Public call on Wilmar to take action

25 June 2014

Senator O’SULLIVAN (Queensland) (19:28): I rise tonight to continue to speak on a matter that is, on the one hand, of great interest and, on the other, of great concern in my state of Queensland. To reference the subject of my speech, it is about the marketing arrangements that exist in the sugar industry in my home state. For over 100 years, the sugar industry in Queensland has had a single marketing desk. For a long period of time the industry was regulated but for a considerable period of time now it has been unregulated, with Queensland Sugar Ltd marketing the economic interests of sugar growers right throughout the state internationally.

QSL is a not-for-profit company that is owned by the growers and millers in that state, where any profits generated by their trading performances are returned to the growers, producers and millers in the form of enhanced and attractive payments in the pools that are offered in the year following. QSL was not formed accidentally; it was the result of a royal commission in my home state in 1912, where, with the development of QSL, an attempt was made to deal with an imbalance in market power that was held by the millers over the interests of the growers. It was created so that the rights of, and the risks and rewards to, growers and millers were equalised and balanced, producing what is now known as the economic interest of growers in two-thirds of the sugar that they deliver to mills for processing. This two-third/one-third agreement has been enshrined contractually for generations within the sugar industry through the raw sugar supply agreement between the millers and QSL and the supply agreement between growers and their mills. It is regarded as a longstanding convention and it is regarded to be in the economic interests of Queensland growers.

On 20 May this year Wilmar International, a multinational company based in Singapore, who has a substantial interest in the sugar industry in Queensland —in fact, control over two-thirds of the sugar that is processed in my home state—notified QSL that it would be withdrawing from the collective single desk marketing arrangements, effective 2017. This has resulted in a significant reaction from the growers in my state. In fact, we have established that over 1,600 —getting up towards 50 per cent—of the grower-producers in Queensland have written to Wilmar. These include, I understand, most Wilmar grower-producers and suppliers, as well as growers who are not attached to the Wilmar mills, who have indicated to Wilmar that they do not want the QSL arrangement weakened by alternative marketing options.

Before anybody challenges us in relation to free market arrangements, there is no challenge to the ability on the part of Wilmar to be able to market their share of the sugar. This is about Wilmar properly recognising 100 years of convention, where growers have a two-third interest in that product when it is delivered to their mills. Sugar is somewhat different to other agricultural commodities in that there is quite a short harvest period, where the harvest is delivered to the mills in the region predominantly by a light rail system. Unlike grains, sugar cannot be stored. Therefore, the owners of the sugar—the grower-producers—do not have the same ability as a grain producer to bide their time with respect to where and when they might market the commodity. Unlike grain, once harvested, sugar has to be processed within a matter of hours, otherwise it starts to lose moisture, and then the capacity to process the sugar content diminishes to a point where the sugar is effectively spoiled after a short period of time.

The challenge here is to be able to accommodate Wilmar’s lawful rights to be able to market sugar but not at the expense of taking away the rights of grower-producers. Grower-producers in my home state have made very substantial investment decisions over the last 100 years, and in some cases over recent decades, based on the prospect that they will produce a commodity in which they will have a continued interest after harvest and after processing into the marketing arrangements. This affords our grower-producers in Queensland the opportunity to decide whether they engage in selling their sugar interest through a low-risk pool, a medium-risk pool or indeed a high-risk pool. They know that, no matter what the outcome, because they are shareholders along with their miller partners, they will share in any of the benefits that are developed as a result of those sales.

Additionally, in 2010, Wilmar and other millers had no difficulty at all in recognising this economic interest to the growers, when QSL, due to inclement weather that prevented the harvest from being completed, were unable to meet about $110 million worth of international contracts. This was the cost of the penalties incurred by that company. Those penalties were properly, in recognition of growers’ interests, sheeted back home to the growers and the millers. The growers in my state collectively stumped up about $66 million.

All I want for my state, and all the grower-producers in my state want, is a free market environment. For that to occur, there has to be choice, there has to be transparency and there has to be competitive tension —that is, of course, unless it is a single desk that is owned, where the interests of that single desk are owned by the grower-producers. The call has gone out to Wilmar to consider—and it has been coined as a phrase—the growers’ choice. The growers’ choice is not a request but a demand on Wilmar that they recognise the economic interest of these growers that has existed for over 100 years and that recognises the ability of grower-producers to harvest the benefits and expose themselves to the risks that markets produce for the produce that they and their families grow—and in some instances have grown for four or five decades. I have said before—and others have said it also— that, collectively, those of us who have any capacity to influence the decisions that will result from this departure of Wilmar from QSL will not relent until such time as those growers’ interests are recognised.

I understand that our agricultural minister in the state of Queensland has urged Wilmar to consider this. I understand that our federal agricultural minister has made like statements and intends to elevate his rhetoric in relation to this matter in the near future. I call on Wilmar simply to respect the 100 year convention of the 4,000 families who have nourished them to date in my home state.

The ACTING DEPUTY PRESIDENT ( Senator Gallacher ): Earlier Senator Waters sought leave to table some documents. Now that the documents have been circulated, is leave granted?

Leave granted.

Senate adjourned at 19:38