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experience of the sugar industry will be fundamental to the development an efficient harvesting and
transport system in mallee.
2.6 Harvesting Costs and Payment Structures
2.6.1 Payment Structures
Optimal harvest structures and policies that increase whole-of industry profitability through the
establishment of meaningful pricing structures that reflect quality of work and output, and that
improve efficiency and market satisfaction are a key element of any industry.
Sugar System
The current harvester payment system, where harvest operators are paid at an agreed rate for each
tonne of delivered cane product (i.e. including extraneous matter and soil) that they harvest, has been
in place for many years. While it is easy to monitor and understand, dollars per tonne sends a very
clear market signal to the harvester that tonnes per hour equals profit per hour and quality is a minor
focus. It raises a fundamental question regarding the market signals that are sent to each participant
in the cane supply chain (i.e. farmers, harvesters and millers).
This dollars per delivered tonne system encourages harvester operators to cut at high pour rates
because they receive greater income by cutting the maximum possible tonnage per hour, at the same
costs per hour, thus making more profit. However, harvesting at high pour rates, increases the levels
of extraneous matter (EM) and soil in cane, and these in turn decrease CCS and increase mill costs.
High harvester fan speeds are used in an attempt the control EM levels, but with marginal success
and, importantly, with high cane losses.
While this dollars per tonne payment system encourages maximum efficiency in terms of maintaining
a high delivery rate, it ignores the cost of cane loss because the cost of lost cane to the harvesting
contractor, who receives a smaller fraction of the total value, is insignificant compared to the
increased money made from high machine throughput. Thus, the behaviour that is encouraged by the
current payment system is the antithesis of harvesting best practice, which is based on the premise
that low fan speeds and low pour rates produce cane in the bin of better quality with minimal cane
loss.
Per tonne payment systems also do not encourage improvements in farm layout(especially since
growers are more likely to change operator for pricing reasons rather than job-quality issues), another
factor that is closely involved in the overall efficiency of harvesting. Harvesting costs are very
sensitive to farm layout factors such as row length and haul distance.
The Boston Consulting Group (2004), lists a set of key criteria for the design of an ideal payment
system, as follows:
• Integration of the growing and processing requirements that reward cooperation.
• Accurate market signals reliably reflecting the quality of cane supplied.
• Effective utilisation of capital at all steps.
• Production of a range of products of different values.
• Practical, robust and simple financial drivers suitable for long term use.
• Consistent price messages all going in the same direction.
• Changes in price that benefit all parties by a similar amount, with sharing of market risk
enhancing cooperation.
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