NSW sugar producers are battling aggressive cost-cutting by foreign-owned sugar millers, which they say has the potential to push them out of business and create a market ripe for driving prices to consumers sky-high.
In the past fortnight, big Australian sugar customers have been offered prices below the cost of production, based on importing sugar from subsidised markets and packing it in Australia.
The NSW Sugar Milling Co-operative, which in partnership with Manildra runs the only Australian-owned sugar refining business at Harwood on the North Coast, has raised concerns the underlying strategy is to create a domestic market dominated by one supplier.
The concerns over the impacts of market power in the wake of foreign take-overs of Queensland sugar processing assets come amid a senate inquiry looking into the need for stronger competition laws in the sugar industry.
The inquiry, from which a report will be handed down in November, was instigated by the decision of three large milling companies, MSF, Wilmar and Tully, to pull out of the industry-owned, century-old single desk marketing system with Queensland Sugar Limited (QSL).
While the majority of NSW sugar was sold domestically - and as such that withdrawal from QSL does not directly affect the southern industry - the inquiry has broad terms in regard to the marketing of sugar and was an opportunity to review the impacts on the Australian sugar industry from the extensive foreign buy-ups of the past few years, said NSW Sugar Milling Co-operative chief executive Chris Connors. The entry of Wilmar had seen a "far more ruthless approach on many matters", he said.
While the increase of imported whites and raws was partly due to the high Australian dollar, more worrying was the use of subsided imported sugar to substitute Australian-produced sugar, cutting millers and growers in Australia out on better prices and higher premiums, he said.
"We are seeing sugar being sold into the spot price for physical supply into later periods," he said.
"The current sugar price is in contango (the forward price is much higher than the spot price).
"Selling at spot price means the sugar, and therefore cane, has to be bought at the spot price, whether imported or Australian-produced.
"Either way, the grower misses out."
NSW Canegrowers vice president David Bartlett said end users needed to be aware that while they may be securing cheap prices now, longer-term they would feel the brunt when there was no competition for their contracts.
"NSW sugar is sold on the domestic market at prices based on the world market. We are now seeing substantial under-cutting of that world price on the domestic market, which makes it unviable for us to compete," he said.
Mr Connors said the Australian industry through the years had been able to develop relationships that recognised the need to ensure the sustainability of all participants.
Wilmar this week declined to comment on the claims of aggressive cost-cutting in the domestic market, but in a statement issued in July said the QSL model was outdated and was being overtaken by international competition.
Shan Goodwin
Journalist for The Land on the North Coast.
Journalist for The Land on the North Coast.
