Sugar Reform Package

Sugar Reform Package

Federal Government Assistance Package

The following is a broad outline of the elements of the Federal Government's assistance package, which has been announced by the Prime Minister. It sets out CANEGROWERS current understanding of the main elements of the package and has been drawn from a verbal briefing. We have not had the opportunity to review the detailed documents; this process will commence immediately.

The government has stressed that this package is a response to CANEGROWERS and ASMC's Joint Submission to the Federal Government in February 2004. It recognises that the industry has reached a crisis point but that the industry is committed to supporting and promoting comprehensive reform and restructure.

1. The first important element of the package is the requirement that the industry associations commit in writing to a 'Statement of Intent' to undertake the comprehensive reform and restructure that was referred to in the CANEGROWERS/ASMC submission. This industry commitment will precede payments of any funding under the package. 
2. An Industry Oversight Group (IOG) and Regional Guidance Groups will undertake oversight of the delivery of the package within the industry and the regions. These groups will be small and focussed. The preference is for up to five members of these groups. The IOG, in particular, would have membership that is representative but not necessarily drawn from industry.  Appoints to the IOG will be made by Minister Truss and cleared by Cabinet; it will be several weeks, at least, until this process is completed.  RGG's will "build on and augment" existing industry initiatives such as the Regional Industry Boards in various areas.
3. The Federal government will fund a sustainability grant to the Australian sugar industry of $146 M in financial year 2004/05 of which approximately $137 M will go to Queensland. This will be paid to growers and millers based on the average of the last 3 years' production. It will be paid as a separate item to mills by QSL and by mills to growers. Payments will occur in June and January to current growers only. The Federal government will seek state assistance in provision of this sustainability grant from the Queensland, New South Wales and Western Australian governments. The Federal government will also request that this extra funding (which will amount to approximately $30 per tonne of sugar) will be used for activities that promote sustainability.  Access to this grant will not be means tested.
4. All growers will be entitled to business planning assistance. A grant of $2 500 will be available for those receiving income support, $1 500 for those who are not. Access to assistance listed below will be contingent upon business plans being completed. Planning assistance will also be available for cooperative mills. Crisis counselling will also be funded.
5. Grower restructuring grants will be available for on-farm activities to undertake significant operational restructuring. They will be available at the rate of $75 per hectare of cane up to a maximum of $15,000 per grower over two years. There will be a "menu" of cultural and business practices that these grants are available to support.  This grant is not means tested but may need to comply with regional and the farmer's business plans.
6. A reestablishment grant for persons exiting the industry will be available. This will be set at $100,000 for those choosing to exit in 2004/05, $75,000 if the exit is in 2005/06 and $50,000 if the exit is in 2006/07. A harvesting contractor who is not a farmer will also be entitled to reestablishment grant of $50,000.
   
   Re-establishment Grants are subject to an assets test. To qualify for the maximum grant you and your partner can have up to $212,500 in net assets after the sale, lease or diversification away from cane production of your sugar industry enterprise.
   
   The value of your principal place of residence (house and curtilage ie house and surrounding area up to 2ha) is excluded from the assets test up to certain limits.  For a partnered homeowner up to $212,500 is exempt and for a single home owner up to $149,500 is exempt.  Your net assets also exclude household contents and personal effects worth up to $10,000.
   
   Exit must be from cane growing for at least 5 years. There will be differing treatment for those choosing to sell (in which case the reestablishment grant will not be counted as taxable) or those who choose to lease (reestablishment grant taxable). It was noted that there would be a number of conditions on these and that it would be important to review the "fine print".
   
   If, instead of a reestablishment, a grower chooses to pass his or her farm on to his or her children, there will be a 3-year window of opportunity to gift the farm to a child without affecting access to the aged pension. Farm value must be less than $500 000 and the home is an exception.  This cannot be taken up as well as the reestablishment grant; it is an alternative and there are eligibility conditions on the length of time the farmer and the next generation have been on the farm. However, if the child chooses to exit, then he or she may be entitled the reestablishment grant.
   
   Subject to certain conditions, if a primary production business is transferred within a family and no consideration is payable (ie. no payment is made), no transfer duty is payable.  Click here for details:
   
   Assistance with retraining for those exiting the industry will also be available but details are not available at this time
7. Current income support provisions will continue until next March 2005 under current provisions.
8. The Regional Guidance Groups will be required to produce regional business plans by December 2004. This may be a precondition for the second half of the sustainability grant that is due to be paid in January 2005.
9. Regional and community projects, particularly those that support diversification, innovation and value chain integration will be supported up to a limit of $75 M over three years. They can be applied for competitively and will be required to align with regional plans. Guidelines for these projects are being finalised.

An information pack on this is available on the AFFA website

Click Here for More Information on the AFFA Website 

The total value of this package is $444 M.  This does not include any increased assistance that may be made available by state governments.

CANEGROWERS will be examining in detail the full package and will continue to keep you updated as to the important issues that will arise.

Media Release

Federal funding package lays the groundwork for sugar industry recovery

The sugar adjustment package announced today by the Prime Minister was the result of an ongoing partnership between the Federal Government, the sugar industry and its communities, cane growers leader Jim Pedersen said today. 

Mr Pedersen, who is Chairman of the peak representative body for sugarcane growers, the Australian Cane Growers Council, said the package would provide for the immediate stabilisation of the battling Australian sugar industry.

He said the program provided up-front financial assistance to help stabilise the industry economy; improved options for individual growers and harvester operators planning their futures; funding to foster industry innovation and change; and incentives for regional diversification and development of profitable agribusiness.

Although he had not had an opportunity to examine the full details, he said the package had addressed the majority of elements identified by the CANEGROWERS organisation and the Australian Sugar Milling Council in their joint submission to the Government.

"The package will lift the blanket of uncertainty suffocating individuals and families by allowing them to make informed decisions about their futures. We should see substantial benefits flow through to depressed coastal communities from Far North Queensland to northern New South Wales."

Fundamental to the federal package was the provision for stabilisation grants to be paid to all Australian cane growers and millers during the course of the 2004 season. Those grants, coupled with restructuring grants for those wishing to invest in the industry's future, should help inject fresh confidence into the industry.

"Although world sugar price and weather conditions are the main factors influencing profitability, clarification of our future operating environment will mean growers will now be in a better position to consider their options. It is now up to every grower to decide whether they are going to invest further in the cane industry or to seek opportunities elsewhere."

"The improved re-establishment provisions for those wishing to leave the industry will allow them to rebuild their lives off the farm or to retire with some dignity and resources. In the meantime, welfare payments will continue until next March for those who need them.

The inclusion of a range of achievable programs designed to foster diversification and regional restructuring, would help underpin the industry's future.

Mr Pedersen said that, depending on the timing of rationalisation and the numbers of growers and harvester operators who took advantage of the various assistance programs on offer the total value of the package could be in the order of $450 million. While this was less than the amount sought by the industry the program provided sufficient resources in the key areas identified in the joint CANEGROWERS and Australian Sugar Milling Council submission to enable the industry to move ahead with increased certainty and optimism.

In return the Government expects every participant operating within the industry to commit to a substantial restructuring program that will allow it to become more competitive and sustainable in an increasingly more difficult international marketplace.

Mr Pedersen said that, in offering the package, the Federal Government had clearly recognised that the industry was in its current difficult situation through circumstances largely beyond its control.

The Federal Government developed the package in response to a joint submission by and extensive negotiations with CANEGROWERS and the Australian Sugar Milling Council. The two organisations had jointly sought a $590 million program based on stabilisation payments to support rationalisation and restructuring at individual grower and miller level during 2004 and 2005 seasons, funding for development and implementation of regional rationalisation and restructuring programs, and funds for regional programs which allow producers to partially diversify from sugar production into other income streams, and which encourage innovation, value adding, and greater sustainability.