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Sugar cane industry faces shortfall penalties

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The damage from heavy rain, flooding and Cyclone Yasi to Queensland's sugar cane crops has left growers unable to meet export contracts. With more sugar forward-sold than the industry has actually produced, cane growers face sharing the costs of servicing contracts with imported sugar. Marketing organisation Queensland Sugar Limited (QSL), which exports 90 percent of Australia's sugar, reported an 800,000 tonne hole in its export plan as a result of diminished production. The shortfall has forced QSL to buy back futures contracts at premium prices and import sugar from other producers to fulfil some contracts. The costs incurred by QSL will be passed back to its supplying farmers and millers, with a reduction in market rate of between $30 and $45 a tonne. QSL is now considering whether growers or millers should bear the bulk of the cost. Spokesperson for miller Sucrogen, Mark Day, said it is a "system cost" that historically has always been shared between millers and growers. "We’re putting a number of options to growers where they can pay their part of this in one season after the 2010 season crop or the possibility at an individual level of spreading the cost over three seasons." While not all growers agree to forward pricing, the whole industry will be affected by a per tonne price reduction. QSL has argued the financial penalties are a direct result of the unanticipated drop in production and sharing the costs between the marketers, millers and growers will help the industry recover over the long term. Day agreed with QSL's assessment. "We’re not happy to see this cost come along at this stage of the process, just like the growers aren’t. But the fact of life is it’s there, and we’re both going to have to cover it." But Ingham cane grower Ed Morris says the situation is a result of poor decision-making. "More thought should have been put into the amount of cane that was forward sold, with the knowledge of how unpredictable the weather can be around this time of year."

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