Matthew Canavan (Queensland, Liberal National Party) Share this | Hansard source

It is a great pleasure to rise tonight to speak about a very important industry, particularly to Queensland—the sugar industry. Sugar has traditionally been and still is an extremely important industry to Queensland, but it is also very important to the whole nation. Despite being concentrated largely in Queensland and northern New South Wales, it is our second largest export crop just behind wheat. It earns export revenue for this country of about $2 billion a year. So it is very important. Indeed, about 80 to 85 per cent of the sugar we produce every year goes to export markets. There are about 4,500 cane families in Australia, supporting some 40,000 indirect jobs in the sugar industry, the milling industry and related industries. We produce about 35 million tonnes a year on 380,000 hectares. At the moment, this industry is in quite a bit of transition and change. We need to be mindful of the impact of that and whether the regulations and laws we have are fit for purpose, given the changes that are occurring, and a lot of changes are happening right now in the industry.

There are about 24 mills which produce sugar in this country, but overwhelmingly the ownership of those mills is concentrated in the hands of just two major companies. While there are seven different companies who own those 24 mills, based on tonnes produced around 53 per cent of the tonnes of cane produced in this country are now owned by one company, a company called Wilmar, which is Singaporean owned. They have about half the market. A Thai company called Mitr Phol Group, who now own Maryborough Sugar Factory, produce another 10 per cent. So more than 60 per cent of our sugar is produced by just two companies. It is actually very analogous and very similar to the situation we have in retail markets now, where about 60 to 70 per cent of groceries or packaged goods are sold by two companies.

This puts growers in quite an invidious position: they therefore only have a couple of companies to sell their sugar to. Indeed, it is worse than that because, while 63 per cent of the market is owned by these two companies, the reality of sugar growing in a district is that it is constrained to that district. Sugar is not a market based on a country; it is not a market that is even based on a state. It is a market based on a local area, the local conditions and the local mill. That is because, when sugar stands in a field and when it gets to maturity, every month that you do not harvest that crop the sugar content of that crop falls. So you need to get it off. It is perishable in the ground, not just out of the ground. And to get it off you need to get it to a mill as soon as you can, and that means economically you can really only send it to the mill closest to your farm. So the reality for most canegrowers is that they have one mill to sell to and one only. They are put in a monopolistic or—in economic jargon—monopsonistic position because they have only one buyer of their product.

That has worked in the past, despite that anticompetitive position, because there has been a level of cooperation and joint ownership of sugar facilities between millers and growers. Until recently—indeed until 1999—Queensland legislation gave canegrowers around two-thirds of the ownership of the crop. So, whatever the price received for that crop, they would generally receive around two-thirds of the revenue. We got rid of that regulation and that is not in the law now. But, even after that, the growers co-owned the sugar marketing body with the mills. So canegrowers own about 50 per cent of Queensland Sugar Limited, who market sugar to overseas companies. That gives them a level of control and ownership and makes sure that the mills, who are clearly in a very strong bargaining position, do not abuse that position. That has been proposed to change, originally by Wilmar, but then Mitr Phol and other mills have come on board, including COFCO, who own Tully Sugar, to say that they want to end that arrangement. They do not want to market their sugar through this joint company—through QSL. Wilmar want to take sugar that they process and sell it through their own company. That is going to put canegrowers in a very invidious position in terms of negotiating with those companies.

We should be looking at whether the regulatory structure is right given that potential change in market dynamics. The Senate is doing an inquiry into these issues right now. A couple of weeks ago I was in a place called Babinda, which is just south of Cairns, and I went to a smaller place called Bellenden Ker, which is not really even a town; it is just a little village with a hall. Around 30 or 40 canegrowers turned up on a Sunday morning—most of us would still be in bed, and I wished I had still been in bed. On a Sunday morning they came down to tell me why this is such a bad idea. They are rightly very concerned about the changes that have been proposed. I just want to make this point: if Wilmar and other companies want to change the market landscape then we should look again at the regulations to make sure that we do not need to make any changes to the regulatory landscape in response to any changes that have been made, because if canegrowers are put in a less powerful negotiating position we need to look again at whether the provisions in the Competition and Consumer Act actually protect their bargaining position.

One thing that was put to me at this meeting, and has now been put forward in submissions by canegrowers and others is: why don't we have a code of conduct under the Competition and Consumer Act which would protect their position and ensure that they have a fair, transparent and resolvable negotiating position with mills? In this place a couple of months ago, the government tabled a regulation for a grain code of conduct. I know it is very important to Senator Nash's constituents in her part of the world, but, in fact, there is not that much difference between the issues in the grain markets and those in the sugar markets. In the grain markets there is usually only one bulk exporter of wheat through a terminal like Brisbane, Newcastle or Adelaide. Therefore, the grain growers are put in a very tough position when they try to negotiate with GrainCorp or, in its era, AWB. Looking at that market structure, we have decided that we need a code of conduct. We need some kind of arrangement in place which ensures that there is an equal, or at least transparent, bargaining process between growers and bulk wheat exporters. That is exactly the same position, almost, as canegrowers are in. Indeed, I would say that canegrowers are in a worse position because you can store your grain; you can use your own trucks—or not necessarily your own, but you can contract with other trucks; you can hold over your grain to other years, because it is not perishable and it does not reduce in quality; and of course there is a larger domestic market for grain, at least on the eastern coast, which there is not for sugar. So canegrowers are in a worse position, but we have no specific protection for canegrowers at a federal government level. Until now, I do not necessarily think that we have needed the protection, because of the cooperative structure in the marketplace. But if that cooperative structure is removed then maybe we need to relook at that, and maybe we should be looking at grain markets and how they are regulated to see if that is something that should be translated into sugar markets.

I think, more generally, we need to be very careful now. The farming sector has changed in the last couple of decades. There has been increasing corporatisation; there has been increasing foreign investment; there are increasing issues around how about 135,000 farmers in this country can negotiate with just a few big corporations to buy or market their products. They do not have the bargaining position that big corporations do. When I was on this trip I went to a place called Mareeba—that was the next day. They do grow a bit of sugar there, but I did not talk sugar there. I talked to some horticulturalists and I said to them: 'Why don't you guys cooperate? Why can't you get together and, effectively, do what the Labor Party do and go on strike and get a better price?' They said, 'Yeah, we tried that a few years ago. Three of us who are growers in Mareeba said, "We're not going to sell to the Cairns marketplace. We're going to stop selling. So next Saturday, no-one drive down to Cairns to sell their product."' They said that the guy who left at 4.30 in the morning drove past the two others who were already coming back from Cairns that morning. It is very hard for farmers to cooperate, because there are so many of them. There is always an incentive for some to do deals outside of a cooperative framework. Given that, we need to recognise that marketplace. Sure, we have laws in place to prevent those with too much market power from abusing that position and limiting Australian farmers' ability to make a decent return on their work and investments.