Australia’s raw sugar industry will likely come out of the coronavirus pandemic with the same viability challenges it had going in – including flat-lining productivity, loss of area, and a need to further complement its reliance on raw sugar sales with diversified revenue streams. The depressed global sugar price, currently around 12 US cents/lb, (below AUD400/tonne) challenges the viability of even the most efficient producer. Volatile market prices have been spurred on by years of production and export subsidies in competitor countries such as India, and the collapse of the oil price, which has seen Brazil decrease its ethanol production from cane in favour of increased sugar production. There appears little the Australian industry can do in the short term and the ASMC will continue to push for justice at the World Trade Organisation (WTO) while riding out this negative cycle. However, the need for increased focus on decreasing the industry regulatory burden and revitalising commercial arrangements is urgent.
ASMC Outlines Sugar’s Bioenergy Potential
The Australian industry currently commercialises ethanol derived from molasses and cogenerated electricity, using bagasse. The ASMC calculates that under more favourable commercial and policy settings, bagasse cogenerated electricity could triple from 0.9 mln MWh to 2.86 mln MWh and ethanol production from molasses could increase from 60 mln lites to 216 mln litres. Numerous changes in industry practice and government policy are needed to improve viability of current supply and increase production through additional installed capacity of bagasse co-generated electricity. Bioethanol cannot compete with Mogas (gasoline) at realistic oil prices under the current market structure of excessive capacity, excise differential, parity pricing and a lack of mandate enforcement. Therefore, improving the viability of current supply and achieving an increase in production from molasses would require a number of significant government interventions, including amongst others, legislation that enacts a national minimum biofuels mandate of at least 5%; and facilitation of an ethanol market price that is independent of the Mogas 95 price.
MSF’s Maryborough Sugar Mill Likely to Close
MSF’s Maryborough sugar mill in Queensland is likely to close after the 2020 crushing season, according to the local State Member of Parliament. The mill has been crushing cane for 126 years. Mill operator MSF Sugar, owned by Thai Company Mitre Phol, has already entered a deal to sell more than 5,000 ha of sugarcane farmland around the mill. Discussions are underway to divert 90 growers’ cane to the Isis Central Sugar Mill (ICSM), for the next two seasons, as MSF Sugar has a cane supply agreement with growers until the end of the 2022 season. MSF Sugar’s Company Secretary confirmed discussions were underway, but that no decision has yet been made by MSF Sugar to cease operations at the Maryborough Mill.