20 December 2012: Sugar shaker: state of play Australian sugarcane industry (season 2012 wrap up)
The sugarcane industry is surprisingly upbeat about future seasons, despite 2012’s slightly dampened production, heralded by a slower than expected recovery from flooding, cyclones and prolonged dry in previous years.
CANEGROWERS says that the Australian sugar industry has increased in value by a $100 million in four years.
“Cane growers have been widely reported to be planting out extra area to cane, buoyed by the solid prices on offer and a positive outlook for coming seasons, says Steve Greenwood, CEO of peak sugarcane group CANEGROWERS.
Australian sugar resurgence:
The Australian sugar industry is undergoing an extensive resurgence. Large international corporations are investing billions and world sugar prices are at all-time highs. Now in a new growth phase, the industry is again coming to the fore as a major economic driver of regional Queensland.
“The intense interest in milling assets by large international players is telegraphing the message broadly that there is a real future in Australia’s sugarcane industry – and one worth investing in, says Greenwood.
Harvest 2012 and beyond:
The Australian sugarcane harvest drew to a close mid-December. While it has not been the sudden return to optimum production they had hoped for at the outset of the season, cane growers are still on the whole more upbeat than they have been in many years.
By the end of the season, 30.4 Mt was harvested. This is up on the 2010 and 2011 harvests which bought in harvest lows of 27.5 Mt and 27.9 Mt of cane respectively. Production has been dampened by slow recovery from cyclone damage and one of the wettest seasons on record, in the years beforehand. But CANEGROWERS has put out initial hopes for a return to a more normal harvest in 2013.
“Weather dependent, the initial estimates for 2013 could well put Australian production back up at around the 31-32 Mt mark, says Greenwood. “That’s more than 265 Suncorp Stadiums of sugarcane, says Steve Greenwood CEO of CANEGROWERS. Some punters have even suggested a haul of 33 Mt in 2012
Graph 1: Production – light brown bars indicate forecasted data
Additional area being planted to cane:
While actual planting data will not be known until March next year, indications from sugarcane areas across Australia suggest plantings will be well up. Some planting still includes replacing cyclone, flood and smut damaged ratoons; but also includes large tracts of land being returned to cane, including area from the now defunct managed investment schemes, and additional new area being brought into cane.
After a period of rapid rationalisation and restructure which saw the number of cane grower’s drop by 40% over the past two decades, the pace of restructure has stabilised.
There are currently around 4000 cane farming businesses in Australia. The typical cane farm is family owned and operated, and employs an impressive mix of the latest technology and management practices to help increase farm profitability and sustainability. Many farm businesses have bought cane land from retiring neighbours, partially accounting for the dramatic drop in farm numbers but only slight drop in total production.
“Growers are using the latest technology and research findings to increase their productivity, profitability and stewardship. Sugarcane is an international commodity, and Australian cane growers have been at the forefront of the wave of change needed to stay competitive in the increasingly international marketplace, says Greenwood.
Graph 2: Restructure steadies – cane growers are using the latest technology and research findings to increase their productivity, profitability and sustainability – light brown bars indicate forecasted data
Investors back a bright future for Aussie sugar:
Large commercial investors are certainly seeing a future worth backing, with the takeover of Sucrogen (previously CSR Sugar) by Singaporean agribusiness giant Wilmar (late-2010), followed by the purchase of Mulgrave and Bundaberg Sugar’s far north Queensland mills by Maryborough Sugar Factory. MSF bought about the closure of the Babinda mill, and Thailand’s biggest producer of sugar, Mitr Phol, stepping up its stake in MSF (early-2012). Chinese company COFCO took the controlling interest in Tully Mill (mid-2011) and after a prolonged bidding war, Sucrogen acquired Proserpine Mill (mid-2012). Sugarcane may make a return to the Ord region in Western Australia after the WA government announced Chinese company Shanghai Zhongfu as the key proponent to lease and develop 13,400 hectares in the Kimberley's Ord stage two expansion. The Chinese real estate company plans to build a $450 million sugar mill near Kununurra, which is intended to produce four million tonnes of sugar cane and 500,000 tonnes of export sugar.
It’s not all international investment, we have seen Australian owned Mackay Sugar buy up Australia’s most northern-most mill, Mossman (mid-2012).
CANEGROWERS says investment – be it international or from home soils –brings a much-needed cash injection to the sector. “These investors are not perturbed by recent seasonal performance and vagaries of the weather, says Greenwood. “It is about achieving a good balance – a strategic commercial mix of investors underpins a strong and healthy industry, says Greenwood. He underscores the importance of the role of the FIRB in looking at international investors’ plans for longer-term investment.
Australian ownership of Australian sugar mills currently sits at around 28%.
Graph 3: Ownership of Australian Mills 2012 - based on 2010 tonnages as to the percent ownership by country
The market for Australia’s high quality sugar from Asia far outpaces the Australian sugarcane industry’s ability to expand. That said, the industry is on an expansion phase. Reports are coming in from around the sugarcane growing districts, which extend from Mossman in far north Queensland to Grafton in northern New South Wales, of increased plantings which are really underscoring the revival. Greater areas planted to sugarcane will further bolster the booming industry in coming years – necessary growth to meet growing demand from Asia. Some areas are reporting large tracts of land being returned to sugarcane after many years of being used for then higher value crops. Of particular note is the amount of land formerly planted to trees under the then heavily subsidised Managed Investment Schemes, coming back into cane. New mill owners are playing their own part, offering incentives to increase plantings and therefore throughput to their mills.
Sugar price coming off highs, but still strong:
Around 80% of Australia’s sugar crop is exported making global sugar prices important to profitability of the industry. While sugar prices have come off their highs due to an emerging surplus, the demand for Australian sugar is strong due to increasing demand from our biggest customer – Asia.
Graph 5: Prices coming off highs, but still strong
Hard hitting year of issues
It has been an uncompromising year all-round for the sugarcane industry; with big issue followed by big issue. Every corner of the sugarcane industry seems to be undergoing a shakeup, with large-scale reviews of everything from marketing to research, to farmers’ very right to farm.
All these changes have implications down the chain for sugarcane growers across Australia, whose wants and needs must be constantly re-examined to ensure that the industry is ready to equip itself to move with the times and to position the Australian industry to capture global sugar demand. While not without pain, the reviews have been necessary and have set forward the clear intention of building the most robust sugarcane industry possible.
The industry – growers and millers – overwhelmingly supported reforms to the Australian sugarcane industry’s research function. The turnout in a like vote in Australia’s agricultural sector is believed to be unprecedented, with a whopping 77% casting a vote. Of those, 84% voted yes to support formation of streamlined and modernised research body, Sugar Research Australia.
Ensuring the Australian industry remains at the forefront of sugar production on the world stage was the key motivator which had seen BSES Limited, ASMC, CANEGROWERS and QSL partner to complete a large-scale project to overhaul research, development and extension for the Australian sugarcane industry.
Originally sparked by a recognition of the need to streamline research provision, where three organisations (BSES, SRDC and SRL) worked in the same space, reform was pushed into the forefront by research provider BSES Limited’s funding shortfalls, principally stemming from declining crop tonnages (on which levies are set), together with ever-increasing industry expectations. The industry saw the opportunity for rejuvenation of its research, development and extension function.
The final proposals to overhaul, streamline and modernise sugar research were tabled to the federal Minister of Agriculture, Fisheries and Forestry, Joe Ludwig, in September 2012; replete with the resounding voice of industry asking the Australian Government to make this reality.
Research reform will continue to be a key issue for the entire sugarcane industry, given the next few years will be critical to strengthening both the industry and its place within a strong, internationally recognised Australian agricultural sector. Reforms are needed to capitalise on favourable market price opportunities, and to back the Australian sugarcane industry by ensuring that a strong research and development function is in place, so that in another 10 years Australian sugarcane is still held up internationally as front-runners in agricultural innovation.
Australia wants to continue to lead the charge in sugar production on the world stage - and this reform will help give industry the tools and direction to do just that.
Regulation on the way out with support of Sugarcane BMP
A world-class best management system for sugarcane growing has been kick-started, as the Queensland Government announced a game changing project under which CANEGROWERS will lead development of a new standard for sustainable sugarcane production in Australia.
CANEGROWERS has secured $3.5 million from the Queensland Government for development of a Best Management Practices (BMP) program for sugarcane, with full roll out of the new Sugarcane BMP scheduled for December 2014. Queensland Minister for Environment and Heritage Protection, Andrew Powell, made the announcement at the November 2012 CANEGROWERS Queensland board meeting, to 21 CANEGROWERS Directors representing every major sugarcane growing region in Queensland.
The project puts the responsibility of developing the new international standard for sugarcane squarely in the court of industry says CANEGROWERS CEO, Steve Greenwood. “Who better to drive a rock-solid system than the agronomists, researchers, scientists, and sugarcane stakeholders who have an international reputation for leading the world in proactive technology and practices for sustainable sugarcane growing, he told media.
“This project will change the face of the Australian sugarcane industry. CANEGROWERS will be charged with driving a system which will be internationally held up as the one to follow; rooted in the science - about practical profitable and sustainable farming, not red-tape and rhetoric.
In the lead up to the Queensland State Election earlier in the year, CANEGROWERS had sought the removal of burdensome regulations from the State’s sugarcane growers, lobbying for the industry to be tasked with developing its own best management practice system. “It is pleasing to see that the incoming government has listened and started a large-scale project to deliver on its election promise to reduce red and green tape, says Greenwood. There are targets throughout the project, which when met, will mean regulation can be wound back accordingly.
CANEGROWERS says the other big benefit will be for Queenslanders who will, for the first time, be able to clearly see and take pride in the green credentials of the iconic and economically important industry to the State – one which has driven the development, and to this day remains the lifeblood, of many regional communities along the coast of Queensland. “This project will see CANEGROWERS drive and implement a robust system for the sugarcane industry, which will provide watertight assurance to the community that our cane industry is leading the world in productive, profitable and environmentally sustainable farming, says Greenwood.
Australia’s sugarcane industry is looking down the barrel of severe hikes in the cost of farming, following the Australian Government's decision to severely restrict use of the vital weed management tool diuron.
After a 10 year process, the Australian Government's Australian Pesticides and Veterinary Authority (APVMA) handed down its final decision of what, up until now, has been the best tool to control weeds.
Excessive growth of weeds in sugarcane severely chokes productivity – which means a lot less income for growers, says CANEGROWERS. The peak group has made it clear that the announcement is hugely disappointing and is a costly outcome for cane growers who have completely overhauled their practices to the point they are now recognised worldwide for their cutting edge technology and as being most sustainable in the world.
“This decision has not taken into account that Australia has well-informed, responsible farmers who make responsible decisions on the use of chemicals on their farms, says Steve Greenwood. He says farmers and researchers continuously work to ensure that there is no risk to the environment and are always seeking out new technology and practices to achieve just that.
“This decision is another in a mounting list to rip at the very profitability of growing cane, says Greenwood.
CANEGROWERS says the restrictions to when diuron can be used make the product next to useless for sugarcane growers, who’s only other alternative comes at a shocking four times the cost. “That is money straight off our growers’ bottom line. To be candid, it is out of reach for many growers who can ill afford to shoulder another hike in the cost of growing cane, in light of spiralling hikes in water and electricity resulting from the introduction of the Australian Government's carbon tax, says Greenwood.
“This is a very disappointing result as CANEGROWERS has put in an immense effort to represent the interests of sugarcane growers, he says. “CANEGROWERS has employed scientific experts, surveyed growers and worked closely with an extensive range of industry stakeholders and government officials.
“But at the end of the day, the government has effectively banned the use of diuron across the whole Australian sugar industry, based on just two studies in one region, says Greenwood.
“Growers in other regions of Australia have every right to question how government could limit the use of diuron based upon studies that were done many hundreds of kilometres away. It is a well-known fact that the areas in which cane is grown are climatically and geographically diverse.
CANEGROWERS says is very clear that more research needs to be done in each of the major sugarcane growing districts to accurately determine the actual effect of diuron use. “We call on the Australian Government to carry these out in the earliest possible time. If the government is serious about supporting the sugar industry and the many regional communities it underpins, it will kick this work off in the next few months.
In 2012, QSL rolled out a completed a comprehensive review of its marketing strategy which had been called into question after one of the worst seasons on record debilitated production in 2010.
Broad-ranging changes have now been made to pricing arrangements for millers and growers by sugar marketer, QSL. As part of a push towards a genuine tripartite relationship between millers, growers and QSL, CANEGROWERS has been made privy to the supply agreement between QSL and the mills which supply it. This is important for growers as they renegotiate their own supply agreements with their local mill.
Grower and miller-owned company, QSL, remains the only truly transparent sugar marketer on behalf of industry. QSL currently markets the vast majority of Australia’s sugar to our burgeoning international customer-base, achieving excellent results for Australia through the tonnage it commands.
Increasing international ownership within the Australian milling sector could ultimately see these international groups undertake their own pricing, lessening the tonnage and marketing power of QSL. Being independently owned, these companies would not be required to afford growers the same level of transparency of operations and profit-taking as currently enjoyed through arrangements with QSL.
Maintaining the strength of an industry-owned marketing company ensures continuation of the assurance that any profits that are made, come squarely back to the Australian industry and economy.
Input cost review
At the farm gate, the future is not only focussed on increasing productivity, but putting the screws on the price hikes in the inputs which are needed to run a farming business. From labour, to fuel, to water, to transport, to fertiliser - just to name a few – it has been another whirlwind year and CANEGROWERS continues its work on ever-increasing input costs, working actively on a number of fronts to develop more clever strategies to keep a lid on input costs.
The gloves are off with regards to water pricing. Distribution schemes look set to be hit hard with severe price hikes, and growers, who can ill-afford to take on the extra imposts, have engaged in a very vocal fight for fair water access. On the back of CANEGROWERS lobbying, the Queensland Government is now looking into local management options.
CANEGROWERS will continue the intensity of its lobbying work in the area of water prices, as it is an area that directly impacts on cost of production for a large proportion of growers who are already meeting increased energy and fuel costs.
Fertiliser and Ravensdown Fertiliser Australia
Five years down the track and the benefits of bringing another fertiliser supplier to the south eastern seaboard is showing real-time benefits for growers – really stepping up pressure on skyrocketing input costs.
It is hard to believe that it has been five years since skyrocketing fertiliser prices eroded grower profitability to such an extent that government inquiries into its supply and pricing were triggered. CANEGROWERS drove a high-level examination of direct imports options, and rejected the hit-and-miss one-off import options, which in recent years across the agricultural sector, had missed more often than they hit.
Instead, CANEGROWERS backed a sustainable, transparent, grower-owned long-term solution. CANEGROWERS heralded-in a strategic alliance with New Zealand fertiliser supplier, Ravensdown, which continues to help bring transparency and competition to the market.
The presence of Ravensdown, a company based on values similar to CANEGROWERS’ own as a grower-owned business, is about making a long term difference. It is an excellent example of where CANEGROWERS has taken a difficult but necessary step to secure the strategic foundations of the industry.
More clever ‘Ravensdown type’ schemes are the order of the day for the Australian sugarcane industry.
Queensland Government election: big promises secured for sugarcane
CANEGROWERS coordinated a hard-hitting campaign aimed at making the sugarcane industry’s voice not only heard, but amplified, in the lead up to the Queensland State election in early 2012.
In an intensive lobbying effort, CANEGROWERS highlighted the most critical issues on the Australian sugar industry’s agenda. These issues were consolidated into what became known by the campaigning parties as the six ‘Rs’ for rebuilding the strength of regional Queensland:
in research & development.
2. Remove inefficient regulatory costs:
water & electricity.
3. Reduce green tape:
5. Retain and enhance:
6. Retention and reskilling:
During the campaigning period, each of the parties began to publicise their policies. The sugarcane industry directly secured a number of promises directly addressing its six platforms. Just prior to election-day, CANEGROWERS released a scorecard showing clearly how each of the parties stacked up in addressing the sugar industry’s priority areas.
After the election, and the subsequent change of government, CANEGROWERS has been working closely with the new departments within the Queensland Government to ensure each of the election promises are fulfilled.
The proactive Reef Rescue program has continued to deliver great outcomes for the sugarcane industry. In just three years:
- 1598 sugarcane growers have implemented some $113.4 million worth of enviro projects on farm (sugarcane growers received grants under the program worth $42,232,551. This is matched by $71,133,579 of grower cash and in-kind).
- $113,366,130 focused on practice change for water quality outcomes in nutrient, sediment and chemicals.
- Area covered by practice change - sediment 219,721 ha, chemical practice 96,150 ha.
The federally-funded project has been held up by CANEGROWERS as a shining example of what a truly proactive partnership approach can achieve in a short amount of time. CANEGROWERS is rallying the Australian Government to build on the successes of the program and continue it beyond its current end date in mid-2013. The peak group says that its own CANEGROWERS Sugarcane BMP project would be best served by building on the successful Reef Rescue program, and will be integrated into any future Reef Rescue-type initiatives.
Telling our story
Australian cane growers are leading the way world-wide with new approaches to farm management practices that are practical and economically sustainable. Cane has come under the microscope over the past two decades, and cane growers have risen to the challenge.
During 2012, the sugarcane industry made a clean sweep with all three finalists in the Queensland Premiers Sustainability Awards Rural category, cane growers. Finalists in the Rural Award category were Ingham sugarcane grower Paul Marbelli and Babinda grower Ray Vicarioli. Top honours were presented to Mossman cane grower Doug Rasmussen who was awarded the State’s top award for sustainability.
Not only are Australian cane growers doing it and doing it well, but they are being recognised for their efforts and advances by our international counterparts. But, perhaps because Australia’s primary market for sugar is overseas, traditionally the industry had not put the same energy into informing the Australian public about their efforts.
The communities which have sprung up around cane growing districts, and the nation to which sugarcane is an iconic and economically-important commodity, is long overdue for an update on the ‘new’ sugar industry. It is a great story of technology, cutting-edge practices, green projects which look after farm and environs, and the colourful characters and stories behind those who make up the industry.
This is certainly an area on which CANEGROWERS could benefit by placing a lot more focus - telling the story of cane to local communities, to schools and to urban dwelling neighbours. CANEGROWERS is part of a leaner, greener and iconic Australian industry. The industry as a whole needs to stand up and show just how far we’ve come - and just as importantly - where the industry is going.
At the end of the day CANEGROWERS is a grower body and its focus for the coming year will remain squarely on the multitude of issues facing cane growers. From moderating the Queensland Government’s unworkable approach to regulating the cane sector with reef regulations, to continued access to critical farm tools including ag-chemicals, to working on a fairer approach to water pricing, to bringing pressure to bear on our milling and marketing systems to ensure they are structured in a way to best deliver benefits to growers; these issues are just the tip of the iceberg.
Just for fun – cane movies entertain (and educate)
An animated video and a rapping brikkie collected the top prizes in a quirky movie making project run by CANEGROWERS.
Called the ‘Cane Tube’ competition, all the competition entries are uploaded to YouTube www.youtube.com/thecanetube
This year’s winning entry, ‘Cane-Mation’, is an animated video featuring 3000 digital photographs of elements hand-crafted from felt, paper, cardboard, wood and various foodstuffs, including coffee beans and, of course, sugar. The digital photographs are played back at 25 frames per second and backed with audio and a voice-over. The entry was created by a group of film school graduates from Brisbane, who took five weeks to develop the film using stop-motion, multi-plane technology. The entry took out the top prize of $8,500 and the People’s Choice Award - an additional $2,500 in prize money.
The second prize, and also most viewed, was won by the rapping brickie, James-Anthony Callea, for his ‘Sweet Aussie Canegrower Rap’. An ex-accountant, and current first-year apprentice bricklayer based in Victoria, Mr Callea said although he had no background in sugarcane or agriculture for that matter, he saw the competition as a bit of fun. Asked as to what made him choose a rap video for his entry, Mr Callea said he saw it as a ‘natural’ choice. “I have no skills in animation, so rapping seemed the obvious fit. In fact, I have questionable skills in rapping, so really I was just hoping to communicate the advances in Australian cane growing while hopefully making people laugh, Mr Callea said.
CANEGROWERS CEO Steve Greenwood said the Cane Tube competition was playing a role in helping publicise the innovation on sugarcane farms around Australia. “The competition was initially developed as a light-hearted project aiming at gathering some creative and quirky videos promoting the environmental credentials of the sugar industry, he said. “This year, we have been absolutely blown away by the high quality of entries we’ve received, and the entrants’ effort and time invested into creating the videos has stepped the competition up to another level.
The winning videos can be viewed at www.youtube.com/thecanetube
Steve Greenwood, CANEGROWERS CEO, 0488 721 156
Suzi Moore, CANEGROWERS Communications, 07 3864 6431 or 0427641239
More information: Quick summary of the industry
An iconic Australian industry
Sugarcane is one of Australia’s largest and most important rural industries. With the capacity to produce more than five million tonnes of sugar each year, the Australian sugar industry generates between $1.7 and $2 billion in revenue annually. A low-cost producer, Australia is a major raw sugar exporter with some 80% of the country’s sugar exported. Australia is the third largest raw sugar exporter after Brazil and Thailand. The remaining 20% of sugar produced in Australia is sold on the domestic market.
For more than a century, the growing of sugarcane for production of raw sugar has underpinned the prosperity and economic stability of communities along Australia’s sub-tropical east coast. Sugarcane grows mainly in high rainfall or irrigated areas on coastal plains and river catchments along 2,100 km of coastline, from Mossman in far north Queensland to Grafton in northern New South Wales. About 95% of Australia’s production is grown in Queensland; the remaining 5% is grown in New South Wales. The vast majority of cane is grown on family-owned farms ranging in size from 40 to 250 hectares (ha). On an average sized 110 ha property, approximately 94 ha of sugarcane is harvested each year.
Harvesting and transporting sugarcane
The total area of sugarcane harvested in Australia in last year was 366,639 hectares. While some farms harvest more than 100,000 tonnes of sugarcane, the average grower produces 8,000 tonnes. The sugarcane harvest begins in May in northern Queensland and ends in mid to late December in southern Queensland and northern New South Wales. In Australia, while some sugarcane burning does still occur, around 80% is harvested green.
Once harvested, cane is collected in haul-outs and transferred to semi-trucks for road transport or mill bins for train transport to mills. To minimise sugarcane deterioration and juice evaporation, sugarcane must be transported to a sugar mill within 16 hours of harvest.
Over 30 million tonnes of sugarcane was supplied to Australia’s 24 sugarcane mills by more than 4,000 cane farming businesses (around 5800 sugarcane growers) this year. The mills crush an average of 10,000 tonnes of sugarcane per day and employ approximately 150 people during the season. Together, millers, growers and harvesters determine harvesting and transportation schedules that ensure that the cane is crushed as soon after harvesting as possible.
The sugar market
Prior to deregulation of the sugar market in 2006, Australia enjoyed a ‘single desk’ arrangement in which all sugar was compulsorily acquired by sugar marketer, Queensland Sugar Limited (QSL). Today the majority of Australia’s production is still managed under QSL marketing arrangements. QSL uses its bulk marketing power to leverage beneficial outcomes for Australian sugar on the international market.
With 80% of Australian sugar produced for the export market, the industry is focused on international competitiveness. Australian sugarcane is primarily milled into raw sugar that is sold directly to refineries rather than through trade houses.
In Australia, there are no subsidies and there is no domestic support price. Australian sugar is internationally recognised for its high quality; and the industry is renowned for its supply reliability and superior service. Such success has been achieved through the use of best practice management in production, handling and marketing.
Australia’s capacity to store more than two million tonnes of sugar in a network of bulk terminals is particularly valuable as it allows for year-long customer supply.
The main buyers of Australian sugar are South Korea, Indonesia, Malaysia, Japan, New Zealand and the United States of America. The Asian market is experiencing strong growth in sugar demand as a result of an increasing and per capita income.
The average projected growth in sugar demand for the world is 2% annually.