Change is afoot in the sugar industry as three major sugar manufacturers break away from the industry’s long-standing export body Queensland Sugar Limited (QSL).
Some fear the split by Wilmar Sugar, MP Australia (MSF Sugar) and Tully Sugar could spark price competition and reduce their profit margins for the industry, according to researcher IBISWorld.
The researcher says, however, that Australia’s position as a price-taker in the world sugar market means the effects are unlikely to be as detrimental as expected.
QSL is an industry-owned marketer and is responsible for negotiating prices on behalf of sugar manufacturers and sugar cane growers. It was established in 2000 to replace the Queensland Sugar Corporation, which was responsible for marketing Australian sugar to export markets.
Following the deregulation of the industry in 2006, however, QSL has operated through voluntary contracts with sugar millers.
Despite the voluntary nature of the contracts, most millers continued to operate through QSL until 2014, when three of the five largest sugar manufacturers announced their plans to sever ties at the end of the 2016 season.
“The announcement sparked strong opposition from sugar cane growers that worried that the split would spark price competition, limiting their returns,” IBISWorld says.
“Although Wilmar Sugar, MSF Sugar and Tully Sugar are major players in the domestic sugar manufacturing industry, they are unlikely to significantly influence the world prices received for sugar.
“This means that despite the imminent changes, farmers are likely to receive similar prices for their cane regardless of which sugar mill they sell to, even if they can’t choose.”
IBISWorld says that despite the shake-up, the sugar cane growing industry and the sugar manufacturing industry are both projected to grow in the current year as low world sugar stocks cause world sugar prices to increase.
“As these effects flow through to the Australian market, the sugar cane growing industry is expected to grow by 12.9 per cent, while the sugar manufacturing industry is anticipated to grow by 19.9 per cent.”
