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farmer vs. harvester) is the next least likely model for competition. It was noted that the farmer<br />
owned model in practice operates where the farmer negotiates hard for the on farm inputs (i.e. farm /<br />
mill transfer stage) rather than wait for proceeds to be split after the point <strong>of</strong> sale. The farmer owned<br />
model (i.e. cooperative) occurs in NSW. Hildebrand (2002) noted a low level <strong>of</strong> farmer/mill conflict<br />
and good cooperation resulting in high harvesting efficiency (see illustrative example).<br />
5.4.2 Ownership models within value chain<br />
The sugar industry has a number <strong>of</strong> ownership models across the sugar industry including cooperative<br />
mills, proprietary mills, public and private mills. In addition some proprietary and public mill groups<br />
own farms. Harvesting is done by contractor, harvesting cooperative, or farmer. Mixed ownership<br />
within the value chain has had variable results. It has been observed that the variability in<br />
performance across the value chain is less dependent on the ownership model and more dependent on<br />
the cooperation and commitment between each sector in sharing mill area goals. Hildebrand (2002)<br />
suggested that this cooperation and commitment is dependent on a shared goal for the mill area as the<br />
basic pr<strong>of</strong>it centre.<br />
5.5 Suggested Industry and Business Structures for Mallee<br />
Within the sugar industry costs are generally averaged across participants, individuals are not always<br />
aware <strong>of</strong> their costs (Sugar Industry Oversight Group, 2006). It is argued that streamlining the value<br />
chain is essential to ensure optimal mill throughput and a reliable cane supply. Sustainability will be<br />
enhanced through the identification and targeting <strong>of</strong> real costs. Other mechanisms to ensure supply<br />
reliability include long term contracts and performance based incentives.<br />
Harvest and transport is both a significant component and cost within the cane supply system. 30% <strong>of</strong><br />
costs in the value chain are associated with harvesting and transport <strong>of</strong> sugarcane. Within harvesting<br />
and transport there appears to be significant inefficiencies embedded within these components <strong>of</strong> the<br />
value chain. This is principally a result <strong>of</strong> divided responsibilities between the grower and the miller.<br />
The cost <strong>of</strong> harvesting is the grower’s responsibility while the cost <strong>of</strong> transport is the responsibility <strong>of</strong><br />
the mill. Across some regions within the sugar industry a reduction in the number <strong>of</strong> harvesting<br />
operations and optimising existing groups are demonstrating some benefits.<br />
Ideally the harvest and transport system could be more easily optimised if owned by a single party<br />
managing the process from standing cane in the field to cane delivered to the mill. In practice the<br />
harvest and transport system involves multiple combinations <strong>of</strong> ownership including farmers<br />
(hundreds), contract harvesters (several to many), contract truck transport and the sugar mill.<br />
Hildebrand (2002) and others (Sugar Industry Oversight Group, 2006) identified harvest and transport<br />
as a priority for quantum gains in productivity.<br />
5.6 Lessons for the Mallee industry from Sugar<br />
Institutional and regulatory arrangements have had a pr<strong>of</strong>ound impact on development <strong>of</strong> the sugar<br />
supply chain. In particular, development <strong>of</strong> a cane payment formula that accounts for quality <strong>of</strong> cane<br />
delivered has been significant in improving supply chain performance. Pricing arrangements are now<br />
negotiated regionally based on an industry framework. In the mallee industry, particularly when there<br />
are multiple products and markets, appropriate payment mechanisms need to be considered.<br />
The sugar industry has a number <strong>of</strong> ownership models. Generally the greater the proportion <strong>of</strong> the<br />
supply chain owned by a single entity (eg a cooperative) the greater the efficiency and lower the<br />
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