A MANDATORY code of conduct for the sugar industry is the recommendation of a Senate Committee report, to deal with concerns about the negative impacts on growers of altered marketing arrangements.
The Senate Rural and Regional Affairs and Transport References Committee inquiry was initiated over concerns about Wilmar Sugar Australia’s move in April last year to announce it would exit the Queensland Sugar Limited (QSL) marketing arrangements – giving three years' notice.
Wilmar is looking to sell sugar via its Wilmar Sugar Trading entity rather than through QSL, in which growers and processors currently have a joint interest.
The committee report handed down on Wednesday called for appropriate stakeholder consultation to be undertaken in developing a new code.
But the committee also wants the work of the Sugar Marketing Code of Conduct Taskforce – which has been operating alongside the Senate inquiry – to act as a foundation upon which a code of conduct may be established.
The report said the committee is “very aware” that the recent decisions of Wilmar, MSF Sugar and Tully Sugar - to terminate their Raw Sugar Supply Agreements (RSSA) agreements with QSL at the end of the 2016 season – had led to “a high level of anxiety across the industry”.
“It is the proposition of millers taking on the sugar export and marketing role – previously undertaken solely by QSL – which is at the heart of the committee's inquiry,” it said.
“The committee therefore understands that cane growers and their representative bodies have very real concerns about the potential which would exist, under new arrangements, for milling companies to misuse their market power.
“The committee acknowledges the argument put forward by grower groups that the decision made by Wilmar to terminate its agreement with QSL represents a substantial change to QSL's risk profile.
“The committee also notes that some stakeholders believe that Wilmar's decision to withdraw influenced the later decisions made by MSF and Tully Sugar to also give notice to QSL.”
The taskforce, chaired by Queensland LNP MP George Christensen, has developed a draft mandatory code of conduct that’s set to be handed down Thursday, pending the outcome on a meeting between millers and industry.
Market imbalance: Canegrowers
Canegrowers chair Paul Schembri welcomed the committee report saying it validated the “enormous concern by Australian cane growers that they have been shouting from the roof, but until now have found it difficult to have this issue properly recognised”.
He said, in essence, the report recognised the nation’s cane growers were subject to a significant market imbalance against them and in favour of the large corporate mills they supply.
Mr Schembri said current proposals by the nation’s three largest millers would deny growers the opportunity to choose a marketing company for the sugar in which that they have an economic interest, leaving all marketing decisions to be made by the mills.
“While growers are essentially locked into supplying sugarcane to their local mill, they want some say as to who sells their share of the sugar that has been extracted from that cane,” he said.
“The imbalance which would be created against the nation’s cane farmers is worthy of government intervention to ensure growers have access to a competitive marketing environment.
“Canegrowers will continue to work closely with every side of politics and every stakeholder involved ensuring that the basic rights of cane growers are enhanced.”
Red tape 'unnecessary': Wilmar
But Wilmar executive general manager, strategy and business development, Shayne Rutherford, said wrapping the sugar industry in government red tape was “simply unnecessary” and would have a significant negative financial impact on cane growers and sugar millers.
“Wilmar is committed to setting a new gold-standard benchmark for supply chain fairness for Australian farmers,” he said.
“Our sugar marketing proposal gives Wilmar growers a stronger, fairer and more transparent supply contract than any other farming sector in Australia.”
The report said the sugar industry was one of Australia's largest and most important rural industries with 85 per cent of the raw sugar produced in Queensland exported - generating up to $2 billion in export earnings, while the NSW industry provided a reliable supply of refined sugar to the domestic market.
“Australia's sugar industry is an integral part of the rural and regional communities along the east coast,” it said.
“The committee therefore acknowledges the concerns raised by a number of industry stakeholders throughout this inquiry.
“It is clear that the changes currently occurring in the sugar marketing sector are creating a high level of anxiety for stakeholders – particularly cane growers – who view the changes as a threat to both their own livelihoods and the sustainability of the communities in which they live.
“The committee is of the view that milling companies – particularly Wilmar which is a relatively new player in the industry – need to come to the table prepared to engage in positive negotiations with cane growers and their representatives.
“It is important that any negotiations provide grower groups with the opportunity to clearly articulate, not only their views, but their specific interpretations of key issues.
“A mandatory code of conduct would provide stakeholders with access to impartial, affordable dispute resolution processes and would go some of the way to addressing the inequities in bargaining power between millers and growers.
“The committee is also of the view that a code of conduct should include formal dispute resolution frameworks which support both growers and millers negotiating supply contracts.”