A group of cane growers in north Queensland have pulled the trigger for arbitration to break their bitter stalemate with milling company Wilmar over supply contracts.
The action coincided with embattled sugar marketing company, Queensland Sugar Limited (QSL) securing a much-anticipated on-supply agreement with Australia’s second largest producer, MSF Sugar.
It cleared the way for growers in the Atherton Tableland, Mulgrave, South Johnstone and Maryborough districts to opt for QSL as the marketer of their sugar, and forward price for the 2017 season and beyond.
But in Australia’s largest sugar growing district, the Burdekin, a growers’ collective has served notice to Wilmar requiring the miller to “use all reasonable endeavours” to negotiate a new contract by October 14, or the dispute will go to formal arbitration.
Burdekin and District Cane Growers (BDCG) spokesman Russ McNee claimed the collective of growers that supplies Wilmar’s Invicta, Pioneer and Kalamia mills had been left with little option.
“Our growers have become increasingly frustrated,” Mr McNee said.
“Wilmar is not prepared to accept our position. They’re saying our documents do not comply with the legislation.
“In effect, the arbitration will determine that, if we can’t come to agreement before that.”
Sugar milling companies were vehemently opposed to the clause to force arbitration when legislation was passed last year in Queensland Parliament, requiring milling companies to give farmers a choice in how their share of sugar, or grower economic interest (GEI) was sold into the export market.
Wilmar cynical about arbitration trigger
Wilmar Sugar’s Shayne Rutherford expressed surprise at the move by BDCG to serve notice under the act, but said it was “just a step”.
He said it remained to be seen if the collective was attempting to exert commercial pressure on otherwise “very good and constructive negotiations”, or a genuine desire to take matters to arbitration.
Mr Rutherford cited the Queensland Productivity Commission report indicating arbitration could end up costing each party up to $1.5 million and take 12–18 months to conclude.
“This is a challenging situation for all concerned as we try to work with a flawed piece of legislation that has done all damage and no good for the industry,” he said.
Mr Rutherford acknowledged historically high sugar prices, currently hovering around A$600 a tonne for 2017 contracts, made the pressure to reach agreement on cane supply even more apparent.
He said Wilmar had already signed 1 million tonnes of cane under individual agreements, indicating a clear desire by many growers for the process not to enter a “protracted and expensive legal battle”.
“The numbers of growers are still relatively small … we’re heading for 200 or so, but we have a long way to go,” Mr Rutherford said.
Agreement with BDCG on a cane supply agreement was not out of reach, he said.
BDCG manager Julie Artiach agreed if both parties negotiated in good faith, a resolution could be achieved within three months, or even before the arbitration process began.
However, the milling company’s insistence growers were not and could not be a party to the negotiations of an on-supply agreement between it and the GEI marketing company, QSL, remained a major sticking point.
“Why is Wilmar Sugar trying to exert so much control over GEI sugar? This is sugar used to pay growers,” she said.
“Wilmar Sugar is free to do whatever Wilmar Sugar wants to do with miller economic interest (MEI) sugar, but when it comes to GEI sugar, the terms under which that GEI sugar is transferred to the marketer is imperative to growers.
“It potentially influences what the growers get paid.
“For Wilmar Sugar to assert growers have no interest or are not entitled to know what the terms are that they’re propositioning to QSL as the growers’ marketer is farcical.”
Agreement heralds new era for sugar choice
The finalisation of a long-awaited on-supply agreement between QSL and MSF Sugar was evidence the new sugar marketing legislation was workabl’, according to QSL chief executive officer Greg Beashel.
It also required the ongoing support and co-operation of parties with an existing raw sugar supply agreement with QSL, including Bundaberg Sugar, Isis Central Mill and Mackay Sugar.
Mr Beashel said QSL remained at the negotiating table with Wilmar and Tully Sugar in a bid to secure a similar deal that would facilitate marketing choice for cane suppliers to those companies.
“There’s been a lot of commentary that the legislation doesn’t work, it’s not practical, adds costs and risk, and the agreement we have with MSF shows those things can be managed around and an agreement can be put in place to make all of this work,” he said.
QSL remained in a strong position to offer value to growers, despite Wilmar, MSF and Tully Sugar exiting the sugar pool next season and some growers already opting for other marketing arrangements.
“We see these arrangements lasting for the long term and they’ll be competitive arrangements for a very long time in the MSF regions based on this agreement, so it’s not just about the 2017 season where I acknowledge some tonnage has gone to other marketers,” Mr Beashel said.
“We want to compete for tonnage in those areas and this will be a framework for marketing in the industry for a very long time.”
MSF Sugar’s Paul Heagney said the company expected 80 per cent of the sugar produced in its factories to be sold by MSF next season.
Meanwhile, MSF continued to focus its energy on developing new opportunities to add value to the entire supply chain, such as the $75 million green power station project on the Atherton Tableland.
“It’s not a significant change really in terms of the choice our growers have already had,” Mr Heagney said.
“I think the new era will come when we have cane supply agreements that aren’t based on a cane price formula, they’re based on other revenue streams.”