| Summary |
 Increased sugar supply from major exporting countries, in particular Brazil, has put pressure on prices in Australia’s export markets over the past decade, and subsequently on returns for Australian sugar cane growers. In order for the Australian sugar cane industry to be viable and competitive, producers, millers and the sugar value chain need to continue improving productivity.
The Australian sugar cane growing industry is in transition; the volume of production is relatively stable but has a reduced number of producers, which suggests a trend toward a smaller number of larger farms. |
| Sugar cane production |
Between 2005-06 and 2007-08 the number of sugar cane growers in Australia fell by around 15 per cent to slightly more than 4100.
On average, sugar cane producers harvested 8249 tonnes of sugar cane per farm in 2007-08. There was a wide dispersion of farm sizes and sugar cane production around this average. Nearly two-thirds of growers produced less than 7500 tonnes of sugar cane per farm and accounted for slightly more than one-quarter of Australia’s sugar cane production in 2007-08. In comparison, an estimated 3 per cent of growers produced more than 30 000 tonnes per farm and accounted for 22 per cent of national sugar cane production in the same period.
In 2006-07, a small quantity of sugar cane was produced in the Ord River region of Western Australia, however closure of the mill meant sugar cane production ceased in this region in 2007-08. Sugar cane farms in the Ord River region tended to be larger than else where in Australia. |
| Prices |
With sugar cane prices increasing relative to costs, farm cash incomes strengthened in 2006-07, averaging $94 000 a farm, which is around 40 per cent higher than the average farm cash income in 2005-06. With the exception of producers growing less than 7500 tonnes of sugar cane per farm on average, producers of all scales of sugar cane production realised a positive farm business profit in 2006-07.
In 2007-08, a sharp fall in sugar cane prices and further increases in input prices resulted in a marked deterioration in financial performance in the sugar cane growing industry. On average, farm cash incomes fell 91 per cent in 2007-08 to average around $7000 a farm. Small to medium sized sugar cane growers - those producing less than 22 500 tonnes of sugar cane per farm - realised on average negative or very small positive farm cash incomes. |
| Economies of scale |
| The survey results for 2005-06 suggested there may be economies of scale, whereby average unit cash costs of production decline as farms expand production, in the Australian sugar cane growing industry. While the two additional years’ data (2006-07 and 2007-08) indicates unit cash cost of production falls as production increases, the strength of the suggested economies of scale is much less, particularly when production exceeds 30 000 tonnes of sugar cane per farm. |
| Sugar cane gross margin |
| In 2007-08 the average gross margin of sugar cane production is estimated to have been $3.10 a tonne, well below the 2005-06 and 2006-07 levels of $9.10 a tonne and $11.30 a tonne, respectively. Sugar cane profitability fell in all regions, but regions with the highest concentration of large producers continued to realise the highest average gross margin. |
| Farm management |
In 2006-07, the proportion of producers intending to expand sugar cane production exceeded the number of producers intending to reduce sugar cane production. However, the decline in sugar cane profitability during 2007-08 resulted in more producers indicating their intention to reduce sugar cane production.
The survey results suggest that sugar cane producers have actively sought information to better manage their farms. The most common sources of information on farm management and production used by sugar cane growers were family, friends and other growers. More than 80 per cent of sugar cane growers obtained information from industry organisations such as cane growers associations. Between 2006-07 and 2007-08 there was a large increase in the number of growers who used the internet as a source of information. The number of growers who used production groups and state government sources fell.
In 2007-08, an estimated 30 per cent of sugar cane producers had a written farm management plan, with nearly all producers’ plans containing information on production activities, natural resource management and business activities. Of the farms with management plans, the proportion of management plans containing information on people management and succession planning fell from 47 per cent in 2006-07 to 39 per cent in 2007-08. However, as was observed in 2006-07, the proportion of farm plans including people management and succession planning increased with sugar cane production, reflecting the greater reliance of larger producers on hired labour. |
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