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5. Industry and Business Structures<br />
Industry and business structures will have a significant impact on supply chain development and<br />
operation. In particular industry regulation, payment formulae, supply agreements and ownership<br />
within the supply chain has influenced innovation in and development <strong>of</strong> the sugar supply chain. This<br />
chapter provides a review <strong>of</strong> sugar industry and business structures and concludes with considerations<br />
and recommendations for mallee industry development.<br />
5.1 Overview<br />
The Australian sugar industry is predominately based on the production <strong>of</strong> raw sugar. Other uses and<br />
by-products include molasses, green energy production from the combustion <strong>of</strong> bagasse (fibrous<br />
waste), low volumes <strong>of</strong> organic sugar (speciality) and packaged cane trash as garden mulch. Section<br />
4.1 <strong>of</strong> the report provides greater detail on sugar products and by-products. Refined sugar is regarded<br />
as a separate business. The sugar industry supply chain consists <strong>of</strong> growing, harvesting, transport and<br />
milling which is effectively driven by farmers and millers.<br />
The basic pr<strong>of</strong>it centre within the sugar industry is the mill area. Both the growing and milling sector<br />
is closely dependant on each other due to the perishability <strong>of</strong> cane and high transport costs. The sugar<br />
content (commercial value) <strong>of</strong> sugarcane starts to deteriorate within 16 hours <strong>of</strong> being harvested.<br />
Sugarcane cannot be economically transported beyond a time and cost limited geographical radius.<br />
For both the growing and milling sectors to achieve a pr<strong>of</strong>itable outcome, each in turn must be<br />
pr<strong>of</strong>itable for the economic sustainability <strong>of</strong> the mill area.<br />
Hildebrand (2002) summarises this relationship:<br />
• Farmers seek to ensure that a mill will accept the cane they will grow and harvest over the<br />
season for optimum farm proceeds, to a schedule that averages crop and climate event risks<br />
between farmers (farmer equity) and<br />
• The mill seeks to ensure that cane farming is the most pr<strong>of</strong>itable use <strong>of</strong> land in its feeder area,<br />
and that its milling capacity is adequate to ensure cane continues to be grown in sufficient<br />
quantity by its supplying farmers, in order for the mill to remain economically viable.<br />
Mill areas have various farmer and miller ownership structures however each mill area forms the basic<br />
pr<strong>of</strong>it centre.<br />
5.2 Institutional / Regulatory Framework<br />
5.2.1 Historical Arrangements<br />
The sugar industry has been in operation for more than 100 years and has been examined in detail<br />
many times throughout its history. A relatively rapid change in the institutional / regulatory<br />
arrangements has occurred in the last 10 years, to a point where the sugar industry has moved from a<br />
highly regulated industry to one <strong>of</strong> deregulation.<br />
Historically legislation governed most aspects <strong>of</strong> the industry where development and commercial<br />
activity were premised on remunerative price and grower equity (Sugar Industry Oversight Group,<br />
2006). In the early stages <strong>of</strong> the industry all raw sugar produced in <strong>Queensland</strong> was compulsory<br />
acquired by the Government and sold by a central Sugar Board (the predecessor <strong>of</strong> the <strong>Queensland</strong><br />
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