Three major sugar manufacturers are set to commence exporting through their own channels, severing ties with established industry body Queensland Sugar Limited (QSL), believing they can achieve better prices for millers and growers outside of the body.
Suger manufacturers and sugar cane growers are severing ties with industry body Queensland Sugar Limited (QSL) as they set out to export through their own channels for better prices.
By mid-December, approximately 5.6 million tonnes of sugar cane is expected to be milled as the sugar cane harvest period is in full swing.
According to IBISWorld Senior Industry Analyst Brooke Tonkin, farmers are starting to turn their attention to growing cane for next season.
‘Sugar manufacturers William Sugar, MSF Sugar and Tully Sugar are breaking with QSL, with many sugar cane growers fearful that this will increase pricing competition. However, the effects may not be as severe as antipated because local growers have little influence on global markets,’ Tonkin said.
As an industry-owned marketer, QSL is responsible for negotiating prices on behalf of sugar manufacturers and sugar cane growers.
Following the industry’s deregulation in 2006, QSL has operated through voluntary contracts with sugar millers. Despite the contracts being voluntary, most millers continued to operate through QSL.
In 2014, Wilmar Sugar, MSF Sugar and Tully Sugar, three of the five largest sugar manufacturers, announced that they planned to sever ties with QSL at the end of the 2016 season.
‘Although approximately 80% of Australia’s processed sugar (in volume terms) is exported, Australia accounts for around 3% of global sugar production. ‘This means that despite the imminent changes, farmers are likely to receive similar prices for their cane regardless of which sugar mill they sell to.’
Despite the shake-up, the sugar cane growing industry and the sugar manufacturing industry are both projected to grow in the current year, as low world sugar stocks cause world sugar prices to increase.
As these effects flow through to the Australian market, the sugar cane growing industry is expected to grow by 12.9 per cent, while the sugar manufacturing industry is anticipated to grow by 19.9 per cent.