The ‘current price’ to the producer is $317 per tonne and the price on the shelf is $1,750 per tonne ($1.75/kg). That’s nearly a 600 per cent mark up.”

Mr Katter said the current sugar price is below the cost of production while Indian cane farmers were receiving $850 million in government assistance. He said free trade deals had decimated local agriculture, especially sugar.

A 2010 Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) “Report on the impacts of the Sugar Industry Reform Program (SIRP): 2004 to 2008” said: “SIRP 2004 was successful in the objective of creating structural change … [including] the exit of some growers and harvesters from the industry.”

Under the heading, “Rationalisation and restructure”, the report said: “SIRP 2004 provided opportunities for consolidation through exit of growers, mills and harvesters from the industry.”

Three mills closed and 624 growers left the industry in those four years. Many more have left since. That the government deliberately set out to reduce the size of the industry, which still manifests in frequent farmer suicides, is a disgrace.

The Menzels, like other local growers, suffered an extremely wet year in 2010, two category-five cyclones and pest incursions in the industry. Deregulation had eliminated grower representatives on the QSL board, leaving them with no source of information about potential crop yields or failures. The mills were left as the sole conduit to QSL in determining the likely crop yields. They ignored warnings from growers that not all crops could be harvested because of the wet conditions, and overinflated the estimate of crop yields to QSL and in local media.

(The mills are guaranteed the first four units of sugar, while the farmers, not the mills, are liable for any shortfall of sugar they forward-price with QSL.)

Deregulation removed only the regulations applying to sugarcane growers, leaving those relating to pricing formulas and the millers intact, which placed growers at the mercy of the mills as vulnerable “price takers”.

When all crops were harvested in 2010 and the mill could not fulfil its estimate, the mill charged the growers who had cut cane that year for the cost of sourcing sugar elsewhere to fill the estimate. The Menzels were charged $46,500 and had to borrow from a “big four” bank to cover the shortfall.

The bank’s dealings with them were unconscionable, ultimately forcing them off their farms.

Mrs Menzel said that the banking royal commission had not even scratched the surface of the banks’ unscrupulous behaviour in dealing with farmers. There is a critical need for an extension to both the terms and the length of the royal commission.

The Menzels said that the way to fix the inequity in the system was to reinstate the single selling desk, which would give some power back to canegrowers. Failing that, a mandatory independent arbitrator should be appointed to ensure that mills were not extorting canegrowers.

The canegrowers should also be paid for the whole cane product, rather than just a percentage of the sugar content, Mrs Menzel said.




























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