Friday, April 26, 2013

Sugar marketing conundrum

Loose change previously posted profusely on the strategic maneouvres in the sugar industry which saw MSF, the largest FNQ miller, taken over by Thailand's Mitr Phol. Turmoil has now erupted as Tableland sugar growers revolted over marketing arrangements and will direct their cane to Mossman Mill for next years season.

Mitr Phol MFS have invested heavily in a capital upgrade to the Tableland Mill but apparently have lost the cane? This has been extensively reported at ABC Rural: Cane supply shakeup could stretch further. This is particularly noted:

Maryborough Sugar Factory (MFS) rejects claims by Tableland growers they were being forced to break a longstanding relationship with Queensland Sugar Limited (QSL), which markets most of the state's sugar.
But while MFS comes to terms with a 700,000 tonne hole in cane supply to its Tableland mill, there is mounting disquiet in the Babinda and South Johnstone growing areas near Innisfail, where MFS also owns mills.
Innisfail Canegrowers chairman Joe Marano says now more than ever the miller should be listening to the concerns of growers.
"I have repeatedly said to MFS that we're happy for them to mill our sugar but we just don't want them playing with our wallets," he says.
"We have a stake in QSL that's owned by growers and millers, so why wouldn't we go with a company we have a stake in?
"I don't care what Mulgrave and Maryborough want to do... they're happy to go with Maryborough Sugar.
"Tableland growers repeatedly said that [they wanted to market through QSL] and obviously MFS weren't listening so if this doesn't attract their attention I don't know what will."
 
This is all somewhat curious given that the marketing issues are not new but were a significant part of the previous Aussie-owned MFS strategy when it was headed up local CCIQ identity Brett Moller from the Gordonvale CBD! Moving away from QSL (the old monopoly marketer) was then a key part of the strategy!
 
The rationale that marketing should happen though QSL has also not been adequately explained given the history as posted by ABC Rural today:
 
In 2010, QSL was unable to fulfil its export contracts after disastrous weather kept harvesters from getting onto paddocks and cane into the mills.
QSL forward-sold more sugar than it had in its reserves and was forced to buy back futures contracts at premium prices while also importing sugar from other producers.
The incident cost the industry over $100 million and some growers are still in legal disputes with QSL over the individual costs passed on to them as a result.

To be blunt, back in 2010 QSL stuffed up their hedging strategy in a significant way. I'm not sure I would be as forgiving as the growers for the reasons they have stated, and not sure the reasons have actually been stated and explained?

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