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How lower irrigation water prices can boost QLD’s COVID recovery

Uncertainty linked to the Coronavrus pandemic is undermining general community confidence. The Queensland sugar industry is making a significant contribution to the economy thanks to carefully implemented workplace procedures and health plans.

Increasing input costs are an ongoing concern for the sugar industry, with a decade of higher and higher irrigation water prices are acting as a break on cane productivity. Lower cane volumes means lower mill throughput, which challenges mill viability.

Two-thirds of Queensland’s sugarcane production is dependent on irrigation and water represents 15% and more of a cane irrigator’s total farm costs.

While water prices have been frozen at current rates until July 2021, further hikes will increase total cane production costs above long-run revenues and result in continued declines in cane productivity and cane volumes. 

Looking ahead, lower throughput will challenge the viability of the region’s sugar mills, growers, the local service providers who are heavily reliant on tthe sector and regional sugar communities.

More positively, ASMC has calculated that a 25% reduction in the price of irrigated water could deliver significant regional development benefits with up to $220 million in additional industry and broader outputs over the next four years.

Such a multi-million dollar boost would generate more than $41.7 million in worker incomes, an additional 140 direct jobs and thousands of indirect jobs throughout sugar communities.

Key Facts

  • The Queensland Competition Authority recommendation to government increased irrigation water tariffs by 4% per annum on average over the next 4 years
  • The State Government announced a temporary, 12 month freeze on prices for 2020/21
  • Necessary safety upgrades over the next four years will also be absorbed by Government

Industry Facts

  • 4,300 cane farm enterprises receive around $1.2 billion in cane payments per annum
  • 22 sugar mills pay in excess of $350 million in wages/salaries to over 4,500 employees
  • More than 5,000 suppliers receive nearly $700 million worth of work from QLD’s sugar mills

References

David Rynne, ASMC
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