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					Tableland District Canegrowers

Sugar Industry On The Atherton Tableland
Submission to the:

Federal Government Independent Assessment Of the Sugar Industry

Contact: Murray Smith
Manager Tableland District CANEGROWERS PO Box 1359 MAREEBA Q 4880 Ph: (07) 4092 6065 Fax: (07) 4092 5857 Email: tbl@canegrowers.com.au March 2002

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Submission to the:

Federal Government Independent Assessment Of the Sugar Industry

George Adil, Chariman, Tableland District CANEGROWERS

Maryann Salvetti, Deputy Chairperson, Tableland District CANEGROWERS

Tom Maisel, Director, Tableland District CANEGROWERS

Ross Cuzzubbo, Director, Tableland District CANEGROWERS

Trevor Adil, Director, Tableland District CANEGROWERS

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EXECUTIVE SUMMARY:
In the most recent decade, the Atherton Tableland‟s region has suffered substantial social and economic hardship as a result of Government initiated change. The effect of regulatory changes to the dairy, timber and more recently the tobacco industry has meant the loss of $70 million/annum (measured at the farm gate) of direct income to the local economy. This diminution in direct income has caused considerable hardship within the wider communities of the Tablelands. The first commercially grown sugar cane crop on the Tablelands was harvested in 1991. The Tableland Mill was commissioned in 1997 and incorporates leading edge technology. Tableland Mill assigned sugar cane is processed to a concentrated syrup phase at the Tableland Mill. Further processing of Tableland Mill syrup is undertaken at Bundaberg Sugars‟s Babinda, Mourilyan and South Johnstone Mills. This arrangement utilises spare crystallising capacity at these mills. (Refer to Appendix 1 for a map of the respective mill areas.) Sugar cane grown on the Atherton Tablelands is also transported to Mossman and South Johnstone Mills. Currently, approximately 33% of the Mossman Mill cane supply and approximately 25% of the South Johnstone cane supply is grown on the Atherton Tablelands. The cost of growing and harvesting sugar cane in the Mareeba-Dimbulah Irrigation Area (MDIA) is approximately $21.60/tonne. This figure excludes rate of return on assets or debt servicing. Other off-farm debits to growers cane payment total approximately $1.50/tonne. Tableland district sugar cane averages 14 units of CCS and district yields average 110 tonnes per hectare. Tableland District CANEGROWERS believe there is opportunity to stabilise and broaden the economic base of the sugar industry by Government and industry initiatives in the area of:
     

Domestic raw sugar pricing policy; Mandating an ethanol blended fuel; Mandating the use of biodegradable plastics for a range of uses; Providing greater Government Incentives for cogeneration facilities at sugar mills; Turning more production to „mill whites‟; and Merging the industry‟s marketing and storage, handling and shipping organizations into one business structure.

These opportunities are discussed in more detail in the body of this submission. We believe that price support is urgently required to assist the industry restructure. Such support could be phased out as new initiatives are implemented.

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CONTENTS
1.0 BACKGROUND 5

2.0

DEMOGRAPHICS 2.1 Social 2.2 Economic

6 6 6

3.0

THE SUGAR INDUSTRY ON THE ATHERTON TABLELAND 9 3.1 The Environmental Performance of the Sugar Industry on the Tablelands 10 3.2 Economic Benchmarking for the Tablelands 11

4.0

POTENTIAL OPPORTUNTIES TO ENHANCE THE VIABILITY OF THE SUGAR INDUSTRY 12 4.1 Export or Import Parity Pricing 12 4.2 Market Diversification 13 4.2.1 Ethanol Production 13 4.2.2 Biodegradable Plastics 13 4.2.3 Cogeneration 14 4.2.4 Production of Mill Whites 14 4.2.5 Merging of QSL and STL 15

5.0 6.0

THE NEED FOR IMMEDIATE ASSISTANCE TO THE INDUSTRY 16 COMMENT ON THE INTERNATIONAL ENVIRONMENTAL PERFORMANCE OF THE SUGAR INDUSTRY

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APPENDIX 1 Map of Cane Production Areas Supplying Northern Mills

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1.0

BACKGROUND:

The economy of the Atherton Tableland is based primarily on agriculture, particularly sugar cane, tobacco, horticultural crops, dairy products and cattle fattening. However in the last two decades the region has experienced significant social and economic, government initiated change that has impacted negatively on previously profitable agricultural sectors. With the declaration of a large area of the Atherton Tableland as World Heritage Rainforests in 1988, a previously profitable timber industry was drastically downsized. Similarly, with tobacco deregulation in 1995 and subsequent structural adjustments the previously highly profitable tobacco industry is facing imminent closure. In 1994 this industry alone was injecting over $40M into the local economy. This year the figure is expected to be less than $15M with it likely to collapse to $0 in financial year 2003/04. The deregulation of the dairy industry in July 2000 has affected farming production on the southern Tableland, particularly in the Eacham Shire, with most farmers reporting drastic reductions in farm-gate incomes. The combination of these factors, as well as the impacts of continuing change, unfamiliar market systems and the pressure to operate professional farm businesses, have meant that a region that has been stable and relatively prosperous is now dealing with economic upheaval, job loss and, in some areas, communities in distress. (Department of Transport and Regional Services, 2000,p8) The sugar industry on the Tablelands had its genesis with the collapse of the rice industry as larger farms struggled to find an alternative crop to provide a positive cash flow. Sugar cane trials were initiated on the Tablelands in 1983 with the first commercial crop harvested for the Mossman Central Mill in 1991. The area assigned to the Mossman Mill increased significantly over the next six years. Issues associated with transport costs led to growers attracting interest for the establishment of a mill on the Tablelands. Bundaberg Sugar commissioned the Tableland Mill in 1997. The Tableland Mill is the most recent mill established in Queensland in 75 years and incorporates leading edge technology in an attempt to be capital and operating expense efficient. Examples of such technology include very low manning levels though the use of SCADA systems, a highly steam-efficient design, just-in-time delivery and integrated harvest and transport of sugar cane.

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2.0

DEMOGRAPHICS:

2.1 Social In all Shires on the Atherton Tableland the estimated population increased marginally in the years 1996 to 1999, with average population growth of 1.1% per year. (Source – ABS, 1996 Census) Ages of people in the three cane growing Shires on the Atherton Tableland, the FNQ region and Queensland are shown below in Table 1. Table 1
Shire/Region % of people aged 60 years and over % of people under 15 years % of people aged 10 to 19 years Median Age (June 1996) years

Atherton Eacham Mareeba FNQ Region Queensland

19.6 17.1 15.0 12.4 15.8

23.6 25.1 26.1 23.3 22.3

15.1 14.7 13.9 14.2 14.9

36.6 37.9 35.8 32.5 34.0

Source: ABS, 1996 Census, Usual Residency profile Table U05

Overall the highest proportion of people aged 15 years and over in receipt of social security income support at June 1998 was Atherton Shire (44%) with Mareeba Shire at 37%. (Source: National Economics 2000, Your place: Local Economic Performance. In
Department of Transport and Regional Services, 2000)

Like the other Shires on the Tableland, there appears to be a trend of increasing unemployment in contrast to Australia as a whole. Unemployment in Mareeba Shire for the March quarter of 1999 was 7.7% with a rise to 11.0% in the March quarter of 2000. We expect there would have been further increase in unemployment in subsequent years reflecting the further contraction of the tobacco industry and the collapse of the tea tree industry. 2.2 Economic The gross value of agricultural production in the cane growing shires of the Tableland is shown in Table 2. Table 2 Shire
Mareeba Atherton Eacham

Gross Value of Agricultural Production (1998 $)
$93.1M with 80% derived from crops and 20% from livestock $38.4 M with 70% derived from crops and 30% from livestock. $43.9 M with 10% derived from crops and 90% derived from livestock and production from livestock (e.g. milk, cheeses etc)

TOTAL

$175.4 M with 60% derived from crops and 40% from livestock.

(Source: Department of Transport and Regional Services 2000)

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The sugar industry injected approximately $30M into the local economy for the 2001 season. This figure is exclusive of multipliers etc. The vast majority of sugar cane grown on the Tablelands is located within the Mareeba Dimbulah Irrigation Area (MDIA). The following statistics shown on Figure 1 are intended to provide an overview of the impact of changing crop systems. These figures have been obtained from the Department of Natural Resources and Mines‟ Annual Reports. A CPI adjusted figure to 1998 dollars has been included to more accurately reflect trends. Figure 1
MDIA VALUE OF PRODUCTION TRENDS
$140,000,000 $120,000,000 $100,000,000 $80,000,000 $60,000,000 $40,000,000 $20,000,000 $0

VALUE OF PRODUCTION

Revenue

79 /8 0 82 /8 85 3 /8 6 88 /8 9 91 /9 2 94 /9 5 97 /9 8

YEAR

Reven (Adjusted to Dec 98)

The collapse of the rice industry in the early 90‟s was a precursor to a major contraction of the tobacco industry in the mid 90‟s. The growth in value of production from 1995 could largely be attributed to a rapid expansion in the sugar industry and the development of the tea tree industry. The flattening off in 97/98 is attributable to the collapse of the tea tree industry and depressed world price for sugar. Figure 2 demonstrates very graphically the impact of the demise of the tobacco industry and the replacement of a high-value low-area crop with a broad acre cropping system such as sugar cane. Figure 2
Adjusted Production Revenue/ha
Adjusted Value of Production

$15,000 $10,000 $5,000 $0
79 /8 0 82 /8 3 85 /8 6 88 /8 9 91 /9 2 94 /9 5 97 /9 8

Adjusted Revenue /ha

Year

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Apart from the demise of the tobacco industry, Figure 2 also shows the questionable success of restructuring packages and a continuing slide in income over recent years. This continued slide could have serious implications regarding the viability of smaller holdings in the very near future and corresponding flow-on effects to the socio-economic well being of the MDIA and its communities.

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3.0

THE SUGAR INDUSTRY ON THE ATHERTON TABLELAND:

Sugar cane grown on the Atherton Tableland is assigned to one of the following mills: Tableland Mill South Johnstone Mill Mossman Mill. The areas listed in Table 3 reflect the significance of the Tableland cane supply to the coastal mills. It must be highlighted that industry growth is dependant on a range of economic, market, Government influences, and other externalities. Bundaberg Sugar has indicated a willingness to increase Tableland mill capacity to accommodate significant expansion of the industry on the Tableland and align with growers‟ willingness to plant crops. As such they have indicated that their first major target is achieving 1.2 million tonnes and then to aim for a duplication of the factory to 2.4 million tonnes capacity. Mossman Mill has indicated their desire to be crushing 1.3 million tonnes in 2003 and 1.5 million tonnes in 2007. They currently have enough cane in the ground for 1.1 million tonnes. This scenario would require the planting of an additional 4,000 hectares by 2007. This is in addition to their wish to secure future plantings of sweet sorghum for ethanol distillation and power generation. However the grower take-up rate will be dependant on the mill being able to sustain significant transport costs in the face of low world sugar prices. Table 3 – Tableland Lands Cane Production Area 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 Mill Area Assigned Tableland 8,960 10,114 11,314 12,964 14,000 15,000 Mossman 4,348 4,700 5,100 5,500 5,900 6,400 South Johnstone 3,000 3,000 1,500 TOTAL (ha) 16,308 17,814 18,464 18,464 19,900 21,400

We have assumed that ineffective Cane Production Area (CPA) currently assigned to the South Johnstone Mill is cancelled and that this land will be developed into Tableland Mill CPA in 2002/03. It is likely that all South Johnstone Mill CPA on the Tablelands will be transferred to the Tableland Mill in 2003/04. As such this could align with a major expansion of the Tableland Mill milling capacity. It is likely that social and economic pressures will cause the closure of Mourilyan Mill and that Tableland‟s grown South Johnstone sugar cane will be transferred to the Tableland Mill. The stakeholders readily acknowledge such restructuring as necessary and imminent. Refer to the map shown as Appendix 1 to gain a better understanding of transport implications associated with cane supply to our regional mills.

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Table 4 – Effective Plantings of Cane Production Area 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 Mill Area Planted Tableland 6,247 7,000 8,100 9,600 10,700 11,800 Mossman 3,470 3,750 4,250 4,650 5,050 5,450 South Johnstone 2,200 2,000 1,500 TOTAL (ha) 11,917 12,750 12,750 14,250 15,750 17,250 There is little doubt the sugar industry is currently facing an uncertain future and expansion uptake is very dependent on positioning the industry in a more stable and sustainable economic environment. 3.1 The Environmental Performance of the Industry on the Tablelands As indicated in Table 4 above there is currently 12,750 hectares of sugar cane on the Tablelands. It should also be noted that approximately 80% of this crop is grown in the Walsh and Mitchell River catchments and as such drain to the Gulf of Carpentaria. The remaining crop is largely within the Barron River Catchment that enters the Coral Sea immediately North of Cairns city. Approximately 10,500 hectares of sugarcane is currently grown within the Mareeba Dimbulah Irrigation Area (MDIA). As such cane occupies approximately 50% of the total area irrigated within the MDIA. Soils mapping undertaken by the Department of Natural Resources and Mines has identified approximately 33,000 hectares of land suitable for irrigated sugar cane development within the MDIA.
MDIA - Area Under Irrigation
25,000

Hectares (ha)

20,000 15,000 10,000 5,000 0
79/80 81/82 83/84 85/86 87/88 89/90 91/92 93/94 95/96 97/98

Year

The Tableland sugar crop is harvested green with trash blanketing being the industry norm. The development of sugar cane cropping in the Tolga–Kairi area has seen a shift away from the traditional crops of maize, potatoes and peanuts. Sugar cane cropping coupled with trash blanketing has reduced the propensity for soil loss as a result of run-off from high intensity rainfall events. Past cropping systems often left the soil exposed at the commencement of the „wet season‟.

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The Tablelands area has also led the State in its adoption of water efficient application systems. Approximately 50% of the Tableland crop now utilises lowpressure overhead systems or trickle irrigation. Trials sponsored under the State Governments Rural Water Use Efficiency Initiative are currently taking place in our district to examine the economics of the various irrigation systems. Trials include the use of surge valve technology with surface irrigation. The wide adoption of tail-water recycling systems has also led to improvements in water use efficiency. This initiative has also led to reduced off-farm impacts in terms of sediment and nutrient movement. A direct result has been significant improvement in a range of water quality parameters in the Walsh River. 3.2 Economic Benchmarking for the Tablelands The costs associated with developing and operating an „average‟ cane farm within the MDIA are difficult to quantify. The interdependence of a wide range of variables including; existing farm debt, farm size, irrigation application technology, and source of irrigation water (i.e. price varies dependent on source of supply river, channel or re-lift) mean that generalizations have limited applicability. Nonetheless, the following costs provide a coarse approximation of indicative costs associated with a farm utilising surface irrigation.            $3.00/tonne – fertilizer $3.00/tonne – water and on farm distribution costs (pumping, fluming etc) $1.00/tonne – herbicides $1.00/tonne – repairs and maintenance on assets $0.50/tonne – rates $0.30/tonne – insurance $3.00/tonne – labour $1.00/tonne – fuels $1.50/tonne – insecticides $1.00/tonne – depreciation of assets $6.30/tonne – harvesting

Based on the above the cost of production in the MDIA is approximately $21.60/tonne. This figure excludes rate of return on assets or debt servicing. Other off-farm debits include:  $1.00/tonne – transport  $0.42/tonne - levies (pest and diseases, cane testing etc) Sugar cane grown on the Atherton Tableland‟s averages 14 units of CCS and yields average approximately 110 tonnes per hectare. Development of the Tablelands sugar industry was predicated on achieving an average pool price for raw sugar of $320-00 per tonne. At this price sugar cane of average quality (14 CCS) would be valued at $29-40 per tonne.

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4.0

POTENTIAL OPPORTUNITIES TO ENHANCE THE VIABILITY OF THE SUGAR INDUSTRY

Many countries including the European Union and the United States are taking steps that they consider necessary to protect their farming sectors. Whilst we consider „free trade‟ a laudable notion, the notion is not supported by the world‟s leading economies. At best it is given lip service. We are under no illusion that there will be any significant shift in the medium term as a result of outcomes from the recent WTO meeting in Doha. 4.1 Export or Import Parity Pricing The Australian and New Zealand domestic markets are very significant consumers of raw sugar. Why is it that our domestic market obtains our product at export parity prices rather than import parity prices? Why have parity pricing for the domestic market at all? Why not let domestic sugar consumers compete on the world market? We are expected to believe that the difference between export, import and world price is so small that it would not affect the price that growers receive. We don‟t care if it is only three cents – however we expect that it is significantly more. Every cent that we can achieve for our growers in the current economic environment should be pursued. Given the domestic price of sugar and soft drinks in supermarkets, it is apparent that end products do not reflect the price that growers are achieving for their product. Why is this? Are growers effectively subsidising value added products such that these products may be more competitive? Have we been watching trends in this regard? If not – then why not, and what are we doing about it? We understand that this would require detailed analysis, but maintain that such analysis should be undertaken to understand the market relativities, production costs and margins etc. There have been arguments presented that suggest looking further at domestic pricing policy may jeopardise our „single desk‟ arrangement. We disagree – especially given both the State and Federal Governments‟ stated positions. Further, there is no sound basis in an argument that the domestic market would not have many potential suppliers of sugar if pursued on the world market. However, we expect that domestic suppliers would have a significant competitive advantage. We have been advised by Governments in relation to water pricing that, „growers should form consortiums to pass on cost increases and increase their market power‟. The single desk is effectively such a consortium – Government can‟t have it both ways. It is our opinion that opportunities exist to make better use of our domestic market and achieve better returns to our growers from this source alone.

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4.2 Market Diversification Broadening our product range such that we are not entirely dependent on the world price of raw sugar is an initiative the Queensland industry has neglected for too long. There are a myriad of by-products and co-products including pharmaceuticals, lignin, fructose, sorbital, cardboard and high quality papers that can be produced from sugar cane. Just some of these opportunities are discussed in this submission. 4.2.1 Ethanol Brazil produces approximately 320 million tonnes of sugar cane. Approximately 50% of the crop is processed into fuel ethanol, 25% into sugar for domestic consumption and the balance exported as raw sugar. In recent times we have seen the Indian Government take steps to mandate an E10 motor vehicle fuel blend. We consider we should be pushing as hard as we can to bring about a similar position in Australia. It is almost incomprehensible that we should be a follower rather than a leader in this regard. It is our understanding the Federal Government has foreshadowed legislation that by 2009, 2% of liquid fuels used in Australia should be renewable energy. This, as an initiative will have a very limited impact on the near term viability of the sugar industry - particularly so, given the urgency with which such change is required. A more proactive approach would be for Government to advocate a 10% contribution of renewable energy over a shorter but nonetheless achievable time frame, say 2% per annum. Such an initiative would have the capacity to bring about real change, and fairly quickly. It may be that we would have to import ethanol from Brazil in the short term. So what? The 2% policy, which reflects apparent production capacity of ethanol from C molasses, is really just endorsing the Government‟s „steady as she goes‟ approach when a major „kick along‟ is what‟s needed. A significant incentive into large-scale ethanol production is desirable, encouraging real diversification throughout the sugar industry, including new crops and better utilisation of capital assets in mills, harvesters and transport equipment over longer seasons. Many overseas mills operate for up to 10 months each year – why can‟t we plan to do the same, wherever appropriate? We suggest that a National E10 blend should be pursued with great vigor. There are significant public health and environmental benefits that would accrue from the use of ethanol as a fuel oxygenate. Its use should be pursued at the World Association of Beet and Cane Growers and other levels to achieve a wider world adoption of such a policy. It may be that a domestic industry needs some form of protection similar to that applied in the US (e.g. an emerging industry tariff as allowed by the WTO). However, if Brazil were to export ethanol into Australia this would effectively see sugar moving from the world market into ethanol. Such an outcome could have a small or large positive response on sugar pricing depending on E10 adoption. Of course such a positive response may be offset by increased plantings in Brazil (free trade in sugar will have the same effect), but here also there are limits and continued expansion of the Brazilian industry should not be our foremost consideration in the development of Australian 13

domestic policy. We maintain that both scenarios should be closely examined to identify the most likely and beneficial outcome for the Australian industry. 4.2.2 Biodegradable Plastics The University of Queensland has recently patented a process for the development of a biodegradable plastic from maize starch. They expect to have this product commercialised within the next 4-6 months. DuPont is currently investing considerable resources on examining the development of a biodegradable plastics industry and a range of other products. The crops being examined for this initiative are tobacco, maize, potatoes and sugarcane. Thankfully BSES has taken the initiative to lobby the benefits of sugarcane in this regard and an industry Co-operative Research Centre is being mooted to develop such innovative products. A Japanese consortium has recently visited Queensland to examine the opportunity to establish a 50,000 or 60,000 tonne lactic acid & poly lactic acid plant. Given that the juice, raw sugar and molasses requirements suggested are around 400,000 tonnes, 80,000 tonnes and 180,000 tonnes/year respectively it has the capacity to significantly impact the sugar industry. Further, Farmacule Bioindustries Pty Ltd has had discussions in our District to further explore options in relation to Bio-plastics, high-value therapeutic and industrial proteins, edible vaccines etc. They are currently developing a Memorandum of Understanding with NQ Co-op (a grower owned co-operative based in Mareeba). Approximately 65kg of plastic is manufactured per year for every Australian. Most of this finds its way into landfill. However some of it finds its way into waterways and the ocean. 30% of all plastic is used once for packaging and then thrown away. Our figures suggest that only 0.5% of plastic waste is being recycled. This accounts for roughly 15% (by volume) of household waste. Is it conceivable that Government would mandate a phasing in of biodegradable plastic for a range of specified uses? Would the incremental increase in end product cost be offset by the environmental and economic benefits? We would like to think that this could be a legitimate win – win situation. We consider the mandated uses for biodegradable plastic a worthy objective. 4.2.3 Cogeneration Sugarcane dry matter when burned produces 4,000 Kcal per Kg. One hectare of sugarcane can produce about 100 to 200 million Kcal per year, equivalent to about 10 to 20 tonnes of oil. Several studies have shown that the sugarcane industry can deliver not only surplus bagasse through efficient generation and use of steam, but also a surplus of 60 to 120 kWh of electric power per tonne of cane, which can be delivered to the grid.
(Source: The sugarcane, its by-products and co-products by O Almazan, L Gonzalez and L Galvez)

It is encouraging to see many mills adopting cogeneration capabilities. However further incentives to make the use of renewable energy even more attractive would be beneficial, and encourage sugar mills to become even more steam efficient. This would assist the future national electricity demand and regional power distribution. 14

4.2.4 Switching to Greater Production of Mill White One major opportunity must rest in the production of mill white or refined white sugar. There is a significant margin between the prices of raw sugar and white, currently of the order of US$70 per tonne in favor of white. There is also a major market for mill white to our near north – in the islands of Indonesia, Papua New Guinea and the Philippines to mention a few. Yes, it would have to be bagged and containerised but these facilities are now available through Cairns and should be supported. Just think what effect a boost of up to $140 per tonne sugar would have on our local economies – as evidenced by the situation in northern NSW. A review of the Sugar Act to allow easy diversification of products and markets is needed. 4.2.5 Merging of QSL and STL Prior to the State Government‟s hand over of the then Queensland Sugar Corporation (QSC) to the “industry”, QSC as the marketing agent of the Queensland Sugar Industry had the financial backing of the Queensland Government Treasury. As such QSC had the asset base of the bulk sugar terminals and the legislated powers of acquisition. It controlled assets of approximately A$390 million. When the Sugar Industry Act 1999 was proclaimed QSC became Queensland Sugar Limited (QSL) and the bulk sugar terminals were vested in Sugar Terminals Limited (STL). QSL was capitalized at A$20million basically comprising bulk sugar operational assets (i.e. front-end loaders etc) computers, office furnishings and cash reserves etc. STL was capitalized at A$368million comprising sugar storage sheds, bulk handling equipment and ship loaders. QSL the organization responsible for trading up to A$2000 million worth of sugar (1997) has a very low equity base on which to fund it‟s trading activities. The financial institutions that fund QSL‟s activities do so on the basis of the Sugar Industry Act and the implied powers of acquisition enshrined therein. QSL‟s treasury operations would be severely handicapped by any diminution of that power and there is no doubt that the ability to fund the over-the-bridge price would be severely restricted. A lesser credit rating would result in higher funding costs. STL on the other hand has a very significant asset base. It is for all practical purposes an underutilized capital resource. Beyond the current plans to construct additional storage at the port of Townsville (400,000 tonnes capacity expected Capital Expenditure A$55million) the company‟s capital base is uncommitted. Rather than lying idle the industry‟s equity in STL could be used as collateral in funding industry payments.

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If the organizations were merged it would be possible for the marketing division of the combined company to develop a large range of financial instruments including longer term pricing products (greater than one year) and even perhaps consider other investments (eg. joint venture by-product development and marketing). The merged entity would not have to rely on acquisition to maintain it‟s credit rating and would be truly an industry owned corporation. Individual millers could make specialty sugars marketed and priced independently of the pool and would be able to use the marketing expertise of the company. We believe that STL in being a company limited by shares is a good choice, however on the other hand QSL being a company limited by guarantee we consider a poor choice. Shareholder base is not the same for both companies. Some canegrowers are not shareholders of STL. Over time we would expect to see the variance in shareholder base between STL and QSL (pool participant) will increase as growers sell their STL shares. In the current financial environment it is likely that growers will accelerate the sale of their STL Shares. We believe that the merger of the two entities will bring the following benefits:  Lower cost of operations through synergies and reduced duplication.  Greater degree of industry ownership and accountability.  The creation of a more responsive and dynamic organizational structure.  Growers are required to provide security in the form of a bank guarantee to participate in the Call Pool. It is conceivable that the security required to participate in the Call Pool could take the form of shares in the merged entity, provided the shares were traded on an exempt market. This would serve to reduce the cost for growers to participate in the Call Pool.

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5.0

THE NEED FOR IMMEDIATE ASSISTANCE TO THE INDUSTRY

There can be little doubt that the industry has suffered considerably over the last few years. Pool prices for the 1999 and 2000 seasons have been all-time record lows and the prospects for the 2002 season are very poor. There have been numerous severe instances of cane-grub and orange rust damage in our district in recent seasons that have only exacerbated the effects of poor pool prices on growers‟ debt burden. We do not consider that the Tablelands are alone when we say that debt to equity levels are increasing and are at all time highs for our area. We believe that the only form of assistance that can provide immediate shortterm relief to both growers and millers is Government price support. Further, such support should be contingent on the industry taking a number of measures to restructure and resource new initiatives. As such we propose that such price support be phased out over the next five years.

6.0

COMMENT ON THE INTERNATIONAL ENVIRONMENTAL PERFORMANCE OF THE SUGAR INDUSTRY

We believe that Government needs to acknowledge that in supporting Free Trade, such support is often contingent on accepting the less environmentally sustainable production practices of other nations. And in supporting such ideals the WTO and Governments are effectively endorsing the environmental rape of developing nations. Is this a desirable outcome? For example – the sugar industry in Brazil has increased its area under crop by roughly the comparable equivalent of the entire Australian crop. Did an Impact Assessment Study support this expansion or did it comply with Tree Clearing Legislation? Of course not! Are we as a Nation knowingly to accept agricultural production or indeed other products that are more price competitive than our domestic products when such market advantage is achieved at the expense of sustainable environmental outcomes? In endorsing such notions are we in effect postponing the investment by such institutions as the World Bank in extremely costly environmental repair projects?

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APPENDIX 1

Map of Cane Production Areas Supplying Northern Mills

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