On 27 October 2011, ASA with founding members CANEGROWERS and ASMC, agreed the full Sugar RD&E Reform package based on detailed reviews and input from many stakeholders.

This change package:

• responds to years of industry concern about the overall performance and rising costs of sugar research, development and extension arrangements with three industry funded organisations (BSES, SRDC and the milling agency, SRL)
• will deliver a set of strong, modernising reforms to energise and focus research, and
• when fully implemented, will have ongoing secure funding through levy on all sugarcane growers and millers paid equally (35cents/tonne of cane by growers, 35 cent/tonne of cane by millers).

What is the Australian Sugar Industry Alliance (ASA)?

ASA was formed in 2007 with a goal to “Promote and advance the development of a commercially vibrant, sustainable and self-reliant raw sugar and sugarcane derived products industry”. CANEGROWERS and the Australian Sugar Milling Council are the two founding members of ASA. The model for membership and participation is built also around regional involvement. Regions such as Central Queensland, the Herbert, and Northern NSW have been or are involved in ASA, and other districts are looking at whole-region collaborations to enable ASA membership.

ASA was formed to enhance whole of supply chain collaboration and promote a single industry approach to matters of common interest, including RD&E performance and reform of structures.

• CANEGROWERS represents about 80% of sugarcane grower business units – in Queensland through 15 regional CANEGROWERS associations, and also through the associated CANEGROWERS NSW association.
• ASMC represents 98% of current sugarcane processing capacity. Seven of eight milling companies operating 23 of 24 mills from Far North Queensland to NSW are members. A number of mills also own and operate cane farming enterprises.

Why change sugar RD&E (research, development and extension)?

The need to review sugar RD&E structures arose from serious concerns about the alignment, coordination and performance of RD&E under three research organisations, and about fast rising costs. The three-organisation system is financially unsustainable and unable to deliver the level of R&D and research outcomes that the sugar industry needs to build its output.

Objectives in closely reviewing RD&E arrangements over 2010 and 2011 included to:

• identify a comprehensive set of changes to energise and focus research, achieve efficiencies and ongoing savings
• restructure to meet grower and miller aims, and from listening to diverse stakeholder views through wide consultation, and
• to identify modernising reforms that would attract across industry support, higher industry funding and equal payment by growers and millers.

What is in the RD&E reform package?

The Sugar RD&E Reform package was identified, developed and evidenced by Dr Sandra Welsman, Reform Project Leader, in a report to the ASA Reform Project Group (including Chairs of the research entities) in September 2011. The full package was agreed by CANEGROWERS and ASMC boards, and then by the Australian Sugar Industry Alliance in October. Ongoing equal grower and miller research payments were also agreed with implementation of the reform package including Sugar Research Australia.

The main elements of the endorsed Sugar RD&E Reform package are:

1. Forming a single industry-owned research company, Sugar Research Australia.
Sugar Research Australia (SRA) is to be a new, strong, high-performance research entity with a single vision and plan, and focussed on implementing industry and national R&D priorities. The new organisation and culture will bring in activities of SRDC, the streamlined BSES, plus aspects of the milling research agency SRL. Sugar Research Australia will be underpinned by a statutory levy, to be paid equally by growers and millers, and this structure will attract more government funding for research.

2. A SRA Research Funding Panel, reporting to the SRA board. The Panel is to operate a larger competitive research pool and to apply robust review to internal and external R&D aiming for stronger results and outcomes aligned with industry needs.

3. Efficiency streamlining of BSES over 2011-2012 to achieve a reduction of 20% on BSES 2010-11 operating budget. The changes include reorganisation of activities to three main sites, sale of assets, and new extension arrangements. This streamlining would reduce BSES costs while the essential further efficiencies would be made in bringing current entities into one new organisation, Sugar Research Australia.

4. The industry led Sugar Advisory Services Development Program (SASDP) to run through 2012 in parallel with BSES restructuring, aiming to build a network of local group and independent professional sugar advisory providers. This diagram has been used in industry field meetings.

What are the reform benefits and savings?

Achieving Sugar Research Australia in the form needed by the industry is the next key stage in progressive evolution to a vibrant, sustainable and self-reliant industry. Benefits to the industry as a whole, and to growers, millers and other stakeholders will be substantial. These can be assessed in practical terms such as cost savings, or as stronger operational outcomes as the industry actively addresses collective action needs, through to the real advances of modernising structures and culture. In outline, expected benefits include:

• Stronger research performance. Sugar Research Australia should work to address performance expectations, priorities and issues with efficiency. A key industry priority is for R&D to contribute strongly to the return to a 36mt harvest in 3-5 years. Research-based actions including enhanced plant breeding and variety improvement through a stronger, stable SRA with a robust SRA Research Funding Panel have potential to deliver, say, 30% of the impetus toward this goal. This could translate to production value increases of $150m a year by 2015.
• Industry support for higher, sustainable R&D funding. The sugar industry is committed to investment in research, development and professional extension (RD&E) and this support itself is evidence the industry sees future benefits. However, cost and return is a major issue. With implementation of the reform package, and on formation of Sugar Research Australia, the industry will pay 70 cents a tonne each harvest year (35 cents paid by the grower and the miller of each tonne). This stable statutory levy ($21m a year on a 30mt harvest) will be 27% higher than fees and levies paid in 2009 but less than what would have been required to take BSES out of ongoing losses. Sugar Research Australia will have high-performance capacity and would be financially sustainable.
• Cost savings and efficiency. Administrative and RD&E efficiencies in forming SRA as a single industry owned research organisation should be at least $1.5m a year. ASMC and CANEGROWERS have agreed to a total 70c a tonne of cane from 2013, to be paid equally 35c by growers, 35c by millers to fund Sugar Research Australia. Leaving activities to stay the same and to cover BSES operating losses, the industry would have needed to pay $1 a tonne by 2013. Streamlining and formation of Sugar Research Australia addresses both performance and cost issues.
• Industry performance benefits. The sugar industry sees RD&E Reform and establishing Sugar Research Australia as a key stage in its progressive evolution from regulated structures to a modern, competitive, professional, profitable industry. This should attract new, inventive industry participants and assist with succession. A further 10-20% of industry production growth could reasonably be attributed to modernisation.
• Regional and community benefits. The sugar industry generates jobs along the supply chain and adds diversity and vibrancy to regional communities. R&D also supports industry participants as stewards of their operating environment.

Have growers and millers been consulted and given their views?

Four stages of consultation and communication have been advanced since mid 2011:

• May-Sept 2011. The Reform Project Leader received over 100 written inputs and follow on email interactions, and undertook over 80 meetings in Brisbane, from Cairns to Ballina, and in Canberra, including with SRDC, SRL, SRI, BSES leaders, staff and site groups, CANEGROWERS regional groups, ACFA, Pioneer, Kalamia, mill managers and groups, district productivity services, CSIRO, QUT, DEEDI, DAFF and DuPont staff.
• Nov-Jan 2012. ASA field meetings series 1. Sugar RD&E reform package sessions for grower, mill and local service leaders and associated Sugar Advisory Services Development Program (SASDP) discussions with local groups, advisers, and BSES staff.
• Nov-Feb 2012. Reform package and SASDP discussions with local productivity groups and advisory service providers in many locations with strong attendance.
• March, May 2012. ASA field meetings series 2. ASA led briefings and discussion on RD&E reform, extension and advisory changes including steps toward an Industry Owned Company, Sugar research Australia. Audiences were primarily cane growers, plus industry leaders, mill staff including field and technical, productivity services boards and all staff, BSES staff, advisory service providers, agribusiness, researchers, media and local councils. Attendance across the industry was near 1,000 cane growers and other stakeholders.

The ‘New Era for Sugar Research and Extension’ meetings were structured to enable industry leaders to stand before key audiences, to present the case for developmental change, and to address a range of sometimes complicated questions. Two hours were scheduled for each session, including for a presentation covering:

• the RD&E reform package and reasons (performance, cost, funding balance)
• forms of benefits, and how these should be seen by industry participants
• envisaged single industry owned research organisation (SRA) and key features
• BSES streamlining and its work to become ‘SRA ready’
• the Professional Extensions and Communications Unit and local extension changes
• the Sugar Advisory Services Development Program (SASDP), and
• key next steps, including towards Sugar Research Australia and an industry poll.

An hour or so was allowed at the end of each session for formal and informal discussion. Five Information Sheets were prepared for the field meetings. Feedback forms were completed by a proportion of attendees at each session.

Is there industry support for these reforms?

Most industry leaders support the Sugar RD&E Reform package as a whole including formation of Sugar Research Australia with a compulsory levy paid equally by growers and mills, because this reform does address industry needs in terms of stronger research performance for the industry and control of costs.

CANEGROWERS in Queensland and NSW represents over 80% of sugarcane growers, and the Australian Sugar Milling Council represents 98% of milling companies in Australia. Elected leaders have been long-concerned about research performance and rising costs of having three different research organisations.

Establishing Sugar Research Australia as one focussed, high-performance, industry owned research and research management organisation to improve research performance and efficiency, and to bring costs to reasonable levels, is a key part of the full research reform package endorsed by the Australian Sugar Milling Council and CANEGROWERS through the Australian Sugar Industry Alliance (ASA) in October 2011 after wide consultation across the industry.

There are, and will be, differences of opinion about aspects of the reforms, however most leaders see the integrated reform package as vital, considered, workable and sustainable.

Has the Australia Government been consulted? And other stakeholders?

ASA leaders have met with the Minister for Agriculture, Fisheries and Forestry, Senator Joe Ludwig, in Canberra. ASA representatives also met with Departmental officers in February, April, May and June this year and further meetings are scheduled particularly in relation to governance requirements around managing industry levies and matching government payments. ASA is providing the Minister with information progressively including on consultation, communication and voting arrangements.

Senator Ludwig has indicated to the Australian Sugar Industry he is keen to see efficient and effective arrangements in place to deliver RD&E for the industry. The Minister has also told ASA representatives that he is willing to receive a submission supported by the industry proposing alternate RD&E arrangements. The Australian Government will not make a decision on this proposal until a formal submission is received. Additional information needed includes results of the Sugar Poll vote in August and envisaged company governance arrangements as set out in the developing Sugar Research Australia Constitution and Statutory Funding Agreement [link].

During September, ASA will report to the Minister for Agriculture, Fisheries and Forestry. Based on industry support – in the form of a successful vote, the formal submission to the Minister will seek the Australian Government’s agreement to formation of Sugar Research Australia as an Industry Owned Company, funded by a statutory levy. Sugar Research Australia features would be as set out in the initial Submission, and in the envisaged Constitution and Statutory Funding Agreement. Under the Levy Principles and Guidelines, there will be a six week period for any objections to be lodged with the Minister, Parliamentary Secretary or the Department of Agriculture, Fisheries and Forestry.

A wide range of sugar industry RD&E stakeholders were consulted during 2011 and this continues in 2012. Interactions include briefings and discussions with Government Departments such as the then DEEDI and DERM in Queensland, researchers from CSIRO, QUT, BSES and other providers, productivity service groups, and advisory providers of all backgrounds. In addition to regular meetings with BSES, there have been a number of letters and briefings with SRDC, SRL, and groups including ACFA, Kalamia and Pioneer grower organisations.

Where can I download Reform reports?

The set of Sugar RD&E Reform documents, the Reform report (Sept 2011), The Industry Priorities for Research (Dec 2011) and the ASA initial proposal to the Minister on establishing Sugar Research Australia (Feb 2012), and other key items are available on this Sugar Poll 2012 website [links].

Are there risks or other approaches?

The major risk for the Australian sugar industry is in trying to hold on to structures that do not address RD&E performance needs or cost issues. Time has been allowed for the three industry-backed organisations to improve interactions and lift overall performance and results but industry groups still have major concerns.

A single, stable, well-funded Industry Owned Company (Sugar Research Australia) with a larger research funding pool and cost saving efficiencies will provide a centre for longer term R&D strategy and will have the strength to address performance needs and challenges.

The full RD&E Reform package addresses a range of industry and research needs. The extension changes are based on models used in other rural industries. The modern Industry Owned Company model is now operating in nine industries including meat, dairy, horticulture and wool.

Other approaches have been mentioned briefly by some groups and/or identified by ASA. ASA included points on four in the initial proposal on Sugar Research Australia (Feb 2012, page 27), a summary of these points follows:

• Merging SRDC into BSES with a mix of voluntary or required industry payments as now. ASA decided this would not work effectively and a BSES entity would not secure Federal matching funds or achieve research funding stability aims.

• Amalgamation of SRDC with another rural industry-government R&D Corporation to try to reduce administration. There would be few savings and issues with R&D performance under multiple entities would not be addressed.

• Continuing SRDC as a government agency, with a much higher compulsory levy to operate SRDC and SRDC funding research providers including BSES. Although there would be access to additional matching funds, this approach would not address performance or cost or efficiency issues. The sugar industry must now work to obtain the higher potential performance and savings of a strong, focussed, industry owned company, Sugar Research Australia, that can program R&D to address major challenges to assist this industry to compete into the future.

• One sugar research organisation as a Federal Government body. This would not be supported by ASA. In addition to concerns about priorities and accountabilities, the industry assets need to continue in industry ownership.

Negatives? Are there reasons to vote against?

The Sugar RD&E Reform package, including the formation of Sugar Research Australia as a single industry owned research organisation, backed by higher funding from a stable and secure compulsory statutory levy, and working to carry out and fund research aligned with industry priorities, should deliver substantial RD&E performance advances. These will benefit the Australian sugar industry across Queensland and NSW, and other regions that may develop over time. Similarly, a larger, robustly managed competitive pool should attract strong research proposals of all types, and foster funding of plant breeding, farming systems, milling, social and adoption R&D.

Some people or groups may feel disadvantaged by some of the changes. There was inequity in the former BSES field staffing across regions for instance, even though growers were all paying the same fees. Some areas may feel they a not as well off as before. Some staff of the organisations may be concerned. Some may also want Sugar Research Australia to undertake activities that fall outside the scope for an Industry Owned Company backed by a statutory levy working to benefit the Australian industry.

Cost might be seen as a factor against change and a levy. However, with formation of Sugar Research Australia there will be a cost reduction to growers (of 2 c/t). Milling Companies in ASMC have already agreed to pay more once Sugar Research Australia starts operating.

Sugar Research Australia will have around 150 staff mainly moving from BSES. There will be roles for staff committed to and working strongly for the future of the industry through aligned RD&E activities. Sugar Research Australia and its research and research management will grow stronger with this dedicated input with benefits all round. The modernising reforms and culture changes are already attracting interest from active professionals within and outside the sugar industry including through the Sugar Advisory Services Development Program.

Over the last six months some groups and individuals have raised concerns or ‘negatives’ about the proposed research restructuring and formation of Sugar Research Australia as a single industry owned company supported by a compulsory statutory levy to be paid equally by growers and millers.

The Australian Sugar Industry Alliance considers each of the points made and has included summaries of these in the key documents, including the initial submission to the Minister in February 2012. This table summarises points raised and provides comments and responses.

Point raised	Comment
The plan risks demising RD&E structures and fails to adequately address future requirements of the industry	The major risk for the sugar industry is in holding on to traditional structures, or a hybrid arrangement for funding that does not grasp performance or cost issues. Considerable time has been allowed for current organisations to lift overall performance and outcomes. A single, stable, funded Industry Owned Company with a larger research pool and cost efficiencies will provide a centre for longer term R&D strategy and will have the strength to address performance needs and challenges, within a larger budget.
Focus is on cost-cutting rather than industry growth and it panders to millers on change.	There is agreement for growers and millers to pay more and equally through a statutory levy. Performance and cost levels are key issues to be addressed by any industry in committing participants to payments into collective funds. CANEGROWERS and ASMC expect efficiencies and building of current strengths to higher performance.
This is cost-shifting with growers paying more.	ASMC and CANEGROWERS have agreed to a total 70c/tonne of cane harvested from 2013, to be paid equally 35c/t by growers, 35c/t by millers to fund Sugar Research Australia with streamlined activities from BSES. Without restructuring and formation of SRA, industry would need to pay about $1/tonne by 2013 (growers could have to pay up to 65c/t). SRA will also deliver higher performing, more efficient and sustainable RD&E arrangements for the industry’s future. With the reforms, money is left ‘in the field’ for local areas and growers to decide on usage (rather than all growers being charged a much higher fee).
Our growers will pay more for the current set-up, even $1 per tonne.	Some have suggested paying $1/tonne. This is usually linked to requirement to see value for money and for millers to pay half, ie. 50c/t from growers, 50c/t from millers. There is no evidence of any sizeable group of growers willing to pay $1 a tonne as fees.
Little consultation with grass-roots growers	Growers have been involved in the over 120 consultation and communications sessions to date. Field Meetings series 2 in March and May 2012 was attended by over 1,000 growers and others.
Large and foreign owned entities will be able to dominate votes and selection of directors.	The 4-bases voting system in the ASA submission ensures interests of smaller and larger businesses are recognised in all forms of voting. All levypayers large and small will be entitled to be members of SRA. All sugarcane production and milling entities contributing to the industry and economy will be able to vote.
After three years, millers could walk away.	This cannot occur. Once the whole industry (growers and millers) agree though a poll to form SRA with a statutory levy at 70c/t paid equally by growers and millers, this continues indefinitely. The levy cannot be changed for growers or millers without a whole industry vote passed by growers and millers.
No clear company structure being proposed	Key elements are put forward in part 5 of the ASA initial SRA submission. This has been distributed and is available on this website. A draft Constitution and Statutory Funding Agreement are also posted on this website [link].
No policy on whether industry bodies would seek corporate membership.	This is also discussed in the February 2012 submission. Only levypayers would be members of Sugar Research Australia, not industry bodies.
Sugar Research Australia is intended to both fund and carry out R&D.	Carrying out R&D can be an IOC function, in line with industry needs. The SRA Research Funding Panel is key. Principles for effective governance and robust operation of the Panel are being developed as part of Towards SRA, Definition and Due Diligence work underway [see more].
Industry entities BSES and SRDC will be lost – merged into Sugar Research Australia.	Sugar Research Australia would be a new organisation, with a modern culture and a focussed, collective-good RD&E purpose backed by a statutory levy. Key activities, assets and liabilities of BSES, SRDC and aspects of SRL would move to SRA for stronger performance outcomes.
BSES and the industry is losing national research capacity and extension capacity.	The ASA supported streamlining of BSES is holding and building key research capacities, particularly world-class plant breeding and variety development still based on 100,000 stage 1 seedlings. R&D activities will continue under SRA where research projects excel under robust Panel review taking into account long term needs (all IOCs consider long term research provision). This Industry must have the best research it can obtain. Extension capacity is growing at local level and through the Sugar Advisory Services Development Program. Career path options are widening and a modern industry will attract interest.
Costs of achieving an IOC to meet Government and Departmental requirements.	ASA has an Sugar Research Australia formation program mapped out to 2013-14 including due diligence activities over April to July 2012. Performance advances will outweigh costs to establish SRA. Efficiencies alone should recover formation costs in under two years, with performance benefits and savings ongoing.
Different models need to be reviewed and considered including from overseas.	Frontline models for RD&E strategic development and industry and organisational management are to be found in Australia. Approaches raised are discussed in the ASA initial submission, February 2012.
Farmers or millers in some areas may want to invest more in particular R&D or to ask SRA for extra or special services on a direct payment or consulting basis.	Both the Industry Owned Company model regarding commercial conduct, and Australian Sugar Industry Alliance objectives (reflecting wide consultation on priorities), mean Sugar Research Australia would not look to sell staff time as consultants or as contract researchers to local or overseas firms. Part of the concern about alignment of BSES activities with Industry Priorities relates to a mix of bases on which work was undertaken for income.ASA is vitally concerned that sugar industry research, development and associated R&D extension be focussed, effective, efficient, sustainable, and deliver advances for the industry and communities. This needs to be done by SRA running efficient research-based operational variety development, biosecurity and professional extension activities, and by the SRA Research Funding Panel managing a strong, competitive research process for determining whether a proposed RD&E project aligns with industry priorities and has merit in structure and likelihood of achieving beneficial outcomes.An ongoing statutory levy will enable Sugar Research Australia to utilise staff for greater results for the Australian Sugar Industry, and to not need to take them away from vital R&D work confirmed through the SRA Research Funding Panel processes to align with Australian Sugar Industry Priorities. Consolidating effort is also one of the reasons BSES directors are supporting formation of Sugar Research Australia backed by a secure statutory levy.There will be a clear pathway for industry businesses and other organisations to work with SRA researchers to shape their idea or need into a collaborative research or development project (such as to develop specific varieties for an area). The collaboration can put a developed project proposal to the SRA Research Funding Panel through the competitive process.If an industry group or business contributes substantial funds to the proposed project (as well as seeking SRA funding) this could be seen as a measure of confidence in successful outcomes. The Panel will assess alignment with priorities and merit next to other projects in terms of potential benefit for the industry and its parts. This will ensure best use of industry and government funds and of SRA staff.With a larger competitive research funding pool, the SRA Research Funding Panel will be able to consider more collaborative projects of merit.

 

How is the RD&E reform being funded?

CANEGROWERS and the Australian Sugar Milling Council jointly funded phase 1 in 2010-11. QSL has largely funded phase 2 including the Welsman industry consultation, recommendations, and implementation (RD&E Reform package). BSES, SRDC and SRL will fund their elements of the due diligence and implementation process ahead of the formation of Sugar Research Australia. CANEGROWERS and ASMC are paying their own significant resources and inputs into the reform. Costs of the review and reform ($1.5-$2.0m) will be covered within two years, from focused RD&E and stronger results, plus more efficient resource use and ongoing cost savings.