The Queensland sugar industry has been rocked by what can only be described as a bold and arrogant move by Sugar Terminals Limited (STL) to announce that it would terminate its Operator Agreement with Queensland Sugar Limited (QSL).
The move was made without consultation with sugar industry organisations, or with the 4,900+ growers and millers who are its shareholders. STL claims the move has been “in order to reduce costs, drive greater efficiencies and to remove a clear conflict of interest which will better position STL to serve the industry into the future”.
It is felt by STL that the 2017 industry shift to multiple sugar marketers using bulk sugar terminals - which led to a new business model drawing distinctions between QSL as a sugar marketer and QSL as terminal operator – has changed the environment. STL claims it requires greater transparency.
The announcement itself has lacked transparency, taking all industry players outside the STL boardroom by complete surprise. There is a feeling in the grower sector that in fact removing a successful third-party management/operations structure will diminish transparency.
This move seems a leap, given that as recently as October STL Chairman Mark Gray said in his address to the STL Annual General Meeting, “Setting aside depreciation and insurance, where all industries have been subject to significant increases in premiums, STL’s controllable operating costs were lower in FY22 than in FY18, the first year of our new business model. After allowing for inflation, this is a significant decline in costs in real terms.” Given that success, growers applaud the present structure for returning those outstanding achievements. We trust it will continue to drive efficiencies and are concerned change would put future success in jeopardy.
Along Queensland’s seaboard, six bulk sugar terminals stand in testimony to what can be achieved when industry works cooperatively. Historically, they are the product of that spirit: for example- Central Region (ie: Mackay) terminal expansions in the 1980s were built using “Number 2”, or risk pool sugar returns. Growers took a reduced payment for their Number 2 Pool Sugar for several years to see a fourth sugar shed built at Mackay Harbour, dramatically increasing terminal capacity and efficiency.
These are sugar industry assets, and moreover, they are “choke point” assets. That means the Bulk Sugar Terminals overseen by STL are the sugar industry’s only gateway to lucrative export markets. Growers would be irate if these assets were misused to prioritise returns to shareholders. Bulk terminals were never built with the intention of creating a cash-cow for shareholders, but for mutual benefit across the industry. The sugar industry needs a very clear explanation as to how taking a not-for-profit operator out of the equation will lead to improved cost-efficiency.
And what happens if STL is unable to improve cost-efficiency? Would it then shift back to outsourcing, potentially to a foreign-owned corporation? This would be unacceptable, and a sovereign risk to a significant agricultural export sector that returns some $2.5 billion to the Australian economy.
Originally built by industry and government, since the year 2000 Queensland’s sugar terminals have been overseen by STL, granted in a peppercorn sale from government, but operated and managed by QSL’s operations arm. QSL is a not-for-profit organisation that has quite distinct and corporately separated sections for sugar marketing and for terminal operations. Terminal operations – including storage, shipping and logistics- are executed by QSL on a cost-recovery basis only as a service to the industry.
Under the terms of the existing Operating Agreement, QSL remains the operator of the state’s bulk sugar terminals (BSTs) until 30 June 2026.
It is also worth noting that STL has taken steps to diversify its commodity base, with the Bundaberg Common User Infrastructure Project. In locations like the Southern Region (which includes Bundaberg, Childers and Maryborough), where the sugar industry has reduced output there is a logic to making better use of un-used bulk storage area. However, this is not something that we necessarily would like to see in regions of increasing output, such as Mackay. As an industry asset, it would be unacceptable to see these changes come at the expense of the sugar industry that has worked so hard to create terminal facilities that are a tribute to our strong industry’s efforts, toil and the foresight of our predecessors.
Mackay Bulk Sugar terminal has a long and rich history as an asset built and maintained by the Queensland sugar industry- from paddock to port. Pictures: Contributed
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