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Wednesday, 11 December 2002
Page: 7785


Senator HARRIS (6:06 PM) —I will commence my contribution to the debate on the disallowance motion by giving a thumbnail sketch of the Queensland sugar industry. I have spoken to groups of people in the sugar industry from my home town of Mareeba, which is a sugar-producing area, and people from the Mosman mill, the South Johnston mill, the Burdekin and Mackay. I made a point of being in Mackay when the Mackay sugar group had their AGM, and I would have spoken to 400 growers that morning. The sugar package is an extremely perplexing problem. In Mackay, I was told that the ratio of growers who support the package was about 9 to 1. It is interesting to note that those who were supporting the package tended to be younger farmers who had very high debt levels and who would be able to access the package. Those who were requesting that the package be opposed tended to be older farmers who had saved their money in the good times, had diversified as the government had asked them to do and had off-farm income. So they found themselves in the situation that, no matter what the government put in the package, it would not assist them at all.

One of the farmers I spoke to in Mackay, who had been through the process of being assessed for the supplementary income, told me that at the end of that process he was informed that he would be entitled to $35 per fortnight. That equates to $910 per year. The next step for this farmer to attain that $35 per fortnight was for him to go to his accountant to get a certified sugar determination, for which the accountant would be paid $1,100. So the farmer and his family get $910 for the year in supplementary assistance and his accountant—who probably got the information off a computer program and would have already had copies of the farmer's taxation documents; we should be generous and say he did two hours work—would pick up $1,100. If it happened to be an extremely complex assessment, then the accountant could apply for that fee to be increased to $1,600. So we have still got the same farmer receiving $910 in assistance for the year and his accountant is paid $1,600. The package is wrong, and this is what people are saying. It is not that people do not want a package; it is that they believe that the package has strings attached to it that will be to the detriment of the industry.

When we look at what has happened over the years to the sugar industry, we see that one of the major issues that has assisted the farmers has been the single desk selling program and cane allocation. When the idea of giving assistance to the cane farmers was first brought forward, the original intention was that a levy be put in place and, according to my understanding, that it be put only on retail sugar. It was not intended to affect wholesale sugar or sugar used in other products. Therefore, it was only going to be applied to the sugar that we purchased from the supermarket shelf.

We need to look at that. The figure paid to farmers for what is called in the industry `mill white sugar' is as high as $280 or as low as $220. The farmer gets only two-thirds or 61 per cent of that amount. The return to a farmer can be as low as $18 per tonne of cane that they have cut. The mill white then goes off to the refinery, and the accepted industry price out of the refinery is $800 per tonne. So it has gone from—we will use the higher figure—$280 per tonne as mill white to $800 per tonne after it has been processed by the refiner. What does that cost you and me when we go into the supermarket? On average, it costs us $1.35 per kilo, which is $1,350 per tonne. The farmer who spends 12 months of the year going through all of the heartache—`Will it rain; have we got cane beetle; do I have to replant a much higher percentage of cane than I should?'—will receive $280 per tonne for mill white. It comes out of the refinery at $800 per tonne and appears in the supermarket at $1,350 per tonne. If you do your homework, you will realise that between the refinery and the shelf price somebody is picking up $550. To clarify that: having worked all year, the farmer gets $280 per tonne for mill white sugar. There is no more value added to it when it comes out of the refinery—the only cost is the distribution—and that end of the industry gets $550 per tonne.

That is where the problem is, and that is why the proposal was to pay 25c from the retail price of sugar on the shelf into a pool for distribution to cane growers based on their cane allocation. If you had a 4,000 tonne allocation, you would get an appropriate portion of the pool. If you were a major producer and had 15,000 to 20,000 tonnes, you would get a larger percentage accordingly. The farmers with small 4,000 to 5,000 tonne cane allocations are at the very efficient end of the industry and generally have very little debt. Those who are doing what the government has asked them to do—that is, get big or get out—have enormous financial commitments. To say that people are eligible for low-interest loans or supplementary income provided they do not have assets over a certain value excludes a large percentage of the farmers who have done what the government has asked them to do. That is what this package is about—forcing people out of the industry unwillingly.

It is constantly said that Brazil is the problem. Yes, we know that, but what is actually causing that? In 1997, the exchange rate for the Brazilian real was approximately 1.1 to the US dollar—it was actually 1.1065, for anyone who really wants to work it out. Brazilian farmers were almost getting parity for their sugar. If they put a pound of sugar on the export market, they were almost getting the equivalent of the US cents per pound price. The exchange rate in 2002 is 3.5882. The devaluation in the Brazilian Real means that in 2002 Brazilian sugar farmers get three times what they were being paid in 1997. That is why Brazilian farmers can put sugar on the world market at the equivalent of US5c per pound and make a profit. They are getting three times what they were getting, by virtue of the exchange rate. It is not that our Australian sugar industry is inefficient. I am not saying that the Australian government should have devalued the Australian dollar. I am saying that is the problem. When your major competitor is getting three times what they were getting in 1997 on both the home and the export markets, it does not matter how efficient your industry is—you cannot compete against them.

In his contribution, Senator Boswell made mention of the single desk process and said that it is the Queensland government which would ultimately make the decision to remove it. That is correct. What Senator Boswell did not tell you is that in their latest assessment of Australia's economic outlook the World Trade Organisation were extremely caustic in relation to our single-desk process. They even had the audacity to use our dairy industry as an example: they said that it had been through a deregulation program and was thriving as a result. Well, excuse me: talk to a dairy farmer. It is pressure on the Australian federal government from the WTO that will ultimately lead to the removal of the single desk process. One of the ways that the federal government can bring pressure on the state governments is through the federal assistance grants, commonly referred to as FAGs. They are tied to the state governments' implementation of federal government policies. There is a distinct link between the allocation of funding and the pressure that the federal government brings on the state governments to effect federal government policies.

Let us look at what I will call the South Johnstone debacle, close to my home in Mareeba. The South Johnstone Mill was taken over by the Bundaberg Sugar Group, but how it was done was not in the best interests of the growers. The National Australia Bank had made loans to the South Johnstone Mill and, accordingly, had mortgages over the mill. As well as its infrastructure, the mill owned two very large cane farms. The National Australia Bank appointed a receiver to the South Johnstone Mill. I know that the growers applied to the receiver to do due diligence on the mill's books with the proposal of the growers taking back the mill as a cooperative. The receiver did not assist them in any way. I will not go so far as to say that he hindered them, but he certainly did not assist them. There were also proposals to sell the two cane farms the South Johnstone Mill owned, which would have cleared the entire debt to the National Australia Bank. Again, they were refused.

Senator Boswell referred to the Commonwealth providing $4.5 million to the mill. Yes, the Commonwealth did do that, and it did help the mill. But the insidious thing, which Senator Boswell did not tell you, was that that was underwritten by the growers. They guaranteed to pay that $4.5 million back to the Commonwealth over a period of years by paying a levy on their cane. When the deal was done between the National Australia Bank and Bundaberg Sugar, the $4.5 million received by the mill was a debt left with the growers, and it is there today. So you have a receiver who settles with an asset and then leaves the growers with the debt. It concerns me that we are staring the same thing in the face at Mossman. Again, the National Australia Bank holds the mortgages over that mill. If the growers enter into another agreement to underwrite funding, Lord help them—and I do not say that facetiously.

Why are the growers so strongly opposed to this levy? They are not opposed to the levy; they are opposed to the strings that are tied to the levy. One of the Queensland government's conditions of accepting the levy is to look at removing the single desk, and they are also looking at removing the guaranteed cane allocations. Once they are gone, the growers will have no ability to negotiate with the mills. A grower whom I was speaking to in the last two days said that the mills now require the growers to split all of their properties up into allocated areas. When their cane goes into the mill, the ticket on the wagon has to show the species and the lot that it has come from. You do not have to be Einstein to work out that within the next 12 months, if those cane allocations are removed and the mills do not have to take all of that cane, they will selectively tell growers, `We will take blocks X, Y and Z'— knowing full well that the CCS is higher on those—and leave the growers with the rest of the areas. These are the problems that the sugar industry is facing. For that reason, One Nation will reluctantly oppose the measures. (Time expired)