Sugar Industry in Australia - Case Study Example

Sugar industry in Australia Student name Course name Lecturer’s name Date Introduction The Australian sugar industry over the last few years has recorded enormous significant changes. The industry is exporting nearly more than three quarters of its sugarcane production therefore integrating itself to the overall global economic growth (Antony et al., 2005). The Queensland parliament move to re-regulate sugar, a move to eliminate International Sugar Agreement, has received impositions to limit and regulate sugar production. Irrespective of these current developments, the sugar industry in Queensland is still highly regulated. As a form of contrast, regulations imposed on other industries like wheat production in New South Wales have been relaxed or even removed. With the passing of the Sugar Industry act in Australia, regulations were made relating to production and marketing of sugar in Queensland. The marketing and production practices of firms were now assumed by the newly incorporated Queensland sugar Corporation (Antony et al., 2005). However, the recent move by the Queensland parliaments to re- regulate the sugarcane industry has been received with a lot of contention from many people. As others regard this move as being detrimental to the sugar industry players others perceive this move as beneficial in the sense that production and marketing costs of sugar are now controlled by the state. Further, some argue that the total output of the industry has been reduced because the industry is not performing as it should be. There is a belief that high domestic sugar prices have prevented growth of players in the industry (Antony et al., 2005). This essay therefore seeks to understand the two perspectives of ‘sugar socialism’ and the aspect of ‘Economic Lunacy’. Analysis The answer as to why Queensland sugar industry is so much regulated is to a great extent chronicled. Household sugar costs or prices were settled and obtaining and showcasing forces were set up in Queensland. Under the Sugar Acquisition Act, all crude sugar created in Queensland was necessarily gained by the Queensland Government and sold for its sake by the Sugar Board, the forerunner of the Queensland Sugar Corporation (Oskam, Meester and Silvis, 2010). In this way, an arrangement of area task was acquainted to control the level and area of sugarcane production. Under this framework, sugarcane must be developed on only designated or doled out areas. Cultivators were required to convey sugarcane to assigned plants; what's more, factories were required to acknowledge all sugarcane developed on relegated land in their plant territory. Generally, other features of the conveyance and valuing courses of action were determined in going with control (Swinnen and Rozelle, 2009). All things considered, it is straightforward why numerous in the business upheld the form of control stipulated by the Queensland parliament (Oskam, Meester and Silvis, 2010). Producers dreaded the local monetary force of mill operators and, as the business extended, both producers and mill operators expected that the business could be misused by overseas purchasers (Oskam, Meester and Silvis, 2010). Directions were additionally seen as a method for diminishing hazard and settling maker’s earnings, and as a method for keeping up for built up cultivators the higher costs feasible from residential deals. Be that as it may, the world is altogether different today. Makers in many commercial enterprises now have an entry to significant business sector information on which to base creation and promoting choices (McKillop & Zonca, 2015). Refined money related apparatuses have gotten to be accessible to oversee cost and wage variability. Australian makers have lessened (Oskam, Meester and Silvis, 2010). The adoptions of the regulation have to a great extent proved to provide stability to both the sugar cane growers themselves and the millers in general (Horák, 2013). As a matter of fact, each player in the industry has been significantly insulated from the many pressures in the industry, arising as a result of trading with each other. Additionally, neither of the core players, i.e., the cane producers and the millers have had to shoulder the responsibility of production as well as marketing decisions, a move which is perceived to be the sole responsibility of producers in other industries. This is therefore because the state has taken the responsibility of production and marketing. As a result of the move adopted by Queensland parliament, production of cane has significantly increased and the industry has had an opportunity to sell off all the cane it produces without any need to supply credit (Horák, 2013). Further, the compulsory form of acquisition has resulted to increased returns because domestic prices are permitted to be held way high above export prices. However, in as much as the move was termed by others as ‘sugar socialism’ which was seen as beneficial, others rubbished this ideology implemented by the Queensland parliament as detrimental and they termed it ‘Economic Lunacy ‘According to the socialism perspective, all factors of production are controlled by the state (Jati, 2013). The sugar being controlled by the state adopted this form of perspective. The move was taken positively by others; others referred to it as economic lunacy or total economic foolishness. The move was termed so because of a number of negative implications it could cause on the business world, Queensland and the Australian economy at large. Firstly, the measure of one of Australia's all the more universally aggressive commercial enterprises has been authoritatively compelled. Therefore, trade open doors for crude sugar, and conceivably refined sugar, has been foregone. The inability to make utilization of this potential speaks to a huge misfortune to the country overall (Kumari & Nakano, 2015). Secondly, new generation and fares are demoralized by the use of an altered 12% installment differential for built up cultivators (Jati, 2013). This is commensurate to an assessment on new cultivators and industry development. In any case, the advantages that accumulate to build up producers from the differential are little, speaking to around a 1% increment in returns. This proofs to be costly, hence in the long run affecting the total cost of production (Kumari & Nakano, 2015). Thirdly, the move was also seen as economic lunacy in the sense that the pro rata distribution of expansions or land in task has supported the utilization of minimal area at the cost of different regions more qualified for sugarcane cultivation (Swinnen and Rozelle, 2009). Around 5% of relegated land has been surveyed as minor or unsatisfactory for sugarcane developing. Further, the move reduced the production of sugar since the area designated for sugar production was not good for maximum production of sugar. The areas that were seen as productive for sugar production were not utilized as a result of the move (Jati, 2013). Fourthly, confinements on the exchange of task have propagated a size of sugarcane developing which is beneath that required to understand the accessible economies of size and to create at the smallest cost as possible. Further, the directions have hindered makers from reacting to changes in economic situations. For example, the brutal conditions as of late experienced. Cultivators and mill operators are bolted into endorsed hones (Ville, 2013). Independently they can't fundamentally extend or contract creation. As a result of the restriction, cultivators can't showcase their own particular sugar, regardless of the possibility that it is further bolstering their budgetary good fortune to do as such. The move by the Queensland parliament prevented cultivators from utilizing a portion of the budgetary instruments utilized by other rustic or rural makers to deal with their own danger. As a result, advancement has been smothered (McNeill & Shrapnel, 2015). Lastly, the absence of rivalry in the promoting of Australian sugar diminishes the order on the Queensland Sugar Corporation to look for the most noteworthy business sector returns and to minimize costs. Similarly, constraints on the utilization of land have disheartened producers from seeking after best agronomic practices (Swinnen and Rozelle, 2009). They have additionally resorted to practices which may have unfriendly ecological outcomes. For instance, sugarcane producers have resorted to more prominent utilization of composts or fertilizers and pesticides per hectare, which have very detrimental effects on the environment (Olper et al., 2014). Additionally, the controls on advertising, combined with levy help, have expanded residential sugar costs and decreased the intensity of client commercial enterprises which resulted to residential costs of refined sugar being evaluated to be around 40 % higher than fare costs (McNeill & Shrapnel, 2015). Conclusion In Australia, the sugar industry is a perfect example of industries in the Agricultural sector, which has heavily suffered from the effects of over-regulations. In conclusion the overall sugar industry needs to be independent, vibrant, sustainable and self-reliant. In the recent past, the forms of regulations have been re-introduced again by Queensland parliament, hence hindering maximum production, full exploitation of resources and hindrance to innovation. A perfect industry is an industry where in as much as there are regulations, the market forces of demand and supply are left to take control, while on the other hand ensuring that the players in the market benefit a great deal (Ville, 2013). The essay therefore concludes that the move by Queensland parliament to re-impose regulations is not economically viable. This denies sugarcane producers to exercise their freedom in the market, as should be the case in any free market economy. Bibliography Antony, G., Prestwidge, D., Sandell, G., Archer, A., Thorburn, P. and Higgins, A 2005, ‘Towards farming-systems change from value-chain optimisation in the Australian sugar industry’, AFBM Journal, vol. 2, no. 1, p. 1-9. Horák, J 2013, ‘Regulations of sugar transporters: Insights from yeast’, Current Genetics, vol. 59, no. 1-2, p. 1–31. doi: 10.1007/s00294-013-0388-8 Jati, K 2013, ‘Sugar commodity price analysis: Examining sugar producer countries’, International Journal of Trade, Economics and Finance, vol. 4, no. 5, p. 288–295. Kumari, R and Nakano, Y 2015, ‘Does land lease tenure insecurity cause decreased productivity and investment in the sugar industry? Evidence from Fiji’, Australian Journal of Agricultural and Resource Economics. DOI: 10.1111/1467-8489.12133 McNeill, T and Shrapnel, W 2015, Apparent consumption of refined sugar in Australia (1938-2011)’, European Journal of Clinical Nutrition, vol. 69, no. 11, p. 1233–1237. doi: 10.1038/ejcn.2015.105 McKillop, C. and Zonca, C 2015, Sugar marketing bill passes Queensland Parliament but millers vow to fight it. Available at: http://www.abc.net.au/news/2015-12-03/sugar-bill-passes-but-millers-vow-its-just-the-beginning/6996408 (Accessed: 29 April 2016). Olper, A., Fałkowski, J and Swinnen, J 2014,  Political reforms and public policy: Evidence from agricultural and food policies, World Bank Economic Review, vol. 28, No. 1, p. 21-47. Oskam, A., Meester, G and Silvis, H 2010, EU policy for agriculture, food and rural areas, Wageningen Academic Publishers, Wageningen. Swinnen, J and Rozelle, S 2009, “Governance Structures and Resource Policy Reform: Insights from Agricultural Transition.,” Annual Review of Resource Economics, vol. 1, no. 1, P. 33–54. Ville, S 2013, Peter D. Griggs, Global industry, Local Innovation: the History of Cane Sugar Production in Australia, 1820–1995, Australian Economic History Review, vol. 53, no. 3, p. 320–321. doi: 10.1111/aehr.12016 Read More